As filed with the Securities and Exchange Commission on February 8, 2019
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BJs Wholesale Club Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 5331 | 45-2936287 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
25 Research Drive
Westborough, Massachusetts 01581
(774) 512-7400
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Christopher J. Baldwin
Chairman, President & Chief Executive Officer
25 Research Drive
Westborough, Massachusetts 01581
(774) 512-7400
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Howard A. Sobel Gregory P. Rodgers Ryan K. deFord Latham & Watkins LLP 885 Third Avenue New York, New York 10022 Telephone: (212) 906-1200 Fax: (212) 751-4864 |
Graham Luce Brigitte Eichner 25 Research Drive Westborough, Massachusetts 01581 Telephone: (774) 512-7400 Fax: (508) 986-7153 |
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered |
Amount to be
Registered |
Proposed Maximum
Offering Price per Share (1) |
Proposed Maximum
Aggregate Offering Price (1) |
Amount of
Registration Fee (1) |
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Common stock, $0.01 par value per share |
58,345,145 |
$26.80 | $1,563,649,886 | $189,514 | ||||
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(1) |
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended. In accordance with Rule 457(c) of the Securities Act of 1933, as amended, the price shown is the average of the high and low sales prices of the common stock on February 7, 2019 as reported on the New York Stock Exchange ( NYSE ). |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Prospectus
Up to 58,345,145 Shares
BJs Wholesale Club Holdings, Inc.
Common Stock
This prospectus relates to the offer and sale from time to time by the selling stockholders identified in this prospectus of up to an aggregate of 58,345,145 shares of our common stock, par value $0.01 per share.
The shares of our common stock registered hereby may be offered and sold by our selling stockholders through one or more underwriters, broker-dealers or agents. If the shares of our common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agents commissions. The shares of our common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. See Plan of Distribution.
We are not selling any shares of common stock under this prospectus, and we will not receive any of the proceeds from the sale of shares of our common stock by the selling stockholders.
This prospectus describes the general manner in which shares of our common stock may be offered and sold by any selling stockholder. When the selling stockholders sell shares of our common stock under this prospectus, we may, if necessary and required by law, provide a prospectus supplement that will contain specific information about the terms of that offering. Any prospectus supplement may also add to, update, modify or replace information contained in this prospectus. We urge you to read carefully this prospectus, any accompanying prospectus supplement and any documents we incorporate by reference into this prospectus and any accompanying prospectus supplement before you make your investment decision.
Our common stock is listed on the New York Stock Exchange under the symbol BJ.
The last reported sale price of our common stock on February 7, 2019 was $26.86 per share.
Investing in our common stock involves risk. See Risk Factors beginning on page 18 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission (SEC) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2019.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR COMMON STOCK |
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F-1 |
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You should rely only on the information included elsewhere in this prospectus and any free writing prospectus prepared by or on behalf of us that we have referred to you. We have not and the selling stockholders have not authorized anyone to provide you with additional information or information different from that included elsewhere in this prospectus or in any free writing prospectus prepared by or on behalf of us that we have referred to you. If anyone provides you with additional, different or inconsistent information, you should not rely on it. The selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.
No action is being taken in any jurisdiction outside the United States to permit an offering of common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restriction as to any offering of our shares of common stock and the distribution of this prospectus applicable to those jurisdictions.
This prospectus is a part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the SEC) using a shelf registration or continuous offering process. Under this shelf process, the selling stockholders may from time to time sell shares of our common stock covered by this prospectus. Additionally, under the shelf process, in certain circumstances, we may provide a prospectus supplement that will contain certain specific information about the terms of a particular offering by one or more of the selling stockholders. We may also provide a prospectus supplement to add information to, or update or change information contained in this prospectus. You should read this prospectus and the information incorporated by reference before deciding to invest in shares of our common stock. You may obtain this information without charge by following the instructions under Where You Can Find More Information appearing elsewhere in this prospectus.
This prospectus includes estimates regarding market and industry data that we prepared based on our managements knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information, industry reports and publications, surveys, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate.
In this prospectus, we make reference to consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to typical supermarket competitors. The following is how we verify that we provide our members this value:
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We periodically identify the four supermarket chains (or banners) most prevalent in our clubs primary trade areas (the Supermarket Competitors). |
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We create a basket of 100 popular manufacturer-branded grocery food and non-food items, each of which was among our top-selling national brand items in its category and was also carried, in varying pack sizes, in supermarkets. We believe this basket is representative of manufacturer-branded grocery items because of their popular appeal and recognitionas evidenced by both presence and sales volumein our clubs and at the Supermarket Competitors. |
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We hire an independent third-party company to visit multiple (a minimum of six) sites for each of the Supermarket Competitors, which are located in the trade areas of one or more of our clubs, no less |
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frequently than once every two weeks. The third-party comparison shoppers record the prices of each item in the basket carried by the Supermarket Competitor, in the closest pack size to the size BJs carries, and then they calculate the price on a unit-price basis. We compare unit prices to ensure a common denominator for price comparisons. We direct the measurement company to ignore coupons and exclude items that were on promotion by us or by a Supermarket Competitor, as promotional prices do not represent everyday values in our view. |
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To calculate the Supermarket Competitors average price for the items in the basket, we average the measured prices of the items at each Supermarket Competitor store sampled, create an average measured unit price for each item at each Supermarket Competitor, compare those to our chain average unit price, and arrive at a relative percentage difference for each Supermarket Competitor. We then average these percentage differences for the four Supermarket Competitors. The average difference is consistently more than 25%. |
We will only include an item in the basket if it is carried by at least two of the four Supermarket Competitors. This means that over time we may replace items in the basket with different comparable items, if we are consistently unable to get prices for comparison on an item, to be sure we continue to offer the same relative savings.
We also use a rolling average of measured prices. At a minimum, we will use an average of two consecutive periodic or monthly measurements of prices at both BJs (using our chain average price) and the Supermarket Competitors. We may use up to 52 consecutive weeks, or 12 consecutive months, of price data for comparison. We make our savings claim using price data that are not more than 60 days old, as to the most recent price measurement in the data set.
The Supermarket Competitors do not include non-traditional sellers of groceries, such as drugstores, online sellers, superstores, convenience stores, other membership clubs and mass market retailers.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets for the products we distribute. Market share data is subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of market shares. In addition, customer preferences are subject to change. Accordingly, you are cautioned not to place undue reliance on such market share data. References herein to the markets in which we conduct our business refer to the geographic metropolitan areas in which our clubs are located.
We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to the last day of January. Accordingly, references herein to fiscal year 2012 relate to the 53 weeks ended February 2, 2013, references herein to fiscal year 2013 relate to the 52 weeks ended February 1, 2014, references herein to fiscal year 2014 relate to the 52 weeks ended January 31, 2015, references herein to fiscal year 2015 relate to the 52 weeks ended January 30, 2016, references herein to fiscal year 2016 relate to the 52 weeks ended January 28, 2017, references herein to fiscal year 2017 relate to the 53 weeks ended February 3, 2018, and references herein to fiscal year 2018 relate to the 52 weeks ending February 2, 2019. The first quarter of fiscal year 2017 ended on April 29, 2017, the second quarter of fiscal year 2017 ended on July 29, 2017, the third quarter of fiscal year 2017 ended on October 28, 2017, the first quarter of fiscal year 2018 ended on May 5, 2018, the second quarter of fiscal year 2018 ended on August 4, 2018, the third quarter of fiscal year 2018 ended on November 3, 2018, and each of these quarters contains thirteen weeks. In this prospectus, unless otherwise noted, when we compare a metric (such as comparable club sales) between one period and a prior period we are comparing it to the analogous period from the prior fiscal year.
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We adopted the Financial Accounting Standards Boards Accounting Standards Codification No. 606, Revenue from Contracts with Customers, and related amendments (ASC 606) effective February 4, 2018 using the modified retrospective method. The amounts reported in the consolidated statement of operations for the thirty-nine weeks ended November 3, 2018 and the consolidated balance sheet as of November 3, 2018 reflect this adoption. According to the modified retrospective method, all financial information before February 4, 2018 was not restated. See Note 3 to our unaudited consolidated financial statements included elsewhere in this prospectus for more information regarding our adoption of ASC 606.
As used in this prospectus, unless the context otherwise requires, references to:
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ABL Amendment means the refinancing amendment to the ABL Facility dated August 17, 2018, among the Company, BJs Wholesale Club, Inc., Wells Fargo Bank, National Association, and the other lenders and issuers party thereto; |
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ABL Facility means our $1,000.0 million senior secured asset based revolving credit facility and term loan, as subsequently amended; |
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Amended and Restated Stockholders Agreement means the amended and restated stockholders agreement among CVC Beacon LP, Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., and Beacon Coinvest LLC (together with Green Equity Investors V, L.P. and Green Equity Investors Side V, L.P., the LGP Sponsor), and the Company; |
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the Company, BJs, we, us and our mean BJs Wholesale Club Holdings, Inc. and, unless the context otherwise requires, its consolidated subsidiaries; |
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First Lien Amendment means the refinancing amendment to the First Lien Term Loan dated August 13, 2018, among the Company, BJs Wholesale Club, Inc., the lenders and other parties that are party thereto and Nomura Corporate Funding Americas, LLC; |
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GAAP means U.S. generally accepted accounting principles; |
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First Lien Term Loan means our $1,925.0 million senior secured first lien term loan facility entered into on February 3, 2017, as subsequently amended; |
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Prior ABL Facility means our $1,000.0 million senior secured asset based revolving credit facility and term loan prior to its amendment on February 3, 2017; |
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Prior First Lien Facility means our $1,500.0 million senior secured first lien term loan facility that was refinanced by the First Lien Term Loan on February 3, 2017; |
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Prior Second Lien Facility means our $600.0 million senior secured second lien term loan facility that was refinanced by the Second Lien Term Loan on February 3, 2017; |
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Prior Term Loan Facilities means our Prior First Lien Facility and our Prior Second Lien Facility; |
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Second Lien Term Loan means our $625.0 million senior secured second lien term loan facility entered into on February 3, 2017, which we repaid in full and terminated in connection with the IPO (as defined herein); |
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selling stockholders means the entities and individuals named herein (other than the Company) that may offer or sell shares pursuant to this prospectus; |
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September Offering means the offering of 32,200,000 shares of the Companys common stock by certain selling stockholders, including 4,200,000 shares offered pursuant to the underwriters option to purchase additional shares of the Companys common stock from certain selling stockholders, completed on October 1, 2018; |
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Sponsors means investment funds affiliated with or advised by CVC Capital Partners (CVC) and Leonard Green & Partners, L.P. (Leonard Green), which collectively own a controlling interest in us as of the date of this prospectus; |
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Stockholders Agreement means the stockholders agreement dated September 30, 2011, among CVC Beacon LP (f/k/a CVC Beacon LLC), the LGP Sponsor and the Company that was executed in connection with the acquisition of the Company by the Sponsors; |
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Term Loan Facilities means our First Lien Term Loan and our Second Lien Term Loan, together; and |
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Voting Agreement means the voting agreement among CVC Beacon LP, Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC and the Company. |
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On July 2, 2018, we completed an initial public offering (the IPO) of 43,125,000 shares of our common stock at a public offering price of $17.00 per share, which included 5,625,000 shares issued pursuant to the underwriters option to purchase additional shares of our common stock.
We received $685.9 million in proceeds, net of underwriting discounts and offering expenses, a portion of which we used to fully repay all of our outstanding borrowings under the Second Lien Term Loan, which has now been terminated, as well as for general corporate purposes.
In connection with the IPO, we completed the following transactions:
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we amended and restated our certificate of incorporation to, among other things, (i) increase the number of authorized shares of capital stock from 20,000,000 shares to 305,000,000 shares, comprised of 300,000,000 shares of common stock and 5,000,000 shares of preferred stock and (ii) divide the board of directors of the Company (the Board) into separate classes of directors; |
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we amended and restated our bylaws; |
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we and our Sponsors entered into the Amended and Restated Stockholders Agreement, as discussed elsewhere in this prospectus. See Certain Relationships and Related Party TransactionsAmended and Restated Stockholders Agreement; |
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we and our Sponsors executed a Voting Agreement, as discussed elsewhere in this prospectus; see Certain Relationships and Related Party TransactionsVoting Agreement; |
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we established the audit committee and nominating and governance committee; |
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we ratified and adopted an incentive award plan (the 2018 Plan); |
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we adopted an employee stock purchase plan (the ESPP); |
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we adopted amendments to the Fourth Amended and Restated 2011 Stock Option Plan (the 2011 Plan Amendment) and the 2012 Director Stock Option Plan (the 2012 Plan Amendment); |
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we adopted a non-employee director compensation policy (the Non-Employee Director Compensation Policy) and director and executive stock ownership guidelines (the Director Stock Ownership Guidelines and the Executive Stock Ownership Guidelines, respectively); and |
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we granted certain members of our board of directors, senior management and key employees equity awards, as discussed elsewhere in this prospectus. See Executive Compensation. |
This prospectus includes trademarks and service marks owned by us, including BJs Wholesale Club ® , BJs ® , Wellsley Farms ® , Berkley Jensen ® , My BJs Perks ® , BJs Easy Renewal ® , BJs Gas ® , BJs Perks Elite ® , BJs Perks Plus ® , Inner Circle ® and BJs Perks Rewards ® . This prospectus also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ® , or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
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Certain financial measures presented in this prospectus, such as Adjusted EBITDA and free cash flow, are not recognized under GAAP. We define Adjusted EBITDA as income from continuing operations before interest expense, net, provision (benefit) for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including compensatory payments related to options, stock-based compensation expense, preopening expenses, management fees, noncash rent, strategic consulting expenses, severance, asset retirement obligations and other adjustments. We define free cash flow as net cash provided by operating activities net of capital expenditure.
Adjusted EBITDA
We present Adjusted EBITDA, which is not a recognized financial measure under GAAP, because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA following the date of this prospectus, and any such modification may be material. In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
Management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation; to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and to compare our performance against that of other peer companies using similar measures.
Adjusted EBITDA has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
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Adjusted EBITDA does not reflect every expenditure, future requirements for capital expenditures or contractual commitments; |
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Adjusted EBITDA does not reflect changes in our working capital needs; |
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Adjusted EBITDA does not reflect the significant interest expense, or the amounts necessary to service interest or principal payments, on our outstanding debt; |
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Adjusted EBITDA does not reflect income tax expense, and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate; |
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Adjusted EBITDA does not reflect expenditures associated with new club openings; |
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although depreciation and amortization are eliminated in the calculation of Adjusted EBITDA, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any costs of such replacements; |
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non-cash compensation is and will remain a key element of our overall equity-based compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; and |
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Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations. |
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We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental information. See Summary Consolidated Financial and Operating Data for a reconciliation of income from continuing operations to Adjusted EBITDA.
Free Cash Flow
We present free cash flow because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity. Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on capital lease obligations or cash payments for business acquisitions. Free cash flow is not a measurement of financial performance under GAAP, may have limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, net income, cash flow provided by operations or any other measure of performance derived in accordance with GAAP. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows. See Summary Consolidated Financial and Operating Data for a reconciliation of net cash from operating activities to free cash flow.
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This summary highlights selected information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all the information that may be important to you. You should read the entire prospectus carefully, especially Risk Factors beginning on page 18 of this prospectus, Managements Discussion and Analysis of Financial Condition and Results of Operations beginning on page 50 of this prospectus, and our consolidated financial statements and related notes included elsewhere in this prospectus, before deciding to invest in our common stock.
Our Company
BJs Wholesale Club is a leading warehouse club operator on the east coast of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services to deliver a differentiated shopping experience that is further enhanced by our omnichannel capabilities.
Over the last three years, we have hired Chris Baldwin as Chairman, President and Chief Executive Officer and have made multiple senior management hires and changes, adding consumer packaged goods, digital and consulting experience to our leadership team. This new leadership team has implemented significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJs more convenient. These changes have delivered results rapidly, evidenced by positive comparable club sales over the last six quarters and net income growth of over 109% and Adjusted EBITDA growth of 31% in aggregate from fiscal year 2016 to fiscal year 2017. We believe that these changes will continue to impact sales, profit margins and free cash flow performance favorably in the future. In fiscal year 2017, we generated total revenues, net income and Adjusted EBITDA of $12.8 billion, $50 million and $534 million, respectively.
Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 216 large-format, high volume warehouse clubs spanning 16 states. In our core New England markets, which have high population density and generate a disproportionate part of U.S. GDP, we operate almost three times the number of clubs compared to the next largest warehouse club competitor. In addition to shopping in our clubs, members are able to shop when and how they want through our website, www.bjs.com; our highly-rated mobile app and our integrated Instacart same-day delivery offering.
Our goal is to offer our members significant value and a meaningful return, in savings, on their annual membership fee. We have more than five million members paying annual fees to gain access to savings on groceries, consumables, general merchandise, gas and ancillary services. The annual membership fee for our Inner Circle ® Membership is $55 per year, and our BJs Perks Rewards ® Membership, which offers additional value-enhancing features, costs $110 annually. We believe that members can save over ten times their $55 Inner Circle membership fee versus what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJs on manufacturer-branded groceries. In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality. Our two private label brands, Wellsley Farms ® and Berkley Jensen ® , represent over $2 billion in sales, and are the largest brands we sell. Our customers recognize the relevance of our value proposition across economic environments,
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as demonstrated by over 20 consecutive years of membership fee income growth. Our membership fee income was $259 million for fiscal year 2017, and represents approximately half of our Adjusted EBITDA.
Our approach to merchandising positions us between other warehouse clubs and grocery retailers. We sell a wide range of products, combining the bulk savings of a warehouse club with a broader assortment and selectively smaller pack sizes in perishable and grocery products than our club competitors. We have more stock keeping units (SKUs) than other warehouse retailers (around 7,200 versus around 4,500 for other warehouse retailers), which allows us to offer a greater selection while still enabling us to manage our inventory more efficiently than supermarket and mass-market competitors (which can carry 40,000 or upwards of 100,000 SKUs, respectively). We also offer a treasure-hunt experience with exciting finds in apparel, electronics, home goods and seasonal merchandise, as well as ancillary services such as tire installation, vision care, travel and insurance at attractive values. Our 138 gas stations provide members with additional savings and convenience, which we believe drive more trips and reinforce our strong value proposition. We believe our continuously refreshed assortment, expanded perishable offerings and differentiated value proposition drive strong member loyalty and our warehouse club industry-leading average shopping frequency of 22 trips to BJs annually. Our membership renewal rate for members with two or more years of tenure, a key indicator of member satisfaction and loyalty, was at an all-time high of 86% during fiscal year 2017.
Our target members care about value, quality and convenience and shop at warehouse clubs for their family needs. Our target members are a price sensitive demographic with large household sizes, representing nine million households in our trade areas. While we believe that we appeal to households with a wide range of incomes, we target households with an average annual income of approximately $75,000. We believe this group represents a historically underserved demographic in our core markets. Our membership offerings include the BJs Online Access SM Membership, our core Inner Circle ® Membership and three enhanced levels of membership and affiliation through our BJs Perks Rewards ® Membership and our My BJs Perks ® Mastercard ® offerings, which offer benefits such as cash back on purchases and discounted gasoline prices. These value-added membership tiers and affiliations further consolidate our members spend and improve customer loyalty and renewal rates, which ultimately increase the lifetime value of the member. The membership model allows us to capture more comprehensive data about our members, which we proactively use to optimize price, promotion and assortment to evolve with changing consumer demands.
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Recent Strategic Initiatives
Led by Chris Baldwin, who became our Chief Executive Officer in February 2016 and Chairman in 2018, we have implemented significant changes to corporate culture and business operations over the last three years, modernizing the tools we use to compete in a rapidly evolving retail environment, including:
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Next Generation Leadership Team and Reinvigorated Culture: Our leadership team is led by Chris Baldwin, who we hired as President and Chief Operating Officer in 2015 and became our Chief Executive Officer in 2016 and Chairman in 2018, and Bob Eddy, who has been our Executive Vice President and Chief Financial Officer since January 2011 and took on the expanded responsibility of Chief Financial and Administrative Officer in February 2018. Our leadership team comprises management talent from diverse disciplines and backgrounds across all aspects of our business. We have recently hired, promoted or added responsibility for all 13 of our executive officers. The diverse backgrounds of our management team reflect experience in retail, consumer packaged goods (CPG), digital, audit and consulting, at leading companies such as Hess, Procter & Gamble, Nabisco, Bain & Company, PricewaterhouseCoopers, eBay and Dicks, among others. The diversity of backgrounds supports various aspects of strategic initiatives across our company. For example, our leadership teams experience in the CPG industry provides well-informed insight that helps position BJs as a key partner with suppliers and drive value for our customers while growing volume and margins. Our new leadership team has instilled a more proactive culture and approach to many facets of corporate decision making, which has rapidly delivered results. |
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Relentless Focus on Our Consumer: Our membership program provides us access to comprehensive data on consumer behavior and purchasing patterns. To capitalize on this data, we have used rich, data-driven analytics to drive improved decision-making in all aspects of our business, including procurement, merchandising, product positioning, club openings, marketing and promotion campaigns, among others. As a result, we have been able to implement a range of assortment initiatives such as supplier renegotiations, competitive contract options, SKU optimization and brand switching. We are also using our data to better target member acquisition and retention efforts for existing and new clubs. While we have made substantial progress, we believe there are opportunities to further develop our data analytics capabilities. |
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Enterprise-Wide Cost Discipline and Improved Profitability: We have created a culture of cost discipline across both member- and non-member facing functions. In 2015, we launched our category profitability improvement (CPI) program to address our procurement spending, and during fiscal years 2016 and 2017 and the first three fiscal quarters of 2018 we negotiated over $300 million in expected annual procurement savings. We drove these savings by improving dialogue with our national brand and private label suppliers to educate them on the value proposition we offer to our members and by implementing competitive bidding throughout our buying process. In partnership with our suppliers, we are now using our data to maximize marketing campaigns, creating a symbiotic relationship that provides benefits to both parties. We further lowered our cost of goods sold by recalibrating and streamlining our portfolio of private label brands from 13 to two focused brands and by emphasizing our value proposition versus national brand equivalents, which increased our private label penetration from 10% of total merchandise sales in fiscal year 2012 to approximately 20% in the thirty-nine weeks ended November 3, 2018. We have also focused on staying disciplined in our overhead cost structure and have been able to hold addressable SG&A expenses relatively flat, allowing topline growth and gross profit expansion to translate into Adjusted EBITDA growth. We believe these cost savings will allow us to drive our next wave of growth through thoughtful investments in our business. |
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Technology-Driven Improvements to Customer Experience and Convenience: We have invested in omnichannel initiatives to boost convenience for our members. Powered by substantial back-end IT investments, we now offer, alongside in-store shopping, the enhanced convenience of an omnichannel |
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shopping experience. We have launched mobile apps with Add-to-Card Coupons and Express Scan capabilities, have added Shop BJs.comPick Up inClub capability, and have rolled out same-day delivery of certain grocery items with no mark-up to item pricing, providing our members convenient ways to shop when and how they feel most comfortable. |
These strategic initiatives have delivered results rapidly, as evidenced by several key operating metrics:
BJs Wholesale Club is a leading player in the large and growing U.S. warehouse club channel, a retail channel characterized by highly discounted prices and a curated selection of SKUs and services offered in a warehouse format. According to the Warehouse Club Intelligence Center, our channel generated $167 billion of sales in 2017 and has grown at a compound annual growth rate (CAGR) of 4.5% since 2007. This pace of growth exceeded that of the grocery and GAFO (General Merchandise, Apparel and Accessories, Furniture and Other Sales) retail channels, which experienced CAGRs of 2.7% and 1.1%, respectively, during this period, according to the U.S. Census.
Source: Warehouse Club Intelligence Center-2017 Warehouse Club Guide
The warehouse club model maintains several structural advantages over other retail formats that enable operators to provide significant value and a differentiated experience for the customer while also achieving an attractive return on invested capital. These advantages include:
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membership fee subscriptions that provide stable cash flows while driving consolidation of customer spend and encouraging buy more, save more behavior; |
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comprehensive customer purchasing data, enabling operators to analyze customer spend more effectively and meet consumer demand; |
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low operating costs per square foot due to high inventory turnover, low club labor requirements and efficient distribution networks; and |
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limited and bulk-sized SKUs, and a no-frills warehouse environment, which deliver a clear value proposition to consumers who are increasingly focusing on savings and price transparency. |
According to the Warehouse Club Intelligence Center, the U.S. warehouse club channel is projected to grow at a five year CAGR of 4.0% from 2017 through 2022. Our channel is well-positioned to continue taking market share from a variety of other retail channels, including supermarkets, mass, convenience, department, specialty and variety stores. In recent years, fundamental changes in consumer shopping behavior have contributed to significant disruptions in the retail industry. Among these key changes is a growing consumer focus on value, driven by multiple factors including the growth of ecommerce, an increase in price transparency and demographic trends such as household-forming millennials and retiring baby boomers. Together, these factors favor retailers that offer strong value propositions, including warehouse clubs, where value is a fundamental part of the consumer perception. Additional tailwinds for the channel include recent retail store closures and bankruptcies that, we believe, provide an opportunity to take incremental market share. Warehouse clubs are also well-positioned against e-commerce retailers due to competitive pricing, an emphasis on fresh food, differentiated service offerings including gasoline, and the treasure hunt experience of the warehouse club trip. We believe that warehouse club customers view online retail and club visits as complementary for their shopping needs, with club visits providing great value in essential needs and online retail filling in for one-off purchases not available at warehouse clubs.
Our Competitive Strengths
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Differentiated Shopping Experience: We believe our business model enables us to provide significant value to our members versus non-warehouse club competitors. We define providing value in multiple ways. First, BJs consistently offers prices that are 25% lower on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. Second, we offer a continuously refreshed assortment of on-trend general merchandise, competitively-priced gas and a variety of ancillary services that our non-warehouse club competitors generally do not provide. We believe that members can save over ten times their $55 Inner Circle membership fee compared to what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJs on manufacturer-branded groceries. Our clubs also carry 950 fresh food SKUs in selectively smaller pack sizes, whereas other warehouse club competitors offer significantly fewer SKUs in predominantly larger pack sizes. Together, we believe our significant value proposition and broader offering drive increased customer loyalty and higher trip frequency, positioning us to compete more effectively for weekly shopping market share. |
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Well-Positioned Footprint and Flexible New Club Model: We are a leading warehouse club operator on the east coast of the United States, where our 216 clubs and 138 gas stations are well-positioned in some of the most attractive markets in the United States. In our core New England markets, we operate almost three times the number of clubs when compared to the next largest warehouse club competitor. Nearly all of our clubs generate positive club-level EBITDA. Many of our clubs are located in densely populated, high traffic locations that are difficult to replicate due to expensive and limited real estate. In 2016, the markets in which we operate delivered GDP contribution, population growth and household incomes above the respective U.S. |
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averages. Our club sizes range from 63,000 sq. ft. to 150,000 sq. ft., with newer clubs primarily made up of our 85,000 sq. ft. model. We have also recently implemented a more data-driven model for new club site selection and member acquisition. This model, combined with our wide range of warehouse club sizes, allows for a flexible real estate expansion strategy that can be customized for infill or adjacent markets. We operate or contract for six distribution centers that serve our existing club base and have capacity to support up to about 100 additional clubs in the eastern United States. |
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Large and Loyal Membership Base: Our business model creates a virtuous cycle of member spending, savings and loyalty, which drives our large and loyal membership base. We have over five million paid memberships, made up of more than 10 million total members, as of fiscal year 2017. Our target member represents the largest segment of warehouse club shoppers in BJs trade areas with 9 million households and $7 billion of annual club channel grocery spend. The strong loyalty of our membership base is reflected in our all-time high renewal rate of 86% during fiscal year 2017. Additionally, as our membership base is price sensitive, our value proposition resonates even more during economic downturns, as evidenced by our stronger comparable club sales results versus other warehouse clubs during these historical periods. |
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Attractive Strong Free Cash Flow across Economic Cycles: Our membership model, low operating cost structure and disciplined capital spending allow us to generate predictable, strong free cash flow. Membership fees provide us with a stable stream of high margin revenue that is independent of merchandise sales, accounting for approximately half of Adjusted EBITDA in 2017, and positions us advantageously versus non-warehouse competitors. This income stream has grown every year over the past two decades. Additionally, our low club labor requirements and efficient distribution network result in low operating costs per square foot. We maintain a disciplined working capital strategy focused on sustaining low receivable levels and inventory turnover that matches or exceeds payment terms. Our clubs typically require a limited amount of maintenance capital expenditures to operate. Our business model enabled cash flow from operating activities to grow by 32%, from $159 million to $210 million, and free cash flow to grow by 55%, from $47 million to $73 million, from fiscal year 2015 to fiscal year 2017. Our strong and steady free cash flow allows us to invest growth-focused capital in new clubs and initiatives, which we believe will generate positive returns on investment. |
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Experienced Management Team with a Proven Track Record: Our management team is led by Chairman, President and Chief Executive Officer Chris Baldwin, who we appointed Chief Executive Officer in February 2016 and Chairman in 2018. Chris has over 30 years of experience in retail and consumer products and, given his significant experience in the consumer products industry, brings a |
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differentiated, consumer-oriented approach to retail. Chris also serves as the Chairman of the National Retail Federation, where he gains valuable insight into the broader retail industry. Chris collaborates closely with Bob Eddy, our Executive Vice President and Chief Financial and Administrative Officer. Bob is among the longest serving members of the BJs executive team, joining BJs in 2007, becoming Executive Vice President and Chief Financial Officer in 2011, and taking on the expanded responsibility of Chief Financial and Administrative Officer in February 2018. We also recently bolstered our team by appointing Lee Delaney as Chief Growth Officer in May 2016. Lee took on the expanded responsibility of Chief Commercial Officer in May 2018. Prior to joining BJs, Lee was a Partner in the Consumer Products practice at Bain & Company, where he gained a deep understanding of retailer-supplier dynamics. Other members of the BJs management team include recent outside hires and internal promotions. Our current management team has driven BJs recent performance momentum and is implementing a culture of operational discipline with processes and procedures focused on long-term, profitable growth. |
Our Growth Strategies
We believe we can drive sustainable sales and profit growth by executing on the following strategies:
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Grow Our Member Base: We benefit from access to comprehensive data on our members shopping behaviors that, we believe, is instrumental in implementing targeted, data-driven marketing and merchandising initiatives that improve the in-club shopping experience, grow wallet share and increase new member acquisition. We have invested significantly in augmenting our member acquisition and retention strategies, including investments in member segmentation and marketing, with the aim of driving a shift towards greater member engagement and membership renewals. For example, by recently upgrading our prospecting strategy from rigid, analog, semiannual mass campaigns to personalized, digital, always on campaigns, we believe we can continue to grow our member base. |
We have been successful in driving members into higher tiers of membership and affiliation, growing by 316% the number of members holding one of our My BJs Perks Mastercard offerings from fiscal year 2014 through fiscal year 2017. We are continually investing in our membership program to increase new member acquisition rates and drive renewals through value added membership and affiliation tiers. We believe we have the potential to significantly increase the penetration levels of our value-added membership and affiliation tiers. We are developing models to predict our members likelihood to renew so that we can proactively market to at-risk members, highlighting the value of their membership while encouraging breadth of shop and trip frequency with targeted promotions. We recently launched checkout lane prompting of premium membership awards and are rolling out checkout lane credit card approvals to expedite the application process.
Our ongoing efforts also include increasing our use of social media, optimizing direct mail, converting promotional offer members into paid memberships, engaging young families and facilitating ease of membership renewals. We grew our BJs Easy Renewal ® penetration from 18% in fiscal year 2015 to 37% in fiscal year 2017. We believe we can grow our BJs Easy Renewal penetration further. We expect to leverage our membership data and deep analytics to dynamically optimize offers, providing a platform that, we believe, enables us to more effectively engage our members, transition them into value added membership and affiliation tiers and deliver greater share of wallet.
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Relentlessly Focus on the Consumer to Drive Sales: We intend to continue our efforts to optimize our product assortment and positioning and plan to expand our current product offerings into new and adjacent categories, including a broader apparel assortment, enhanced perishable offerings, tools and new family-oriented categories. We also have ongoing initiatives to enhance our private label offerings, deliver novel in-club experiences by continuously refreshing our assortment, improve |
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workforce training and management through scheduling algorithms and provide services that enhance the overall member experience. We intend to continue initiatives aimed at growing comparable club sales through advancing member engagement, tailoring promotional offerings, improving the convenience of accessing our offering and allowing our members to complete their shopping in less time. We utilize social media, including via personalized outreach, to enhance our understanding both of member engagement and of the implications for shopping at our clubs and online. We are leveraging our learning to deliver greater value to our members and drive improved engagement. We also plan to expand our gas penetration and have identified opportunities to expand on-site and near-site gas stations at existing clubs and optimize pricing and loyalty programs. We focus our efforts on supporting the ease and consistency of each members experience, increasing trips to our clubs and enhancing the appeal of our clubs as a shopping destination. |
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Improve Trip Convenience and Differentiate Omnichannel Offering: During the Sponsors tenure as our owners, we invested over $230 million in IT initiatives, including the implementation of SAP, which we believe is a key enabler in our ability to collect and utilize our data and further build our omnichannel capabilities. We are currently expanding several technology initiatives to enhance our omnichannel capabilities over the next two years. These initiatives include: |
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mobile apps with Add-to-Card (which allows users to add digital coupons to their membership card) and Express Scan functionalities (which allows members to use smart phones to scan bar codes as they shop the club to facilitate quick checkout); |
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Shop BJs.comPick Up in-Club (which allows members to buy products online and pick-up in club within two hours); and |
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a same-day delivery offering, which allows members to shop our clubs from the convenience of BJs.com, and have orders delivered the same day for a nominal delivery fee. |
We are also aggressively advancing our digital capabilities to enhance personal outreach to our members. We have already added experienced and accomplished omnichannel and IT leadership talent to our team to facilitate these efforts and will continue to invest in our omnichannel capabilities and data analytics. We believe these initiatives will result in a more seamless, convenient shopping experience for our members and will drive financial results.
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Expand Our Strategic Footprint: We believe the six existing Company-operated and contracted distribution centers that serve our clubs are sufficient to support the opening of about 100 additional clubs in the eastern United States, and we plan to open a total of 15-20 new clubs over the next five years. We will focus this expansion on infill and markets adjacent to our existing locations. We also expect to benefit from recent club and department store closures in several of our markets and adjacent markets. In fiscal years 2016 and 2017, we implemented a data-driven approach to club openings with results in our latest pilot clubs that included new membership at club opening that was 240% greater than our average new club opening in fiscal year 2015. |
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Continue to Enhance Profitability: Over the last three years, our management team led a number of operational improvements at BJs and delivered significant savings. For example, under our CPI program, which we launched in fiscal year 2015 to address procurement spend across 70 product categories, we implemented initiatives such as supplier renegotiations, SKU optimization and brand switching. During fiscal years 2016 and 2017, and the first three fiscal quarters of 2018 we negotiated over $300 million in expected annual procurement savings. We are continuing to review additional product categories through our CPI program, which we believe can deliver significant incremental procurement savings. |
In January 2018, we increased our membership fees by 10%, consistent with our historical practice of raising membership fees every five years. Additionally, we have been focused on controlling our
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Selling, General and Administrative spend, and we will continue to invest in technologies to drive efficiencies in the club.
We believe we have opportunities to drive further productivity savings in the near- to medium-term through additional procurement savings, greater private label penetration and continued cost discipline. We believe our Adjusted EBITDA and free cash flow will improve further as we capture additional benefits from initiatives both already undertaken and to come.
Recent Developments
On December 19, 2018, the Board, upon recommendation of the Boards Nominating and Corporate Governance Committee, appointed Christopher H. Peterson as a director to serve on the Board and as chair of the Audit Committee. Mr. Peterson replaces Tommy Yin, who resigned from the Board effective December 18, 2018. Mr. Peterson has been designated as a Class I director to serve in accordance with the Companys By-Laws until the Companys annual meeting of stockholders to be held in 2019 and until his successor has been duly elected and qualified, or until his earlier death, disqualification, removal or resignation.
Summary Risk Factors
We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or that may adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider the risks discussed in the section entitled Risk Factors, including the following risks, before investing in our common stock:
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our business being affected by issues that affect consumer spending; |
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our business depending on having a large and loyal membership, and how any harm to our relationship with our members could have a material adverse effect on our business, net sales and results of operations; |
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our business plan and operating results depending on our ability to procure the merchandise we sell at the best possible prices; |
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competition adversely affecting our profitability; |
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our dependence on vendors to supply us with quality merchandise at the right time and at the right price; |
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disruptions in our merchandise distribution, including disruption through a third-party perishable consolidator, adversely affecting sales and member satisfaction; |
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our failure to identify timely or respond effectively to consumer trends, which could negatively affect our relationship with our members, the demand for our products and services and our market share; |
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our being subject to payment-related risks including risks to the security of payment and information; |
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the significant control the Sponsors continue to have over our business which could prevent our other stockholders from influencing significant corporate decisions; |
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our extensive reliance on information technology to process transactions, compile results and manage our business and the adverse effects to our business caused by a disruption of our back-up systems; |
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the potential disruption of our business due to implementation of technology initiatives; |
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changes in laws related to the Supplemental Nutrition Assistance Program (SNAP), to the governmental administration of SNAP or to SNAPs electronic benefit transfer (EBT) systems adversely impacting our results of operations; |
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our substantial leverage adversely affecting our ability to raise additional capital to fund our operations, limiting our ability to react to changes in the economy or our industry, or exposing us to interest rate risk; and |
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the fact that, following our September Offering, we are no longer a controlled company within the meaning of the NYSE rules and the rules of the SEC, but we may continue to rely on exemptions from certain corporate governance requirements during a one-year transition period. |
Our business also faces a number of other challenges and risks discussed throughout this prospectus. You should read the entire prospectus carefully, especially Risk Factors beginning on page 18 of this prospectus, Managements Discussion and Analysis of Financial Condition and Results of Operations beginning on page 50 of this prospectus, and our consolidated financial statements and related notes included elsewhere in this prospectus, before deciding to invest in our common stock.
Our Sponsors
As of the date of this prospectus, the Sponsors together control approximately 42.0% of the voting power of our outstanding common stock and, we expect that they will continue to be able to significantly influence our decisions. You should consider that the interests of the Sponsors may differ from your interests in material respects and they may vote in a way with which you disagree and that may be adverse to your interests. See Risk FactorsRisks Relating to Ownership of our Common Stock and this OfferingThe Sponsors exercise a significant control over the direction of our business and have the right to nominate members of our Board. If the ownership of our common stock continues to be highly concentrated, it could prevent our stockholders from influencing significant corporate decisions for more information. In connection with the acquisition of the Company by the Sponsors, the Company, Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC and CVC Beacon LP entered into the Stockholders Agreement, pursuant to which we have granted them registration rights in respect of our common stock. We entered into an Amended & Restated Stockholders Agreement with these parties in connection with our IPO, pursuant to which the Sponsors further agreed to coordinate sales with each other in situations where piggyback rights are not otherwise applicable such that, subject to certain exceptions and certain minimum ownership thresholds, the Sponsors will be provided notice of, and the opportunity to participate in, each others dispositions on a pro rata basis. See Certain Relationships and Related Party TransactionsAmended and Restated Stockholders Agreement for more information.
2017 Dividend, ABL Facility and Term Loan Facilities
On February 3, 2017, we made (i) a $735.5 million dividend payment to our stockholders, including funds affiliated with the Sponsors, (ii) a $67.5 million payment to certain holders of our outstanding stock options and (iii) a $5.4 million payment to certain of our employees under retention bonus arrangements. We made these payments in part to return to the Sponsors a portion of their equity investment in us. To fund these payments, we amended the ABL Facility and entered into the Term Loan Facilities.
On July 2, 2018, in connection with the closing of the IPO, we repaid all of the outstanding borrowings under the Second Lien Term Loan, following which our obligations thereunder were terminated. On August 13, 2018, we entered into the First Lien Amendment, which amended the interest rate applicable to the First Lien Term Loan. On August 17, 2018, we entered into the ABL Amendment, which amended the interest rates and fees applicable to, and the scheduled maturity of, the ABL Facility. See Description of Certain Indebtedness for more information on the ABL Facility and Term Loan Facilities.
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Our Corporate Information
BJs Wholesale Club Holdings, Inc. changed its name from Beacon Holding Inc. on February 23, 2018. Our principal operating subsidiary is BJs Wholesale Club, Inc., which was previously an independent publicly traded corporation until its acquisition on September 30, 2011, by a subsidiary of Beacon Holding Inc., a company incorporated on June 24, 2011 by our Sponsors for the purpose of the acquisition.
Our principal executive office is located at 25 Research Dr., Westborough, MA 01581 and our telephone number at that address is (774) 512-7400. We maintain a website on the Internet at www.bjs.com. We have included our website address in this prospectus as an inactive textual reference only. The information contained on, or that can be accessed through, our website is not a part of, and should not be considered as being incorporated by reference into, this prospectus.
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The Offering
Issuer |
BJs Wholesale Club Holdings, Inc. |
Common Stock offered for resale by the selling stockholders |
Up to 58,345,145 shares. |
Option to purchase additional shares |
If the selling stockholders use underwriters, the selling stockholders may grant the underwriters an option to purchase additional shares within 30 days from the date of the related underwriting agreement. Any such purchase option will be disclosed in a prospectus supplement. |
Use of proceeds |
We will not receive any proceeds from the sale of our shares by the selling stockholders. The selling stockholders will receive all of the net proceeds and bear all commissions and discounts, if any, from the sale of our shares pursuant to this prospectus. See Use of Proceeds and Principal and Selling Stockholders. |
Dividend policy |
We do not expect to pay any dividends on our common stock for the foreseeable future. See Dividend Policy. |
NYSE symbol |
BJ. |
Risk factors |
Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 18 of this prospectus for a discussion of factors you should carefully consider before investing in our common stock. |
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Summary Consolidated Financial and Operating Data
We present below our summary consolidated statements of operations and of cash flow data for the fiscal years ended January 30, 2016, January 28, 2017 and February 3, 2018. We have derived this information from our audited consolidated financial statements included elsewhere in this prospectus.
We also present below our summary consolidated statements of operations and of cash flow data for the thirty-nine weeks ended October 28, 2017 and November 3, 2018 and our consolidated balance sheet data as of November 3, 2018. We have derived this information from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments that, in our opinion, are necessary to fairly state the financial information set forth in those statements, except for new accounting pronouncements adopted at the beginning of fiscal year 2018 as described in Note 2 of our unaudited consolidated financial statements included elsewhere in this prospectus.
The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the summary consolidated financial and operating data presented below in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this prospectus.
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Statement of Operations Data: |
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Net sales |
$ | 12,220,215 | $ | 12,095,302 | $ | 12,495,995 | $ | 9,006,022 | $ | 9,380,640 | ||||||||||
Membership fee income |
247,338 | 255,235 | 258,594 | 192,578 | 209,825 | |||||||||||||||
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Total revenues |
12,467,553 | 12,350,537 | 12,754,589 | 9,198,600 | 9,590,465 | |||||||||||||||
Cost of sales |
10,476,519 | 10,223,017 | 10,513,492 | 7,578,790 | 7,858,515 | |||||||||||||||
Selling, general and administrative expenses |
1,797,780 | 1,908,752 | 2,017,821 | 1,490,117 | 1,534,314 | |||||||||||||||
Preopening expenses |
6,458 | 2,749 | 3,004 | 2,156 | 4,065 | |||||||||||||||
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Operating income |
186,796 | 216,019 | 220,272 | 127,537 | 193,571 | |||||||||||||||
Interest expense, net |
150,093 | 143,351 | 196,724 | 150,211 | 137,787 | |||||||||||||||
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Income (loss) from continuing operations before income taxes |
36,703 | 72,668 | 23,548 | (22,674 | ) | 55,784 | ||||||||||||||
Provision (benefit) for income taxes |
12,049 | 27,968 | (28,427 | ) | (6,575 | ) | (7,595 | ) | ||||||||||||
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Income (loss) from continuing operations |
24,654 | 44,700 | 51,975 | (16,099 | ) | 63,379 | ||||||||||||||
Loss from discontinued operations, net of income taxes |
(550 | ) | (476 | ) | (1,674 | ) | (308 | ) | (425 | ) | ||||||||||
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Net income (loss) |
$ | 24,104 | $ | 44,224 | $ | 50,301 | $ | (16,407 | ) | $ | 62,954 | |||||||||
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Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands, except per share data) | (unaudited) | (unaudited) | ||||||||||||||||||
Per Share Data: |
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Income (loss) from continuing operations per share attributable to common stockholdersbasic (1) |
$ | 0.28 | $ | 0.51 | $ | 0.59 | $ | (0.18 | ) | $ | 0.58 | |||||||||
Income (loss) from continuing operations per share attributable to common stockholdersdiluted (1) |
$ | 0.27 | $ | 0.49 | $ | 0.56 | $ | (0.18 | ) | $ | 0.55 | |||||||||
Weighted average number of common shares outstanding (1) : |
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Basic |
87,869 | 88,164 | 88,386 | 88,363 | 110,162 | |||||||||||||||
Diluted |
90,241 | 90,736 | 92,264 | 88,363 | 114,944 | |||||||||||||||
Cash dividends per share |
$ | | $ | | $ | 8.31 | $ | | $ | |
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Statement of Cash Flow Data: |
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Net cash provided by operating activities (2) |
$ | 159,361 | $ | 297,428 | $ | 210,085 | $ | 100,359 | $ | 250,893 | ||||||||||
Net cash used in investing activities |
(112,363 | ) | (114,756 | ) | (137,466 | ) | (86,122 | ) | (103,340 | ) | ||||||||||
Net cash used in financing activities |
(46,236 | ) | (188,118 | ) | (69,629 | ) | (14,456 | ) | (151,005 | ) | ||||||||||
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Net increase (decrease) in cash and cash equivalents |
$ | 762 | $ | (5,446 | ) | $ | 2,990 | $ | (219 | ) | $ | (3,452 | ) | |||||||
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As of
November 3, 2018 |
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(in thousands) | (unaudited) | |||
Balance Sheet Data |
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Cash and cash equivalents |
$ | 31,502 | ||
Merchandise inventories |
1,245,110 | |||
Property and equipment, net |
745,889 | |||
Net working capital (3) |
64,029 | |||
Total assets |
3,464,955 | |||
Total debt (4) |
1,973,973 | |||
Total stockholders deficit |
$ | (256,618 | ) |
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Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(unaudited) | (unaudited) | |||||||||||||||||||
Other Financial and Operating Data: |
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Total clubs at end of period |
213 | 214 | 215 | 215 | 216 | |||||||||||||||
Comparable club sales (5) |
(4.2)% | (2.6)% | 0.8% | 0.3% | 4.1% | |||||||||||||||
Comparable club sales excluding gasoline sales |
(0.5)% | (2.3)% | (0.9)% | (1.7)% | 2.0% | |||||||||||||||
Adjusted EBITDA (in thousands) (6) |
$ | 405,992 | $ | 457,326 | $ | 533,507 | $ | 375,509 | $ | 413,057 | ||||||||||
Free cash flow (in thousands) (7) |
$ | 46,998 | $ | 182,672 | $ | 72,619 | $ | 14,237 | $ | 147,553 | ||||||||||
Membership renewal rate |
84% | 85% | 86% | * | * | |||||||||||||||
Capital expenditures (in thousands) |
$ | 112,363 | $ | 114,756 | $ | 137,466 | $ | 86,122 | $ | 103,340 |
* |
Calculated on an annual basis only. See Managements Discussion and Analysis of Financial Conditions and Results of Operations for additional information. |
(1) |
See Note 21 and 15 of our audited and unaudited consolidated financial statements, respectively, included elsewhere in this prospectus for additional information regarding the calculation of basic and diluted income per share attributable to common stockholders. |
(2) |
Includes charges for discontinued operations. |
(3) |
Net working capital is defined as total current assets (excluding cash and cash equivalents) less total current liabilities (excluding current portion of long-term debt). |
(4) |
Total debt includes current and non-current portion of long-term debt, net of discount and debt issuance costs and our obligations under capital leases and financing obligations. |
(5) |
Represents the change in net sales among all clubs open in both the given period and the prior period. In determining comparable club sales, we include all clubs that had been open for at least 13 months at the beginning of the relevant period and were in operation during all of both periods being compared, including relocated clubs and expansions. If a club is in the process of closing, it is excluded from the determination of comparable club sales. In addition, when applicable, we adjust for the effect of an additional week in a fiscal year or quarter. See Managements Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding our calculation of comparable club sales. |
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(6) |
The following is a reconciliation of our income from continuing operations to Adjusted EBITDA for the periods presented: |
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Income (loss) from continuing operations |
$ | 24,654 | $ | 44,700 | $ | 51,975 | $ | (16,099 | ) | $ | 63,379 | |||||||||
Interest expense, net |
150,093 | 143,351 | 196,724 | 150,211 | 137,787 | |||||||||||||||
Provision (benefit) for income taxes |
12,049 | 27,968 | (28,427 | ) | (6,575 | ) | (7,595 | ) | ||||||||||||
Depreciation and amortization |
177,483 | 178,325 | 164,061 | 123,404 | 122,434 | |||||||||||||||
Compensatory payments related to options (a) |
1,497 | 6,143 | 77,953 | 77,953 | | |||||||||||||||
Stock-based compensation expense (b) |
2,265 | 11,828 | 9,102 | 7,649 | 55,985 | |||||||||||||||
Preopening expenses (c) |
6,458 | 2,749 | 3,004 | 2,156 | 4,065 | |||||||||||||||
Management fees (d) |
8,139 | 8,053 | 8,038 | 6,073 | 3,333 | |||||||||||||||
Noncash rent (e) |
8,976 | 7,138 | 5,391 | 4,381 | 3,591 | |||||||||||||||
Strategic consulting (f) |
14,619 | 26,157 | 30,316 | 24,402 | 22,569 | |||||||||||||||
Severance (g) |
7,488 | 2,320 | 9,065 | | 960 | |||||||||||||||
Asset retirement obligations (h) |
(7,044 | ) | | | | | ||||||||||||||
Offering Costs (i) |
| | | | 3,143 | |||||||||||||||
Other adjustments (j) |
(685 | ) | (1,406 | ) | 6,305 | 1,954 | 3,406 | |||||||||||||
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Adjusted EBITDA |
$ | 405,992 | $ | 457,326 | $ | 533,507 | $ | 375,509 | $ | 413,057 | ||||||||||
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Adjusted EBITDA as a percentage of net sales |
3.3% | 3.8% | 4.3% | 4.2% | 4.4% | |||||||||||||||
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(a) |
Represents payments to holders of our stock options made pursuant to antidilution provisions in connection with dividends paid to our shareholders. |
(b) |
Represents total stock-based compensation expense and includes one-time expenses related to certain restricted stock and stock option awards issued in connection with the IPO. |
(c) |
Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred. |
(d) |
Represents management fees paid to our Sponsors (or advisory affiliates thereof) in accordance with our management services agreement, which terminated upon closing of the IPO. See Certain Relationships and Related Party TransactionsManagement Services Agreement. |
(e) |
Consists of an adjustment to remove the non-cash portion of rent expense, which has been recorded on a straight-line basis in accordance with GAAP. |
(f) |
Represents fees paid to external consultants for two strategic initiatives of limited duration. |
(g) |
Represents termination costs associated with voluntary and involuntary workforce reductions that occurred in January 2016, incremental severance expense to former executives, voluntary workforce reductions that occurred in February 2018, and termination costs to a former executive in the thirty-nine weeks ended November 3, 2018. |
(h) |
Represents non-cash gain related to a change in the estimated removal costs of our tanks and other infrastructure at our gasoline stations that has been accounted for as an asset retirement obligation. |
(i) |
Represents one-time costs related to the IPO and September Offering. See Initial Public Offering. |
(j) |
Other non-cash or discrete items as determined by management, including amortization of a deferred gain from sale lease back transactions in 2013, non-cash accretion expense on asset retirement obligations, obligations associated with our post-retirement medical plan and incremental expense to former executives, corporate impairment charges related to transaction costs and a club that we relocated in 2018. |
See Non-GAAP Financial Measures for more information on our use of Adjusted EBITDA.
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(7) |
The following is a reconciliation of our net cash from operating activities to free cash flow for the periods presented: |
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Net cash provided by operating activities |
$ | 159,361 | $ | 297,428 | $ | 210,085 | $ | 100,359 | $ | 250,893 | ||||||||||
Less: Capital expenditures |
112,363 | 114,756 | 137,466 | 86,122 | 103,340 | |||||||||||||||
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Free cash flow |
$ | 46,998 | $ | 182,672 | $ | 72,619 | $ | 14,237 | $ | 147,553 | ||||||||||
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See Non-GAAP Financial Measures for more information on our use of free cash flow.
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You should carefully consider the risks described below, together with all of the other information included in this prospectus, before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Relating to Our Business
Our business may be affected by issues that affect consumer spending.
Our results of operations are affected by the level of consumer spending and, therefore, by changes in the economic factors that impact consumer spending. Certain economic conditions or events, such as a contraction in the financial markets; high rates of inflation or deflation; high unemployment levels; decreases in consumer disposable income; unavailability of consumer credit; higher consumer debt levels; higher tax rates and other changes in tax laws; higher interest rates; higher fuel, energy and other commodity costs; weakness in the housing market; higher insurance and health care costs; and product cost increases resulting from an increase in commodity prices, could reduce consumer spending generally, which could cause our customers to spend less or to shift their spending to our competitors. Reduced consumer spending may result in reduced demand for our items and may also require increased selling and promotional expenses. Issues or trends that affect consumer spending broadly could affect spending by our members disproportionately. A reduction or shift in consumer spending could negatively impact our business, results of operations and financial condition.
We depend on having a large and loyal membership, and any harm to our relationship with our members could have a material adverse effect on our business, net sales and results of operations.
We depend on having a large and loyal membership. Our membership fee income is a substantial source of profit for us, contributing approximately half of our Adjusted EBITDA during fiscal year 2017. Further, our net sales are directly affected by the number of our members, the number of BJs Perks Rewards ® members and holders of our My BJs Perks ® Mastercard credit cards, the frequency with which our members shop at our clubs and the amount they spend on those trips, which means the loyalty and enthusiasm of our members directly impacts our net sales and operating income. Accordingly, anything that would harm our relationship with our members and lead to lower membership renewal rates or lower spending by members in our clubs could materially adversely affect our net sales, membership fee income and results of operations.
Factors that could adversely affect our relationship with our members include:
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our failure to remain competitive in our pricing relative to our competitors; |
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our failure to provide the expected quality of merchandise; |
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our failure to offer the mix of products that our members want; |
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events that harm our reputation or the reputation of our private brands; |
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our failure to provide the convenience that our members may expect over time, including with respect to technology, delivery and physical location; |
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increases to our membership fees; and |
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increased competition from stores, clubs or internet retailers that have a more attractive mix of price, quality and convenience. |
In addition, we constantly need to attract new members to replace our members who fail to renew and to grow our membership base. If we fail to attract new members, our membership fee income and net sales could suffer.
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Our business plan and operating results depend on our ability to procure the merchandise we sell at the best possible prices.
Our business plan depends on our ability to procure the merchandise we sell at the best possible prices. Because we price our merchandise aggressively, the difference between the price at which we sell a given item and the cost at which we purchase it is often much smaller than it would be for our non-club competitors. Further, it is often not possible for us to reflect increases in our cost of goods by increasing our prices to members. Accordingly, small changes in the prices at which we purchase our goods can have a substantial impact on our operating profits. In fiscal year 2016, we began an initiative to obtain lower cost of goods on the merchandise we sell. If we fail in our efforts to reduce the prices we pay for goods, our growth could suffer. If the prices we pay for goods increase, our operating profit and results of operations could suffer, and if we are forced to increase our prices to our members, our member loyalty could suffer.
Competition may adversely affect our profitability.
The retail business is highly competitive. We compete primarily against other warehouse club operators and grocery and general merchandise retailers, including supermarkets and supercenters, and gasoline stations. Given the value and bulk purchasing orientation of our customer base, we compete to a lesser extent with internet retailers, hard discounters, department and specialty stores and other operators selling a narrow range of merchandise. Some of these competitors, including two major warehouse club operatorsSams Club (a division of Wal-Mart Stores, Inc.) and Costco Wholesale Corporationoperate on a multi-national basis and have significantly greater financial and marketing resources than BJs. These retailers and wholesalers compete in a variety of ways, including with respect to price, services offered to customers, distribution strategy, merchandise selection and availability, location, convenience, store hours and the attractiveness and ease of use of websites and mobile applications. The evolution of retailing through online and mobile channels has also improved the ability of customers to comparison shop with digital devices, which has enhanced competition. We cannot guarantee that we will be able to compete successfully with existing or future competitors. Our inability to respond effectively to competitive factors may have an adverse effect on our profitability as a result of lost market share, lower sales or increased operating costs, among other things.
We depend on vendors to supply us with quality merchandise at the right time and at the right price.
We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices. We source our merchandise from a wide variety of domestic and international vendors. Finding qualified vendors who meet our standards and accessing merchandise in a timely and efficient manner are significant challenges, especially with respect to vendors located and merchandise sourced outside the United States. We have no assurances of continued supply, pricing or access to new products, and, in general, any vendor could at any time change the terms upon which it sells to us or may discontinue selling to us. In addition, member demand may lead to insufficient in-stock positions of our merchandise.
Disruptions in our merchandise distribution, processing, packaging or manufacturing, including disruption through a third-party perishables consolidator, could adversely affect sales and member satisfaction.
We depend on the orderly operation of our merchandise receiving and distribution process, primarily through our Company-operated and contracted distribution centers. We also rely upon processing, packaging, manufacturing and other facilities to support our business. Although we believe that our operations are efficient, unforeseen disruptions in operations due to fires, tornadoes, hurricanes, earthquakes or other catastrophic events, labor issues or other shipping problems (which may include, but are not limited to, strikes, slowdowns or work stoppages at the ports of entry for the merchandise that we import) may result in delays in the delivery of merchandise to our clubs, which could adversely affect sales and the satisfaction of our members. In addition, increases in distribution costs, including but not limited to trucking and freight costs, could adversely affect our costs, which could adversely affect our operating profit and results of operations.
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One third-party distributor currently consolidates a substantial majority of our perishables for shipment to our clubs. While we believe that such a consolidation is in our best interest overall, any disruption in the operations of this distributor could materially impact our sales and profitability. In addition, a prolonged disruption in the operations of this distributor could require us to seek alternative perishables distribution arrangements, which may not be on attractive terms and could lead to delays in distribution of this merchandise, either of which could have a significant and material adverse effect on our business, results of operations and financial condition.
We may not identify timely or respond effectively to consumer trends, which could negatively affect our relationship with our members, the demand for our products and services and our market share.
It is difficult to predict consistently and successfully the products and services our members will demand over time. Our success depends, in part, on our ability to identify and respond to evolving trends in demographics and member preferences. Failure to identify timely or respond effectively to changing consumer tastes, preferences (including those relating to sustainability of product sources) and spending patterns could lead us to offer our members a mix of products or a level of pricing that they do not find attractive. This could negatively affect our relationship with our members, leading them to reduce both their visits to our clubs and the amount they spend and potentially impacting their decision to renew their membership. Such a result would adversely affect the demand for our products and services and our market share. If we are not successful at predicting our sales trends and adjusting accordingly, we may also have excess inventory, which could result in additional markdowns and reduce our operating performance. This could have an adverse effect on margins and operating income.
We are subject to payment-related risks, including risks to the security of payment card information.
We accept payments using an increasing variety of methods, including cash, checks, our co-branded credit cards and a variety of other credit and debit cards, as well as Masterpass, Paypal, Apple Pay ® , Google Pay and EBT. Our efficient operation, like that of most retailers, requires the transmission of information permitting cashless payments. As we offer new payment options to our members, we may be subject to additional rules, regulations and compliance requirements, along with higher fraud losses. For certain payment methods, we pay interchange and other related card acceptance fees, along with additional transaction processing fees. We rely on third parties to provide secure and reliable payment transaction processing services, including the processing of credit and debit cards, and our co-branded credit card, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association and network operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change over time. For example, we are subject to Payment Card Industry Data Security Standards (PCI DSS), which contain compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processing and transmission of individual cardholder data. We are also subject to a consent decree entered by the Federal Trade Commission (the FTC) in 2005 in connection with a complaint alleging that we had failed to adequately safeguard members personal data. Under the consent decree, we are required to maintain a comprehensive information security program that is reasonably designed to protect the security, confidentiality and integrity of personal information collected from or about our members. In addition, if our third-party processor systems are breached or compromised, we may be subject to substantial fines, remediation costs, litigation and higher transaction fees and lose our ability to accept credit or debit card payments from our members, and our reputation, business and operating results could also be materially adversely affected. Our security measures have been breached in the past and may in the future be undermined due to the actions of outside parties, including nation-state sponsored actors, employee error, internal or external malfeasance, or otherwise, and, as a result an unauthorized party may obtain access to our data systems and misappropriate, alter, or destroy business and personal information, including payment card information. Such information may also be placed at risk through our use of outside vendors, which may have data security systems that differ from those that we maintain or are more vulnerable to breach. For example, in March 2018, our travel vendor informed us that the personal data of several hundred of our members had been compromised because of
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a data breach at Orbitz, which that vendor used as a platform for making online travel bookings. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may not immediately produce signs of intrusion, we may be unable to anticipate these techniques, discover or counter them in a timely fashion, or implement adequate preventative measures. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and harm to our relationship with our members, any of which could have an adverse effect on our business.
We rely extensively on information technology to process transactions, compile results and manage our businesses. Failure or disruption of our primary and back-up systems could adversely affect our businesses.
Given the very high volume of transactions we process each year, it is important that we maintain uninterrupted operation of our business-critical computer systems. Our systems, including our back-up systems, are subject to damage or interruption from, among other circumstances, power outages, computer and telecommunications failures, computer viruses, internal or external security breaches, catastrophic events such as fires, earthquakes, tornadoes and hurricanes and errors by our employees. If our systems are damaged or cease to function properly, we may have to make significant investments to fix or replace them, and we may suffer serious interruptions in our operations, which might not be short-lived, in the interim. Any material interruption in these systems could have a material adverse effect on our business and results of operations. In addition, the cost of securing our systems against failure or attack is considerable, and increases in these costs, particularly in the wake of a breach or failure, could be material.
Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.
As our business grows, we continue to make significant technology investments both in our operations and in our administrative functions. The costs, potential problems and interruptions associated with the implementation of technology initiatives could disrupt or reduce the efficiency of our operations in the near term. They may also require us to divert resources from our core business to ensure that implementation is successful. In addition, new or upgraded technology might not provide the anticipated benefits; it might take longer than expected to realize the anticipated benefits; and the technology might fail or cost more than anticipated.
Changes in laws related to the Supplemental Nutrition Assistance Program (SNAP), to the governmental administration of SNAP or to SNAPs electronic benefit transfer (EBT) systems could adversely impact our results of operations.
Under SNAP, we are currently authorized to accept EBT payments, or food stamps, at our clubs as tender for eligible items, and payments via EBT accounted for approximately 5% of our net sales for fiscal years 2015-2017. Changes in state and federal laws governing the SNAP program, including rules on where and for what EBT cards may be used, could reduce sales at our clubs. For example, in February 2018, the federal government proposed reductions in food stamp program spending and changes in the programs administration, including the provision of benefits to recipients in the form of government-purchased food items instead of electronic credits and disbursements that can be used to purchase food items (including at our clubs). Any such spending reductions or changes could therefore decrease sales at our clubs and thereby materially and adversely affect our business, financial condition and results of operations.
Our success depends on our ability to attract and retain a qualified management team and other team members while controlling our labor costs.
We are dependent upon several key management and other team members. If we were to lose the services of one or more of our key team members, this could have a material adverse effect on our operations. Our continued
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success also depends upon our ability to attract and retain highly qualified team members to meet our future growth needs while controlling related labor costs. Our ability to control labor costs is subject to numerous external factors, including healthcare costs and prevailing wage rates, which may be affected by, among other factors, competitive wage pressure, minimum wage laws and general economic conditions. If we experience tight labor markets, either regionally or in general, we may have to increase our wages, which could increase our selling, general and administrative expenses and adversely affect our operating income. We compete with other retail and non-retail businesses for these employees and invest significant resources in training them. There is no assurance that we will be able to attract or retain highly qualified team members to operate our business.
Union attempts to organize our team members could disrupt our business.
In the past, unions have attempted to organize our team members at certain of our clubs and distribution centers. Our management and team members may be required to devote their time to respond to union activities, which could be distracting to our operations. Future union activities, including organizing efforts, slow-downs or work stoppages could negatively impact our business and results of operations. Changes in labor laws or regulations in this area could also adversely impact our business if such changes promote union activity.
Our comparable club sales and quarterly operating results may fluctuate significantly.
Our comparable club sales may be adversely affected for many reasons, including new club openings by our competitors and the opening of our own new clubs that may cannibalize existing club sales. Comparable club sales may also be affected by cycling against strong sales in the prior year, by new clubs entering our comparable club base and by price reductions in response to competition.
Our quarterly operating results may be adversely affected by a number of factors including losses in new clubs, price changes in response to competitors prices, increases in operating costs, volatility in gasoline, energy and commodity prices, increasing penetration of sales of our private label brands (Wellsley Farms ® and Berkley Jensen ® ), federal budgetary and tax policy, weather conditions, natural disasters, local economic conditions and the timing of new club openings and related start-up costs.
Changes in our product mix or in our revenues from gasoline sales could negatively impact our revenue and results of operations.
Certain of our key performance indicators, including net sales, operating income and comparable club sales, could be negatively impacted by changes to our product mix or in the price of gasoline. For example, we continue to add private label products to our assortment of product offerings at our clubs, sold under our Wellsley Farms and Berkley Jensen private labels. We generally price these private label products lower than the manufacturer branded products of comparable quality that we also offer. Accordingly, a shift in our sales mix in which we sell more units of our private label products and fewer units of our manufacturer branded products would have an adverse impact on our overall net sales. Also, as we continue to add gas stations to our club base, and increase our sales of gasoline, this could adversely affect our profit margins. Since gasoline generates lower profit margins than the remainder of our business, we could expect to see our overall gross profit margin rates decline as sales of gasoline increase. In addition, gasoline prices have been historically volatile and may fluctuate widely due to changes in domestic and international supply and demand. Accordingly, significant changes in gasoline prices may substantially affect our net sales notwithstanding that the profit margin and unit sales for gasoline are largely unchanged, and this effect may increase as gasoline sales make up a larger portion of our revenue.
Research analysts and investors may recognize and react to the foregoing changes to our key performance indicators and believe that they indicate a decline in our performance, and this could occur regardless of whether the underlying cause has an adverse impact on our profitability. If we suffer an adverse change to our key performance indicators, this could adversely affect the trading price of our common stock.
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Product recalls could adversely affect our sales and results of operations.
If our merchandise offerings, including food and general merchandise products, do not meet applicable safety standards or our members expectations regarding safety, we could experience lost sales and increased costs and be exposed to legal and reputational risk. The sale of these items involves the risk of health-related illness or injury to our members. Such illnesses or injuries could result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, manufacturing, storage, handling and transportation phases or faulty design. We are dependent on our vendors, including vendors located outside the United States, to ensure that the products we buy comply with all safety standards. While all of our vendors must comply with applicable product safety laws, it is possible that a vendor will fail to comply with these laws or otherwise fail to ensure the safety of its products. Further, while our vendors generally must agree to indemnify us in the case of loss, it is possible that a vendor will fail to fulfill that obligation.
If a recall does occur, we have procedures in place to notify our clubs and, if appropriate, the members who have purchased the goods in question. We determine the appropriateness on a case-by-case basis, based, in part, on the size of the recall, the severity of the potential impact to the member and our ability to contact the purchasers of the products in question. While we are subject to governmental inspection and regulations and work to comply in all material respects with applicable laws and regulations, it is possible that consumption or use of our products could cause a health-related illness or injury in the future and that we will be subject to claims, lawsuits or government investigations relating to such matters. This could result in costly product recalls and other liabilities that could adversely affect our business and results of operations. Even if a product liability claim is unsuccessful or is not fully pursued, negative publicity could adversely affect our reputation with existing and potential members and our corporate and brand image, including that of our Wellsley Farms and Berkley Jensen private labels, and could have long-term adverse effects on our business.
If we do not successfully maintain a relevant omnichannel experience for our members, our results of operations could be adversely impacted.
Omnichannel retailing is rapidly evolving, and we must keep pace with changing member expectations and new developments by our competitors. Our members are increasingly using mobile phones, tablets and other devices to shop and to interact with us through social media. We continue to make technology investments in our website and mobile application. If we are unable to make, improve or develop relevant member-facing technology in a timely manner, our ability to compete and our results of operations could be adversely affected.
We depend on the financial performance of our operations in the New York metropolitan area.
Our financial and operational performance is dependent on our operations in the New York metropolitan area, which accounted for 25% of net sales in fiscal year 2017. We consider 39 of our clubs to be located in the New York metropolitan area. Any substantial slowing or sustained decline in these operations could materially adversely affect our business and financial results. Declines in financial performance of our operations in the New York metropolitan area could arise from, among other things, slower growth or declines in our comparable club sales; negative trends in operating expenses, including increased labor, healthcare and energy costs; failing to meet targets for club openings; cannibalization of existing locations by new clubs; shifts in sales mix toward lower gross margin products; changes or uncertainties in economic conditions in this market, including higher levels of unemployment, depressed home values and natural disasters; regional economic problems; changes in local regulations; terrorist attacks; and failure to consistently provide a high quality and well-assorted mix of products to retain our existing member base and attract new members.
Our growth strategy to open new clubs involves risks.
Our long-term sales and income growth is dependent to a certain degree on our ability to open new clubs and gasoline stations in both existing markets and new markets. Opening new clubs is expensive and involves
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substantial risks that may prevent us from receiving an appropriate return on that investment. We may not be successful in opening new clubs and gasoline stations on the schedule we have planned or at all, and the clubs and gasoline stations we open may not be successful. Our expansion is dependent on finding suitable locations, which may be affected by local regulations, political opposition, construction and development costs and competition from other retailers for particular sites. If prospective landlords find it difficult to obtain credit, we may need to own more new clubs rather than lease them. Owned locations require more initial capital and therefore, the need to own new locations could constrain our growth. If we are able to secure new sites and open new locations, these locations may not be profitable for many reasons. For example, we may not be able to hire, train and retain a suitable work force to staff these locations or to integrate new clubs successfully into our existing infrastructure, either of which could prevent us from operating the clubs in a profitable manner. In addition, entry into new markets may bring us into competition with new competitors or with existing competitors with a stronger, more well-established market presence. We may also improperly judge the suitability of a particular site. Any of these factors could cause a site to lose money or otherwise fail to provide a proper return on investment. If we fail to open new clubs as quickly as we have planned, our growth will suffer. If we open sites that we do not or cannot operate profitably, then our financial condition and results from operations could suffer.
Because we compete to a substantial degree on price, changes affecting the market prices of the goods we sell could adversely affect our net sales and operating profit.
It is an important part of our business plan that we offer value to our members, including offering prices that are substantially below certain of our competitors. Accordingly, we carefully monitor the market prices of the goods we sell in order to maintain our pricing advantage. If our competitors substantially lower their prices, we would be forced to lower our prices, which could adversely impact our margins and results of operations. In addition, the market price of the goods we sell can be influenced by general economic conditions. For example, if we experience a general deflation in the prices of the goods we sell, this would reduce our net sales and potentially adversely affect our operating income.
Any harm to the reputation of our private label brands could have a material adverse effect on our results of operations.
We sell many products under our private label brands, Wellsley Farms and Berkley Jensen. Maintaining consistent product quality, competitive pricing and availability of these products is essential to developing and maintaining member loyalty to these brands. These products generally carry higher margins than manufacturer branded products of comparable quality carried in our clubs and represent a growing portion of our overall sales. If our private label brands experience a loss of member acceptance or confidence, our net sales and operating results could be adversely affected.
We may not be able to protect our intellectual property adequately, which, in turn, could harm the value of our brand and adversely affect our business.
We rely on our proprietary intellectual property, including trademarks, to market, promote and sell our products in our clubs. Our ability to implement our business plan successfully depends in part on our ability to build further brand recognition using our trademarks, service marks, proprietary products and other intellectual property, including our name and logos and the unique character and atmosphere of our clubs. We monitor and protect against activities that might infringe, dilute or otherwise violate our trademarks and other intellectual property and rely on the trademark and other laws of the United States.
We may be unable to prevent third parties from using our intellectual property without our authorization. To the extent we cannot protect our intellectual property, unauthorized use and misuse of our intellectual property could harm our competitive position and have a material adverse effect on our financial condition, cash flows or results of operations. Additionally, adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets or other intellectual property.
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Additionally, we cannot be certain that we do not or will not in the future infringe on the intellectual property rights of third parties. From time to time, we have been subject to claims from third parties that we have infringed upon their intellectual property rights and we face the risk of such claims in the future. Even if we are successful in these proceedings, any intellectual property infringement claims against us could be costly, time-consuming, harmful to our reputation, divert the time and attention of our management and other personnel, or result in injunctive or other equitable relief that may require us to make changes to our business, any of which could have a material adverse effect on our financial condition, cash flows or results of operations. With respect to any third party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms.
Our business is moderately seasonal and weak performance during one of our historically strong seasonal periods could have a material adverse effect on our operating results for the entire fiscal year.
Our business is moderately seasonal, with a meaningful portion of our sales dedicated to seasonal and holiday merchandise, resulting in the realization of higher portions of net sales and operating income in the second and fourth fiscal quarters. Due to the importance of our peak sales periods, which include the spring and year-end holiday seasons, the second and fourth fiscal quarters have historically contributed, and are expected to continue to contribute, significantly to our operating results for the entire fiscal year. In anticipation of seasonal increases in sales activity during these periods, we incur significant additional expense prior to and during our peak seasonal periods, which we may finance with additional short-term borrowings. These expenses may include the acquisition of additional inventory, seasonal staffing needs and other similar items. As a result, any factors negatively affecting us during these periods, including adverse weather and unfavorable economic conditions, could have a material adverse effect on our results of operations for the entire fiscal year.
Insurance claims could adversely impact our results of operations.
We use a combination of insurance and self-insurance plans to provide for potential liability for workers compensation, general liability, property, fiduciary liability and employee and retiree health care. Liabilities associated with the risk retained by the Company are estimated based on historical claims experience and other actuarial assumptions believed to be reasonable under the circumstances. Our results of operations could be adversely impacted if actual future occurrences and claims differ from our assumptions and historical trends.
Natural disasters or other catastrophes could negatively affect our business, financial condition and results of operations.
Natural disasters, such as hurricanes, typhoons or earthquakes, particularly in locations where our centralized operating systems and administrative personnel are located, could negatively affect our operations and financial performance. For example, our operations are concentrated primarily on the east coast of the United States, and any adverse weather event or natural disaster, such as a hurricane or heavy snow storm, could have a material adverse effect on a substantial portion of our operations. Such events could result in physical damage to one or more of our properties, the temporary closure of one or more clubs, one or more of our Company-operated or contracted distribution centers or our home office facility, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products, the temporary disruption in the transport of goods to or from overseas, delays in the delivery of goods to our clubs or distribution centers and the temporary reduction in the availability of products in our clubs. Public health issues, whether occurring in the U.S. or abroad, or terrorist attacks could also disrupt our operations, disrupt the operations of suppliers or members or have an adverse impact on consumer spending and confidence levels. These events could also reduce demand for our products or make it difficult or impossible to procure products. We may be required to suspend operations in some or all of our locations, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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Inventory shrinkage could have a material adverse effect on our business, financial condition and results of operations.
We are subject to the risk of inventory loss and theft. Our inventory shrinkage rates have not been material, or fluctuated significantly in recent years, although it is possible that rates of inventory loss and theft in the future will exceed our estimates and that our measures will be ineffective in reducing our inventory shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, for example as a result of increased use of self-checkout technologies, it could have a material adverse effect on our business, results of operations and financial condition.
We are subject to risks associated with leasing substantial amounts of space.
We lease most of our retail properties, each of our three company-operated distribution centers and our corporate office. The profitability of our business is dependent on operating our current club base with favorable margins, opening and operating new clubs at a reasonable profit, renewing leases for clubs in desirable locations and, if necessary, identifying and closing underperforming clubs. We enter into leases for a significant number of our club locations for varying terms. Typically, a large portion of a clubs operating expense is the cost associated with leasing the location.
We are typically responsible for taxes, utilities, insurance, repairs and maintenance for our leased retail properties. Our rent expense for fiscal years 2015, 2016 and 2017 totaled $287.5 million, $298.1 million and $301.9 million, respectively. Our future minimum rental commitments for all operating leases in existence as of February 3, 2018 was $302.6 million for fiscal year 2018 and total $3,122.8 million in aggregate for fiscal years 2019 through 2040. We expect that many of the new clubs we open will also be leased to us under operating leases, which will further increase our operating lease expenditures and require significant capital expenditures. We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our ABL Facility or other sources, we may not be able to service our lease expenses or fund our other liquidity and capital needs, which would materially affect our business.
The operating leases for our retail properties, distribution centers and corporate office expire at various dates through 2040. Several leases have renewal options for various periods of time at our discretion. One of our retail property leases and none of our distribution center leases expire prior to 2027. When leases for our clubs with ongoing operations expire, we may be unable to negotiate renewals, either on commercially acceptable terms, or at all. Further, if we attempt to relocate a club for which the lease has expired, we may be unable to find a new location for that club on commercially acceptable terms or at all, and the relocation of a club might not be successful for other reasons. Any of these factors could cause us to close clubs in desirable locations, which could have an adverse impact on our results of operations.
Over time, current club locations may not continue to be desirable because of changes in demographics within the surrounding area or a decline in shopping traffic, including traffic generated by other nearby clubs. We may not be able to terminate a particular lease if or when we would like to do so. If we decide to close clubs, we are generally required to continue to pay rent and operating expenses for the balance of the lease term, which could be expensive. Even if we are able to assign or sublease vacated locations where our lease cannot be terminated, we may remain liable on the lease obligations if the assignee or sublessee does not perform.
Non-compliance with privacy and information security laws, especially as it relates to maintaining the security of member-related personal information, may damage our business and reputation with members, or result in our incurring substantial additional costs and becoming subject to litigation.
The use of individually identifiable data by our business is regulated at the federal and state levels. Privacy and information security laws and regulations change, and compliance with them may result in cost increases due
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to necessary systems changes and the development of new administrative processes. If we fail to comply with these laws and regulations or experience a data security breach, our reputation could be damaged, possibly resulting in lost future business, and we could be subjected to additional legal or financial risk as a result of non-compliance.
For example, as do most retailers and wholesale club operators, we and certain of our service providers receive certain personal information about our members. In addition, our online operations at www.bjs.com depend upon the secure transmission of confidential information over public networks. A compromise of our security systems or those of some of our business partners that results in our members personal information being obtained by unauthorized persons could adversely affect our reputation with our members and others, as well as our operations, results of operations, financial condition and liquidity, and could result in litigation against us or the imposition of penalties. In addition, a security breach could require that we expend significant additional resources related to the security of information systems and could result in a disruption of our operations.
Federal, state, regional and local laws and regulations relating to the cleanup, investigation, use, storage, discharge and disposal of hazardous materials, hazardous and non-hazardous wastes and other environmental matters could adversely impact our business, financial condition and results of operations.
We are subject to a wide variety of federal, state, regional and local laws and regulations relating to the use, storage, discharge and disposal of hazardous materials, hazardous and non-hazardous wastes and other environmental matters. Failure to comply with these laws could result in harm to our members, employees or others, significant costs to satisfy environmental compliance, remediation or compensatory requirements, private party claims, or the imposition of severe penalties or restrictions on operations by governmental agencies or courts that could adversely affect our business, financial condition, cash flows and results of operations. In addition, risks of substantial costs and liabilities, including for the investigation and remediation of past or present contamination at our current or former properties (whether or not caused by us), are inherent in our operations, particularly with respect to our gasoline stations. There can be no assurance that substantial costs and liabilities for the investigation and remediation of contamination will not be incurred.
Our e-commerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability.
As our e-commerce business grows, we increasingly encounter the risks and difficulties that internet-based businesses face. The successful operation of our e-commerce business, and our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depend on efficient and uninterrupted operation of our order-taking and fulfillment operations. Risks associated with our e-commerce business include:
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uncertainties associated with our website, including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches and legal claims related to our website operations and e-commerce fulfillment; |
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disruptions in telecommunications service or power outages; |
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reliance on third parties for computer hardware and software and delivery of merchandise to our customers; |
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rapid changes in technology; |
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credit or debit card fraud and other payment processing related issues; |
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changes in applicable federal and state regulations; |
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liability for online content; |
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cybersecurity and consumer privacy concerns and regulation; and |
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natural disasters. |
Problems in any of these areas could result in a reduction in sales; increased costs; sanctions or penalties; and damage to our reputation and brands. Personal information from our members may also be placed at risk through our use of outside vendors, which may have data security systems that differ from those that we maintain or are more vulnerable to breach. For example, in March 2018, our travel vendor informed us that the personal data of several hundred of our members had been compromised because of a data breach at Orbitz, which that vendor used as a platform for making online travel bookings. Further, if we invest substantial amounts in developing our e-commerce capabilities, these factors or others could prevent those investments from being effective.
In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools (such as paid search and mobile applications, among others), which may increase our costs and which may not increase sales or attract customers. If we are unable to allow real-time and accurate visibility into product availability when customers are ready to purchase, fulfill our customers orders quickly and efficiently using the fulfillment and payment methods they demand, provide a convenient and consistent experience for our customers regardless of the ultimate sales channel or manage our online sales effectively, our ability to compete and our results of operations could be adversely affected.
Furthermore, if our e-commerce business successfully grows, it may do so in part by attracting existing customers, rather than new customers, who choose to purchase products from us online rather than from our physical locations, thereby detracting from the financial performance of our clubs.
We are subject to a number of risks because we import some of our merchandise.
We imported approximately 4% of our merchandise directly from foreign countries such as China, Vietnam, Bangladesh and India during fiscal year 2017. In addition, many of our domestic vendors purchase a portion of their products from foreign sources.
Foreign sourcing subjects us to a number of risks generally associated with doing business abroad including lead times, labor issues, shipping and freight constraints, product and raw material issues, political and economic conditions, government policies, tariffs and restrictions, epidemics and natural disasters.
If any of these or other factors were to cause supply disruptions or delays, our inventory levels may be reduced or the cost of our products may increase unless and until alternative supply arrangements could be made. Merchandise purchased from alternative sources may be of lesser quality or more expensive than the merchandise we currently purchase abroad. Any shortages of merchandise (especially seasonal and holiday merchandise), even if temporary, could result in missed opportunities, reducing our sales and profitability. It could also result in our customers seeking and obtaining the products in question from our competitors.
In addition, reductions in the value of the U.S. dollar or increases in the value of foreign currencies could ultimately increase the prices that we pay for our products. We have not hedged our currency risk in the past and do not currently anticipate doing so in the future. All of our products manufactured overseas and imported into the United States are subject to duties collected by U.S. Customs and Border Protection. Increases in these duties would increase the prices we pay for these products, and we may not be able fully to recapture these costs in our pricing to customers. Further, we may be subjected to additional tariffs or penalties if we or our suppliers are found to be in violation of U.S. laws and regulations applicable to the importation of our products (including, but not limited to, prohibitions against entering merchandise by means of materially negligently made false statements or omissions). To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ business practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.
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Because of our international sourcing, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.
We source approximately 4% of our merchandise abroad. The U.S. Foreign Corrupt Practices Act and other similar laws and regulations generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, we cannot assure you that we will be successful in preventing our employees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, cash flows and results of operations.
Certain legal proceedings could adversely impact our results of operations.
We are involved in a number of legal proceedings involving employment issues, personal injury, product liability, consumer matters, intellectual property claims and other litigation. Certain of these lawsuits, if decided adversely to us or settled by us, may result in material liability. See the notes to our audited financial statements included elsewhere in this prospectus for additional information. Further, we are unable to predict whether unknown claims may be brought against us that could become material.
Factors associated with climate change could adversely affect our business.
We use natural gas, diesel fuel, gasoline and electricity in our distribution and sale operations. Increased government regulations to limit carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation or regulation affecting energy inputs could materially affect our profitability. Climate change could affect our ability to procure needed commodities at costs and in quantities we currently experience. Climate change may be associated with extreme weather conditions, such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels. We also sell a substantial amount of gasoline, the demand for which could be impacted by concerns about climate change and which could face increased regulation.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations.
Accounting principles and related pronouncements, implementation guidelines and interpretations we apply to a wide range of matters that are relevant to our business, including, but not limited to, revenue recognition, vendor rebates and allowances; inventory; impairment of goodwill, indefinite-lived and long-lived assets; self-insurance reserves income taxes; and stock-based compensation are highly complex and involve subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance.
Provisions for losses related to self-insured risks are generally based upon independent actuarially determined estimates. The assumptions underlying the ultimate costs of existing claim losses can be highly unpredictable, which can affect the liability recorded for such claims. For example, variability in health care cost inflation rates inherent in these claims can affect the amounts recognized. Similarly, changes in legal trends and interpretations, as well as changes in the nature and method of how claims are settled can impact ultimate costs. Although our estimates of liabilities incurred do not anticipate significant changes in historical trends for these variables, any changes could have a considerable effect upon future claim costs and currently recorded liabilities and could materially impact our consolidated financial statements.
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Changes in lease accounting standards may materially and adversely affect us.
The Financial Accounting Standards Board, or FASB, recently adopted new accounting rules, to be effective for our 2019 fiscal year, that will require companies to capitalize most leases on their balance sheets by recognizing a lessees rights and obligations. When the rules are effective, we will be required to account for the leases for our clubs, headquarters and distribution centers as assets and liabilities on our balance sheet, while previously we accounted for such leases on an off balance sheet basis. As a result, a significant amount of lease related assets and liabilities will be recorded on our balance sheet, and we may be required to make other changes to the recording and classification of our lease related expenses. Though these changes will not have any direct impact on our overall financial condition, these changes will cause the total amount of assets and liabilities we report to increase substantially. This could cause investors or others to believe that we are highly leveraged and could change the calculations of financial metrics and covenants under our debt facilities, and under third-party financial models regarding our financial condition.
Goodwill and identifiable intangible assets represent a significant portion of our total assets, and any impairment of these assets could adversely affect our results of operations.
Our goodwill and indefinite-lived intangible assets, which consist of goodwill and our trade name, represented a significant portion of our total assets as of February 3, 2018. Accounting rules require the evaluation of our goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Such indicators are based on market conditions and the operational performance of our business.
To test goodwill for impairment, we may initially use a qualitative approach to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If our management concludes, based on its assessment of relevant events, facts and circumstances, that it is more likely than not that a reporting units carrying value is greater than its fair value, then a quantitative analysis will be performed to determine if there is any impairment. We may initially also elect to perform a quantitative analysis, which is a two-step assessment. In step one we estimate the reporting units fair value by estimating the future cash flows of the reporting units to which the goodwill relates, and then we discount the future cash flows at a market-participant-derived weighted average cost of capital. The estimates of fair value of the reporting unit is based on the best information available as of the date of the assessment. If the carrying value of the reporting unit exceeds its estimated fair value in the first step, a second step is performed; in step two, we compare the implied fair value of goodwill to the carrying amount of goodwill. The implied fair value of goodwill is determined by a hypothetical purchase price allocation using the reporting units fair value as the purchase price. If the implied fair value of the goodwill is less than the reporting units carrying amount, then goodwill is impaired and is written down to the implied fair value amount.
To test our other indefinite-lived asset, our trade name, for impairment we determine the fair value of our trade name using the relief-from-royalty method, which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life. If, in conducting an impairment evaluation, we determine that the carrying value of an asset exceeded its fair value, we would be required to record a non-cash impairment charge for the difference between the carrying value and the fair value of the asset.
If a significant amount of our goodwill and identifiable intangible assets were deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected.
Recent U.S. tax legislation may adversely affect our future cash flows.
The Tax Cuts and Jobs Act (TCJA), which was enacted into law on December 22, 2017, significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income
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tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, revising the rules governing net operating losses and repealing the deduction of certain performance-based compensation paid to an expanded group of executive officers. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service (IRS), any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, since taxing authorities often use federal taxable income as a starting point for computing state and local tax liabilities.
Our analysis and interpretation of the TCJA is ongoing. While the new rules limiting interest deductibility to 30% of our adjusted taxable income are not currently expected to materially increase our tax burden on a permanent basis, such an increase could occur if our income were to materially decrease or our interest burden were to materially increase. Further, the TCJA may result in material adverse effects that we have not yet identified. While some of the changes made by the tax legislation may adversely affect the Company, we believe that other changes, such as the reduction in the U.S. corporate income tax rate, will be beneficial. We continue to work with our tax advisors and auditors to determine the full impact that the TCJA will have on us.
We could be subject to additional income tax liabilities.
We compute our income tax provision based on enacted federal and state tax rates. As tax rates vary among jurisdictions, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax provision. Additionally, changes in the enacted tax rates, adverse outcomes in tax audits, including transfer pricing disputes, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations.
We are a holding company with no operations of our own, and we depend on our subsidiaries for cash.
We are a holding company and do not have any material assets or operations other than ownership of equity interests of our subsidiaries. Our operations are conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to pay dividends, if any, is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans. The ability of our subsidiaries to generate sufficient cash flow from operations to allow us and them to make scheduled payments on our debt obligations will depend on their future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. We cannot assure you that the cash flow and earnings of our operating subsidiaries will be adequate for our subsidiaries to service their debt obligations. If our subsidiaries do not generate sufficient cash flow from operations to satisfy corporate obligations, we may have to undertake alternative financing plans (such as refinancing), restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. We cannot assure you that any such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our obligations, or to refinance our obligations on commercially reasonable terms, could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, we and our subsidiaries may incur substantial additional indebtedness in the future that may severely restrict or prohibit our subsidiaries from making distributions, paying dividends, if any, or making loans to us.
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Risks Relating to Our Indebtedness
We face risks related to our substantial indebtedness.
As of November 3, 2018, our total outstanding debt was $1,957.9 million. Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk associated with our variable rate debt and prevent us from meeting our obligations under our ABL Facility and First Lien Term Loan. Our substantial indebtedness could have important consequences to us, including:
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making it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under our debt instruments, including restrictive covenants, could result in an event of default under the agreements governing our indebtedness increasing our vulnerability to general economic and industry conditions; |
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requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, selling and marketing efforts, product development, future business opportunities and other purposes; |
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limiting our ability to deduct interest in the taxable period in which it is incurred in light of the TCJA; |
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exposing us to the risk of increased interest rates as substantially all of our borrowings are at variable rates; |
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restricting us from making strategic acquisitions; |
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limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and |
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limiting our ability to plan for, or adjust to, changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less highly leveraged. |
The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations under our indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in the credit agreements governing our ABL Facility and First Lien Term Loan.
The ABL Facility and First Lien Term Loan impose significant operating and financial restrictions on us and our subsidiaries that may prevent us from pursuing certain business opportunities and restrict our ability to operate our business.
The credit agreements governing our ABL Facility and First Lien Term Loan contain covenants that restrict our and our subsidiaries ability to take various actions, such as:
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incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; |
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pay dividends or make other distributions on, or redeem or purchase, any equity interests or make other restricted payments; |
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make certain acquisitions or investments; |
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create or incur liens; |
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transfer or sell assets; |
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incur restrictions on the payments of dividends or other distributions from our restricted subsidiaries; |
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alter the business that we conduct; |
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enter into transactions with affiliates; and |
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consummate a merger or consolidation or sell, assign, transfer, lease or otherwise dispose of all or substantially all of our assets. |
The restrictions in the credit agreements governing our ABL Facility and First Lien Term Loan also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that could be in our interest.
In addition, our ability to borrow under the ABL Facility is limited by the amount of our borrowing base. Any negative impact on the elements of our borrowing base, such as accounts receivable and inventory could reduce our borrowing capacity under the ABL Facility.
We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which could have a material adverse effect on our business, financial condition and results of operations.
Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate cash in the future and is subject to general economic, financial, competitive, legislative, regulatory, tax and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings are not available to us in amounts sufficient to fund our other liquidity needs, our business financial condition and results of operations could be materially adversely affected. If we cannot generate sufficient cash flow from operations to make scheduled principal and interest payments in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity. The terms of our existing or future debt agreements, including the First Lien Term Loan and the ABL Facility, may also restrict us from affecting any of these alternatives. Further, changes in the credit and capital markets, including market disruptions and interest rate fluctuations, may increase the cost of financing, make it more difficult to obtain favorable terms, or restrict our access to these sources of future liquidity. Our ABL Facility is scheduled to mature on August 17, 2023 and our First Lien Term Loan is scheduled to mature on February 3, 2024. See Description of Certain Indebtedness. If we are unable to refinance any of our indebtedness on commercially reasonable terms or at all or to effect any other action relating to our indebtedness on satisfactory terms or at all, it could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Ownership of our Common Stock and this Offering
An active trading market for our common stock may not be sustained, and the market price of our common stock may be volatile.
Prior to our IPO, there was no public market for our common stock. Given our limited trading history, an active trading market for our common stock may not be sustained, which could adversely affect your ability to sell your shares and the market price for your shares. Further, the market price and trading volume of our common stock may be volatile. These may be influenced by many factors, including:
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quarterly variations in our operating results compared to market expectations; |
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changes in the preferences of our customers; |
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low comparable club sales growth compared to market expectations; |
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delays in the planned openings of new clubs; |
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the failure of securities analysts to cover the Company or changes in financial estimates by the analysts who cover us, our competitors or the grocery or retail industries in general and the wholesale club segment in particular; |
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economic, legal and regulatory factors unrelated to our performance; |
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changes in consumer spending or the housing market; |
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increased competition or stock price performance of our competitors; |
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announcements by us or our competitors of new locations, capacity changes, strategic investments or acquisitions; |
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actual or anticipated variations in our or our competitors operating results, and our competitors growth rates; |
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future sales of our common stock or the perception that such sales may occur; |
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changes in senior management or key personnel; |
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investor perceptions of us, our competitors and our industry; |
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general or regional economic conditions; |
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changes in laws or regulations, or new interpretations or applications of laws and regulations that are applicable to our business; lawsuits, enforcement actions and other claims by third parties or governmental authorities; |
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action by institutional stockholders or other large stockholders; |
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failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices; |
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speculation in the press or investment community; |
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events beyond our control, such as war, terrorist attacks, transportation and fuel prices, natural disasters, severe weather and widespread illness; and |
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the other factors listed in this Risk Factors section. |
As a result of these factors, you may not be able to resell your shares at or above the price at which you purchased them. In addition, our stock price may be volatile. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us. Accordingly, these broad market fluctuations, as well as general economic, political and market conditions, such as recessions or interest rate changes, may significantly reduce the market price of the common stock, regardless of our operating performance. In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were to become involved in securities litigation, it could result in substantial costs and divert resources and our managements attention from other business concerns, regardless of the outcome of such litigation.
The Sponsors exercise a significant control over the direction of our business and have the right to nominate members of our Board. If the ownership of our common stock continues to be highly concentrated, it could prevent our stockholders from influencing significant corporate decisions.
The Sponsors currently directly or indirectly own approximately 42.0% of our common stock and have entered into the Voting Agreement. The Sponsors will continue to exercise significant influence over all matters requiring stockholder approval for the foreseeable future, including approval of significant corporate transactions, which may reduce the market price of our common stock.
Pursuant to the Voting agreement, the Sponsors are entitled to designate individuals to be included in the slate of nominees recommended by our Board for election to our Board under certain circumstances related to continued ownership of the shares they hold.
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These provisions and the Sponsors ownership of our common stock will allow the Sponsors to continue to exercise significant control over our corporate decisions, including over matters on which our other stockholders have a right to vote. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws also include a number of provisions that may discourage, delay or prevent a change in our management or control for so long as the Sponsors own specified percentages of our common stock. These provisions not only could have a negative impact on the trading price of our common stock but could also allow the Sponsors to delay or prevent a corporate transaction that the public stockholders might approve.
Sales of a substantial number of shares of our common stock in the public market by certain of our stockholders could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of February 2, 2019, we had 137,316,974 outstanding shares of common stock, including 58,345,145 shares of common stock that are the subject of the registration statement of which this prospectus forms a part.
Holders of 44% of our outstanding common stock (including the selling stockholders) have rights, subject to certain conditions, to require us to file registration statements for the public sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders and to cause us to engage in an underwritten offering or other public sale of the shares that are the subject of the registration statement of which this prospectus forms a part. The sale of these shares pursuant to a registration under the Securities Act of 1933, as amended, or the Securities Act, would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by our affiliates as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. See Certain Relationships and Related Party TransactionsAmended and Restated Stockholders Agreement.
Our ability to raise capital in the future may be limited.
Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
If securities or industry analysts do not publish or cease publishing research or reports about us, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock depends in part on the research and reports that third-party securities analysts publish about us and our industry. One or more analysts could downgrade our common stock or issue other negative commentary about us or our industry. In addition, we may be unable or slow to attract research coverage. Alternatively, if one or more of these analysts cease coverage of us, we could lose visibility in the market. As a result of one or more of these factors, the trading price of our common stock could decline.
35
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of the Delaware General Corporation Law, or DGCL, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:
|
establishing a classified board of directors such that not all members of the board are elected at one time; |
|
allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our board of directors and granting to our board the sole power (subject to the rights of holders of any series of preferred stock or rights granted pursuant to the Voting Agreement) to fill any vacancy on the board; |
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limiting the ability of stockholders to remove directors without cause; |
|
authorizing the issuance of blank check preferred stock by our board of directors, without further stockholder approval, to thwart a takeover attempt; |
|
prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders), if the Sponsors cease to own, or have the right to direct the vote of, at least 50% of the voting power of our common stock; |
|
eliminating the ability of stockholders to call a special meeting of stockholders, except for the Sponsors, so long as the Sponsors own, or have the right to direct the vote of, at least 50% of the voting power of our common stock; |
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establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at annual stockholder meetings; |
|
requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our certificate of incorporation or bylaws if the Sponsors cease to own, or have the right to direct the vote of, at least 50% of the voting power of our common stock; and |
|
electing not to be governed by Section 203 of the DGCL. |
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our Company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.
We will be exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act.
We are in the process of evaluating our internal controls systems to allow management to report on, and our independent registered public accounting firm to audit, our internal controls over financial reporting. We are also in the process of performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and, if required, the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We are required to comply with the management certification requirements of Section 404 in our annual report on Form 10-K for our first annual report that is filed with the SEC (subject to any change in applicable SEC rules). We are required to comply with Section 404 in full (including an auditor attestation on managements internal controls report) in our annual report on Form 10-K for the year following our first annual report required to be filed with the SEC (subject to any change in applicable
36
SEC rules). Furthermore, upon completion of this process, we may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting Oversight Board, or PCAOB, rules and regulations that remain unremediated. As a public company, we are required to report, among other things, control deficiencies that constitute a material weakness or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
To comply with the requirements of being a public company, we have undertaken various actions, and may need to take additional actions, such as implementing and enhancing our internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal controls can divert our managements attention from other matters that are important to the operation of our business. Additionally, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, if we are required to make restatements of our financial statements, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy, completeness or reliability of our financial reports and the trading price of our common stock may be adversely affected, and we could become subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources. In addition, if we fail to remedy any material weakness, our financial statements could be inaccurate and we could face restricted access to the capital markets.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and the NYSE, may strain our resources, increase our costs and divert managements attention, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the corporate governance standards of the Sarbanes-Oxley Act and the NYSE. These requirements may place a strain on our management, systems and resources and we have incurred and expect to continue to incur significant legal, accounting, insurance and other expenses that we had not historically incurred as a private company. The Exchange Act requires us to file annual, quarterly and current reports with respect to our business and financial condition within specified time periods and to prepare a proxy statement with respect to our annual meeting of stockholders. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. The NYSE requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting and comply with the Exchange Act and the NYSEs requirements, significant resources and management oversight are required. This may divert managements attention from other business concerns and lead to significant costs associated with compliance, which could have a material adverse effect on us and the price of our common stock.
The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to
37
accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.
We do not currently expect to pay any cash dividends.
The continued operation and expansion of our business will require substantial funding. Accordingly, we do not currently expect to pay any cash dividends on shares of our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directors deems relevant. We are a holding company, and substantially all of our operations are carried out by our operating subsidiaries. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our business, financial condition and results of operations. Under our ABL Facility and First Lien Term Loan, our operating subsidiaries are significantly restricted in their ability to pay dividends or otherwise transfer assets to us, and we expect these limitations to continue in the future. Our ability to pay dividends may also be limited by the terms of any future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries. Accordingly, if you purchase shares of our common stock, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.
Following our September Offering, we are no longer a controlled company within the meaning of the NYSE rules and the rules of the SEC. However, we qualify for and continue to rely on exemptions from certain corporate governance requirements during certain transition periods.
A company of which more than 50% of the voting power is held by an individual, a group or another company is a controlled company within the meaning of the corporate governance standards of the NYSE rules and may elect not to comply with certain corporate governance requirements of the NYSE. Until our September Offering, our Sponsors controlled a majority of the combined voting power of all classes of our stock entitled to vote generally in the election of directors and, as a result, we were a controlled company. During the time when we were a controlled company, we elected not to comply with certain corporate governance standards. Following the loss of our controlled company status, we have one year following ceasing to be a controlled company to comply with all of NYSEs corporate governance standards.
Because of these NYSE transition rules for companies that cease to be controlled companies, we are not required to have our compensation committee consist entirely of independent directors until October 2019. We intend to continue to utilize the NYSEs transition period for companies that are no longer controlled companies. Accordingly, our stockholders do not yet have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.
In addition, although we are no longer a controlled company, the Sponsors continue to be able to significantly influence our decisions. The Sponsors exercise significant control over the direction of our business and have the right to nominate members of our Board. If the ownership of our common stock continues to be highly concentrated, it could prevent you and other stockholders from influencing significant corporate decisions. The Sponsors are in the business of making investments in companies, and may from time to time in the future acquire controlling interests in businesses that complement or directly or indirectly compete with certain portions of our business. If the Sponsors pursue such acquisitions in our industry, those acquisition opportunities may not be available to us.
38
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under any provisions of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. As a stockholder in our Company, you are deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit your ability to obtain a favorable judicial forum for disputes with us.
39
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. You can generally identify forward-looking statements by our use of forward-looking terminology such as anticipate, believe, continue, could, estimate, expect, intend, may, might, plan, potential, predict, seek, vision, or should, or the negative thereof or other variations thereon or comparable terminology. The statements we make regarding the following matters are forward-looking by their nature:
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our business being affected by issues that affect consumer spending; |
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our business depending on having a large and loyal membership, and how any harm to our relationship with our members could have a material adverse effect on our business, net sales and results of operations; |
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our business plan and operating results depending on our ability to procure the merchandise we sell at the best possible prices; |
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competition adversely affecting our profitability; |
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our dependence on vendors to supply us with quality merchandise at the right time and at the right price; |
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our failure to timely identify or effectively respond to consumer trends, which could negatively affect our relationship with our members, the demand for our products and services and our market share; |
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our success depending on our ability to attract and retain a qualified management team and other team members while controlling our labor costs; |
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our comparable club sales and quarterly operating results fluctuating significantly; |
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changes in our product mix or in our revenues from gasoline sales negatively impacting our revenue and results of operations; |
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our failure to successfully maintain a relevant omnichannel experience for our members, thereby adversely impacting our results of operations; |
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our growth strategy to open new clubs involving risks; |
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implementation of technology initiatives disrupting our operations in the near team and failing to provide the anticipated benefits; and |
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our e-commerce business facing distinct risks, and how our failure to successfully manage it could have a negative impact on our profitability. |
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this prospectus under the headings Prospectus Summary, Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and Business, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this prospectus are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements included elsewhere in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements included elsewhere in this prospectus, they may not be predictive of results or developments in future periods.
40
Any forward-looking statement that we make in this prospectus speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this prospectus.
41
We will not receive any proceeds from any offer and sale from time to time by the selling stockholders of the shares of common stock that have been registered pursuant to this prospectus. The selling stockholders will receive all of the net proceeds from any offering made pursuant to this prospectus.
42
We do not currently expect to pay any cash dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings, if any, for the future operation and expansion of our business and the repayment of debt. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our results of operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by applicable laws and other factors that our board of directors may deem relevant. Our business is conducted through our subsidiaries. Dividends, distributions and other payments from, and cash generated by, our subsidiaries will be our principal sources of cash to repay indebtedness, fund operations and pay dividends. Accordingly, our ability to pay dividends to our stockholders is dependent on the earnings and distributions of funds from our subsidiaries. In addition, the covenants in the agreements governing our existing indebtedness, including the ABL Facility and the Term Loan Facilities, significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. See Description of Certain Indebtedness, Risk FactorsRisks Relating to our BusinessWe are a holding company with no operations of our own, and we depend on our subsidiaries for cash and Risk FactorsRisks Relating to our Common Stock and this OfferingWe do not currently expect to pay any cash dividends.
43
The following table sets forth our cash and cash equivalents and our consolidated capitalization as of November 3, 2018.
You should read the data set forth below in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, Description of Capital Stock and the consolidated financial statements and related notes included elsewhere in this prospectus.
As of
November 3, 2018 |
||||
Actual | ||||
(in thousands, except per share data) | ||||
Cash and cash equivalents |
$ | 31,502 | ||
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Long-term debt, including current maturities: |
||||
ABL Facility |
424,000 | |||
First Lien Term Loan |
1,514,783 | |||
Capital lease and financing obligations |
35,190 | |||
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|
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Total debt, net of discount and debt issuance cost |
1,973,973 | |||
Stockholders deficit: |
||||
Preferred stock; par value $0.01; 5,000 shares authorized, and no shares issued or outstanding |
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Common stock; par value $0.01; 300,000 shares authorized, 137,620 shares issued and 136,838 outstanding at November 3, 2018 |
1,376 | |||
Additional paid-in capital |
738,134 | |||
Accumulated deficit |
(979,420 | ) | ||
Accumulated other comprehensive income |
2,401 | |||
Treasury stock, at cost, 782 shares |
(19,109 | ) | ||
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Total stockholders deficit |
(256,618 | ) | ||
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Total capitalization |
$ | 1,717,355 | ||
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The |
number of shares of common stock outstanding as of November 3, 2018 excludes: |
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6,806,068 shares of common stock issuable upon the exercise of options outstanding under our equity incentive plans as of November 3, 2018 at a weighted average exercise price of $9.71 per share; |
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8,500,092 additional shares of common stock reserved for future issuance under our omnibus incentive plan which includes 1,061,993 shares reserved but not issued under our 2011 Plan or 2012 Director Plan; and |
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973,014 shares reserved for issuance under the ESPP, as well as shares of our common stock that may be issued pursuant to provisions in the ESPP that automatically increase the common stock reserve thereunder. |
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SELECTED CONSOLIDATED FINANCIAL DATA
We have derived the following selected consolidated statements of operations and cash flow data for the fiscal years ended January 30, 2016, January 28, 2017 and February 3, 2018 and the consolidated balance sheet data for the fiscal years ended January 28, 2017 and February 3, 2018 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the following selected consolidated statements of operations and cash flow data for the fiscal years ended February 1, 2014 and January 31, 2015 and the consolidated balance sheet data as of February 1, 2014, January 31, 2015 and January 30, 2016 from our unaudited consolidated financial statements not included in this prospectus.
We have derived the following selected consolidated statements of operations and of cash flow data for the thirty-nine weeks ended October 28, 2017 and November 3, 2018 and our consolidated balance sheet data as of November 3, 2018 from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments that, in our opinion, are necessary to fairly state the financial information set forth in those statements, except for new accounting pronouncements adopted at the beginning of fiscal year 2018 as described in Note 2 of our unaudited consolidated financial statements included elsewhere in this prospectus.
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The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the selected consolidated financial data presented below in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this prospectus.
Fiscal Year Ended |
Thirty-
Nine Weeks Ended |
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February 1,
2014 |
January 31,
2015 |
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(unaudited) | (unaudited) | |||||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||
Statement of Operations Data: |
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Net sales |
$ | 12,342,450 | $ | 12,488,247 | $ | 12,220,215 | $ | 12,095,302 | $ | 12,495,995 | $ | 9,006,022 | $ | 9,380,640 | ||||||||||||||
Membership fee income |
242,367 | 243,023 | 247,338 | 255,235 | 258,594 | 192,578 | 209,825 | |||||||||||||||||||||
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Total revenues |
12,584,817 | 12,731,270 | 12,467,553 | 12,350,537 | 12,754,589 | 9,198,600 | 9,590,465 | |||||||||||||||||||||
Cost of sales |
10,621,719 | 10,758,461 | 10,476,519 | 10,223,017 | 10,513,492 | 7,578,790 | 7,858,515 | |||||||||||||||||||||
Selling, general and administrative expenses |
1,807,507 | 1,776,432 | 1,797,780 | 1,908,752 | 2,017,821 | 1,490,117 | 1,534,314 | |||||||||||||||||||||
Preopening expenses |
7,443 | 12,310 | 6,458 | 2,749 | 3,004 | 2,156 | 4,065 | |||||||||||||||||||||
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Operating income |
148,148 | 184,067 | 186,796 | 216,019 | 220,272 | 127,537 | 193,571 | |||||||||||||||||||||
Interest expense, net |
168,364 | 154,481 | 150,093 | 143,351 | 196,724 | 150,211 | 137,787 | |||||||||||||||||||||
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Income (loss) from continuing operations before income taxes |
(20,216 | ) | 29,586 | 36,703 | 72,668 | 23,548 | (22,674 | ) | 55,784 | |||||||||||||||||||
Provision (benefit) for income taxes |
(9,786 | ) | 10,277 | 12,049 | 27,968 | (28,427 | ) | (6,575 | ) | (7,595 | ) | |||||||||||||||||
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Income (loss) from continuing operations |
(10,430 | ) | 19,309 | 24,654 | 44,700 | 51,975 | (16,099 | ) | 63,379 | |||||||||||||||||||
Loss from discontinued operations, net of income taxes |
(4,457 | ) | (296 | ) | (550 | ) | (476 | ) | (1,674 | ) | (308 | ) | (425 | ) | ||||||||||||||
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Net income (loss) |
$ | (14,887 | ) | $ | 19,013 | $ | 24,104 | $ | 44,224 | $ | 50,301 | $ | (16,407 | ) | $ | 62,954 | ||||||||||||
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Per Share Data (1) : |
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Income (loss) from continuing operations per share attributable to common
|
$ | (0.12 | ) | $ | 0.22 | $ | 0.28 | $ | 0.51 | $ | 0.59 | $ | (0.18 | ) | $ | 0.58 | ||||||||||||
Income (loss) from continuing operations per share attributable to common
|
$ | (0.12 | ) | $ | 0.21 | $ | 0.27 | $ | 0.49 | $ | 0.56 | $ | (0.18 | ) | $ | 0.55 | ||||||||||||
Weighted average number of shares outstanding: |
||||||||||||||||||||||||||||
Basic |
87,464 | 87,474 | 87,869 | 88,164 | 88,386 | 88,363 | 110,162 | |||||||||||||||||||||
Diluted |
87,464 | 90,260 | 90,241 | 90,736 | 92,264 | 88,363 | 114,944 | |||||||||||||||||||||
Cash dividends per share |
$ | 4.72 | $ | | $ | | $ | | $ | 8.31 | $ | | $ | |
Fiscal Year Ended |
Thirty-
Nine Weeks Ended |
|||||||||||||||||||||||||||
February 1,
2014 |
January 31,
2015 |
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Statement of Cash Flow Data: |
||||||||||||||||||||||||||||
Net cash provided by operating
|
$ | 204,512 | $ | 285,821 | $ | 159,361 | $ | 297,428 | $ | 210,085 | $ | 100,359 | $ | 250,893 | ||||||||||||||
Net cash used in investing activities |
(144,820 | ) | (158,073 | ) | (112,363 | ) | (114,756 | ) | (137,466 | ) | (86,122 | ) | (103,340 | ) | ||||||||||||||
Net cash used in financing activities |
(69,778 | ) | (130,467 | ) | (46,236 | ) | (188,118 | ) | (69,629 | ) | (14,456 | ) | (151,005 | ) | ||||||||||||||
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Net increase (decrease) in cash and cash equivalents |
$ | (10,086 | ) | $ | (2,719 | ) | $ | 762 | $ | (5,446 | ) | $ | 2,990 | $ | (219 | ) | $ | (3,452 | ) | |||||||||
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46
As of | ||||||||||||||||||||||||
February 1,
2014 |
January 31,
2015 |
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
November 3,
2018 |
|||||||||||||||||||
(in thousands) | (unaudited) | |||||||||||||||||||||||
Balance Sheet Data: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 39,367 | $ | 36,648 | $ | 37,410 | $ | 31,964 | $ | 34,954 | $ | 31,502 | ||||||||||||
Merchandise inventories |
1,015,788 | 1,038,194 | 1,061,854 | 1,031,844 | 1,019,138 | 1,245,110 | ||||||||||||||||||
Property and equipment, net |
854,865 | 850,422 | 794,446 | 763,643 | 758,750 | 745,889 | ||||||||||||||||||
Net working capital (3) |
156,664 | 97,495 | 131,129 | 52,090 | 51,813 | 64,029 | ||||||||||||||||||
Total assets |
3,528,387 | 3,482,980 | 3,408,933 | 3,232,219 | 3,273,856 | 3,464,955 | ||||||||||||||||||
Total debt (4) |
2,411,423 | 2,289,568 | 2,229,835 | 2,056,406 | 2,748,112 | 1,973,973 | ||||||||||||||||||
Total stockholders deficit |
$ | (450,344 | ) | $ | (427,475 | ) | $ | (401,073 | ) | $ | (347,211 | ) | $ | (1,029,857 | ) | $ | (256,618 | ) |
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||||||||||
February 1,
2014 |
January 31,
2015 |
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Other Financial and Operating Data: |
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Total clubs at end of period |
201 | 207 | 213 | 214 | 215 | 215 | 216 | |||||||||||||||||||||
Comparable club sales (5) |
(1.1 | )% | (0.5 | )% | (4.2 | )% | (2.6 | )% | 0.8 | % | 0.3 | % | 4.1 | % | ||||||||||||||
Comparable club sales excluding gasoline sales |
(1.0 | )% | (0.3 | )% | (0.5 | )% | (2.3 | )% | (0.9 | )% | (1.7 | )% | 2.0 | % | ||||||||||||||
Adjusted EBITDA (in thousands) (6) |
$ | 411,729 | $ | 413,904 | $ | 405,992 | $ | 457,326 | $ | 533,507 | $ | 375,509 | $ | 413,057 | ||||||||||||||
Free cash flow (in thousands) (7) |
$ | 62,485 | $ | 130,624 | $ | 46,998 | $ | 182,672 | $ | 72,619 | $ | 14,237 | $ | 147,553 | ||||||||||||||
Membership renewal rate |
83 | % | 83 | % | 84 | % | 85 | % | 86 | % | * | * | ||||||||||||||||
Capital expenditures (in thousands) |
$ | 142,027 | $ | 155,197 | $ | 112,363 | $ | 114,756 | $ | 137,466 | $ | 86,122 | $ | 103,340 |
* |
Calculated on an annual basis only. See Managements Discussion and Analysis of Financial Conditions and Results of Operations for additional information. |
(1) |
See Note 21 and 15 of our audited and unaudited consolidated financial statements, respectively, included elsewhere in this prospectus for additional information regarding the calculation of basic and diluted income per share attributable to common stockholders. |
(2) |
Includes charges for discontinued operations. |
(3) |
Net working capital is defined as total current assets (excluding cash and cash equivalents) less total current liabilities (excluding current portion of long-term debt). |
(4) |
Total debt includes current and non-current portion of long-term debt, net of discount and debt issuance costs and our obligations under capital leases and financing obligations. |
(5) |
Represents the change in net sales among all clubs open in both the given period and the prior period. In determining comparable club sales, we include all clubs that had been open for at least 13 months at the beginning of the relevant period and were in operation during all of both periods being compared, including relocated clubs and expansions. If a club is in the process of closing, it is excluded from the determination of comparable club sales. In addition, when applicable, we adjust for the effect of an additional week in a fiscal year or quarter. See Managements Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding our calculation of comparable club sales. |
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(6) |
The following is a reconciliation of our income from continuing operations to Adjusted EBITDA for the periods presented: |
Fiscal Year Ended |
Thirty-
Nine Weeks Ended |
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February 1,
2014 |
January 31,
2015 |
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||
Income (loss) from continuing operations |
$ | (10,430 | ) | $ | 19,309 | $ | 24,654 | $ | 44,700 | $ | 51,975 | $ | (16,099 | ) | $ | 63,379 | ||||||||||||
Interest expense, net |
168,364 | 154,481 | 150,093 | 143,351 | 196,724 | 150,211 | 137,787 | |||||||||||||||||||||
Provision (benefit) for income taxes |
(9,786 | ) | 10,277 | 12,049 | 27,968 | (28,427 | ) | (6,575 | ) | (7,595 | ) | |||||||||||||||||
Depreciation and amortization |
197,375 | 186,701 | 177,483 | 178,325 | 164,061 | 123,404 | 122,434 | |||||||||||||||||||||
Compensatory payments related to options (a) |
34,366 | 1,690 | 1,497 | 6,143 | 77,953 | 77,953 | | |||||||||||||||||||||
Stock-based compensation expense (b) |
300 | 2,344 | 2,265 | 11,828 | 9,102 | 7,649 | 55,985 | |||||||||||||||||||||
Preopening expenses (c) |
7,443 | 12,310 | 6,458 | 2,749 | 3,004 | 2,156 | 4,065 | |||||||||||||||||||||
Management fees (d) |
8,222 | 8,021 | 8,139 | 8,053 | 8,038 | 6,073 | 3,333 | |||||||||||||||||||||
Noncash rent (e) |
12,176 | 11,417 | 8,976 | 7,138 | 5,391 | 4,381 | 3,591 | |||||||||||||||||||||
Strategic consulting (f) |
| | 14,619 | 26,157 | 30,316 | 24,402 | 22,569 | |||||||||||||||||||||
Severance (g) |
1,592 | 4,392 | 7,488 | 2,320 | 9,065 | | 960 | |||||||||||||||||||||
Asset retirement
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| | (7,044 | ) | | | | | ||||||||||||||||||||
Offering Costs (i) |
| | | | | | 3,143 | |||||||||||||||||||||
Other adjustments (j) |
2,107 | 2,962 | (685 | ) | (1,406 | ) | 6,305 | 1,954 | 3,406 | |||||||||||||||||||
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Adjusted EBITDA |
$ | 411,729 | $ | 413,904 | $ | 405,992 | $ | 457,326 | $ | 533,507 | $ | 375,509 | $ | 413,057 | ||||||||||||||
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Adjusted EBITDA as a percentage of net sales |
3.3 | % | 3.3 | % | 3.3 | % | 3.8 | % | 4.3 | % | 4.2 | % | 4.4 | % | ||||||||||||||
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(a) |
Represents payments to holders of our stock options made pursuant to antidilution provisions in connection with dividends paid to our shareholders. |
(b) |
Represents total stock-based compensation expense and includes one-time expenses related to certain restricted stock and stock option awards issued in connection with the IPO. |
(c) |
Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred. |
(d) |
Represents management fees paid to our Sponsors (or advisory affiliates thereof) in accordance with our management services agreement, which terminated upon closing of the IPO. See Certain Relationships and Related Party TransactionsManagement Services Agreement. |
(e) |
Consists of an adjustment to remove the non-cash portion of rent expense, which has been recorded on a straight-line basis in accordance with GAAP. |
(f) |
Represents fees paid to external consultants for two strategic initiatives of limited duration. |
(g) |
Represents termination costs associated with voluntary and involuntary workforce reductions that occurred in January 2016, incremental severance expense to former executives, voluntary workforce reductions that occurred in February 2018, and termination costs to a former executive in the thirty-nine weeks ended November 3, 2018. |
(h) |
Represents non-cash gain related to a change in the estimated removal costs of our tanks and other infrastructure at our gasoline stations that has been accounted for as an asset retirement obligation. |
(i) |
Represents one-time costs related to the IPO and September Offering. See Initial Public Offering. |
(j) |
Other non-cash or discrete items as determined by management, including amortization of a deferred gain from sale lease back transactions in 2013, non-cash accretion expense on asset retirement |
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obligations, obligations associated with our post-retirement medical plan and incremental expense to former executives, corporate impairment charges related to transaction costs and a club that we relocated in 2018. |
See Non-GAAP Financial Measures for more information on our use of Adjusted EBITDA.
(7) |
The following is a reconciliation of our net cash from operating activities to free cash flow for the periods presented: |
Fiscal Year Ended |
Thirty-
Nine Weeks Ended |
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February 1,
2014 |
January 31,
2015 |
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 204,512 | $ | 285,821 | $ | 159,361 | $ | 297,428 | $ | 210,085 | $ | 100,359 | $ | 250,893 | ||||||||||||||
Less: Capital expenditures |
142,027 | 155,197 | 112,363 | 114,756 | 137,466 | 86,122 | 103,340 | |||||||||||||||||||||
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Free cash flow |
$ | 62,485 | $ | 130,624 | $ | 46,998 | $ | 182,672 | $ | 72,619 | $ | 14,237 | $ | 147,553 | ||||||||||||||
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See Non-GAAP Financial Measures for more information on our use of free cash flow.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the Selected Consolidated Financial Data and our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information included in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the Cautionary Note Regarding Forward-Looking Statements and Risk Factors sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to the last day of January. Accordingly, references herein to fiscal year 2012 relate to the 53 weeks ended February 2, 2013, references herein to fiscal year 2013 relate to the 52 weeks ended February 1, 2014, references herein to fiscal year 2014 relate to the 52 weeks ended January 31, 2015, references herein to fiscal year 2015 relate to the 52 weeks ended January 30, 2016, references herein to fiscal year 2016 relate to the 52 weeks ended January 28, 2017, references herein to fiscal year 2017 relate to the 53 weeks ending February 3, 2018, and references herein to fiscal year 2018 relate to the 52 weeks ending February 2, 2019. The first quarter of fiscal year 2017 ended on April 29, 2017, the second quarter of fiscal year 2017 ended on July 29, 2017, the third quarter of fiscal year 2017 ended on October 28, 2017, the first quarter of fiscal year 2018 ended on May 5, 2018, the second quarter of fiscal year 2018 ended on August 4, 2018, the third quarter of fiscal year 2018 ended on November 3, 2018, and each of these quarters contains thirteen weeks.
Overview
BJs Wholesale Club is a leading warehouse club operator on the east coast of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services to deliver a differentiated shopping experience, that is further enhanced by our omnichannel capabilities.
Over the last three years, we have hired Chris Baldwin as Chairman, President and Chief Executive Officer and have made multiple senior management hires and changes, adding consumer packaged goods, digital and consulting experience to our leadership team. This new leadership team has implemented significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJs more convenient. These changes have delivered results rapidly, evidenced by positive comparable club sales over the last six quarters and net income growth of over 109% and Adjusted EBITDA growth of 31% in aggregate from fiscal year 2016 to fiscal year 2017. We believe that these changes will continue to impact sales, profit margins and free cash flow performance favorably in the future. In fiscal year 2017, we generated total revenues, net income and Adjusted EBITDA of $12.8 billion, $50 million and $534 million, respectively.
Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 216 large-format, high volume warehouse clubs spanning 16 states. In our core New England markets, which have high population density and generate a disproportionate part of U.S. GDP, we operate almost three times the number of clubs compared to the next largest warehouse club competitor. In addition to shopping in our clubs, members are able to shop when and how they want through our website, www.bjs.com; our highly-rated mobile app and our integrated Instacart same-day delivery offering. Our goal is to offer our members significant value
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and a meaningful return, in savings, on their annual membership fee. We have more than five million members paying annual fees to gain access to savings on groceries, consumables, general merchandise, gas and ancillary services. The annual membership fee for our Inner Circle ® Membership is $55 per year, and our BJs Perks Rewards ® Membership, which offers additional value-enhancing features, costs $110 annually. We believe that members can save over ten times their $55 Inner Circle membership fee versus what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJs on manufacturer-branded groceries. In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality. Our two private label brands, Wellsley Farms ® and Berkley Jensen ® , represent over $2 billion in sales, and are the largest brands we sell. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth. Our membership fee income was $259 million for fiscal year 2017 and represents approximately half of our Adjusted EBITDA. For additional detail regarding these initiatives, see BusinessOur Company.
Our business is moderately seasonal in nature. Historically, our business has realized a slightly higher portion of net sales, operating income and cash flows from operations in the second and fourth fiscal quarters, attributable primarily to the impact of the summer and year-end holiday season, respectively.
We believe we are well-positioned to fill a niche between other warehouse clubs and grocery retailers, where we can more effectively compete for the weekly shopping trip. We are pursuing a number of strategies designed to continue our growth, including investing in our membership program to grow our member base, improving the member experience to drive sales and margins, investing in technology to improve member convenience and differentiate our online offering, expanding our strategic footprint and continuing to execute on our strong track record of productivity improvements.
Factors Affecting Our Business
Overall economic trends . The overall economic environment and related changes in consumer behavior have a significant impact on our business. In general, positive conditions in the broader economy promote customer spending in our clubs, while economic weakness which generally results in a reduction of customer spending may have a different or more extreme effect on spending at our clubs. Macroeconomic factors that can affect customer spending patterns, and thereby our results of operations, include employment rates, business conditions, changes in the housing market, the availability of credit, interest rates, tax rates and fuel and energy costs. In addition, during periods of low unemployment, we may experience higher labor costs.
Size and loyalty of membership base. The membership model is a critical element of our business. Members drive our results of operations through their membership fee income and their purchases. The majority of members renew within six months following their renewal date. Therefore, our renewal rate is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. We have grown our membership fee income each year over the past two decades. Our membership fee income totaled $259 million in fiscal year 2017. Our membership renewal rate, a key indicator of membership engagement, satisfaction and loyalty, reached an all-time high of 86% during fiscal year 2017.
Consumer preferences and demand . Our ability to maintain our appeal to existing customers and attract new customers depends on our ability to originate, develop and offer a compelling product assortment responsive to customer preferences. If we misjudge the market for our products, we may be faced with excess inventories for some products and may be required to become more promotional in our selling activities, which would impact our net sales and gross profit.
Infrastructure investment . Our historical operating results reflect the impact of our ongoing investments to support our growth. We have made significant investments in our business that we believe have laid the
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foundation for continued profitable growth. We believe that strengthening our management team and enhancing our information systems, including our distribution center management and point-of-sale systems, will enable us to replicate our profitable club format and provide a differentiated shopping experience. We expect these infrastructure investments to support our successful operating model across our club operations.
Product mix . Changes in our product mix affect our performance. For example, we continue to add private label products to our assortment of product offerings at our clubs, which we generally price lower than the manufacturer branded products of comparable quality that we also offer. Accordingly, a shift in our sales mix in which we sell more units of our private label products and fewer units of our manufacturer branded products would generally have a positive impact on our profit margins but an adverse impact on our overall net sales. Changes in our revenues from gasoline sales may also negatively affect our performance. Since gasoline generates lower profit margins than the remainder of our business, we could expect to see our overall gross profit margin rates decline as sales of gasoline increase.
Effective sourcing and distribution of products . Our net sales and gross profit are affected by our ability to purchase our products in sufficient quantities at competitive prices. While we believe our vendors have adequate capacity to meet our current and anticipated demand, our level of net sales could be adversely affected in the event of constraints in our supply chain, including our inability to procure and stock sufficient quantities of some merchandise in a manner that is able to match market demand from our customers, leading to lost sales.
Gas prices . The market price of gasoline impacts our net sales and comparable club sales, and large fluctuations in the price of gasoline can produce a short-term impact on our margins. Retail gasoline prices are driven by daily crude oil and wholesale commodity market changes and are volatile, as they are influenced by factors that include changes in demand and supply of oil and refined products, global geopolitical events, regional market conditions and supply interruptions caused by severe weather conditions. Typically, the change in crude oil prices impacts the purchase price of wholesale petroleum fuel products, which in turn impacts retail gasoline prices at the pump. During times when prices are particularly volatile, differences in pricing and procurement strategies between the Company and its competitors may lead to temporary margin contraction or expansion depending on whether prices are rising or falling, and this impact could affect our overall results for a fiscal quarter.
In addition, the relative level of gasoline prices from period to period can lead to differences in our net sales between those periods. Further, because we generally attempt to maintain a fairly stable gross profit per gallon, this variance in net sales, which may be substantial, may or may not have a significant impact on our operating income.
Fluctuation in quarterly results . Our quarterly results have historically varied depending upon a variety of factors, including our product offerings, promotional events, club openings, weather related events and shifts in the timing of holidays, among other things. As a result of these factors, our working capital requirements and demands on our product distribution and delivery network may fluctuate during the year.
Inflation and deflation trends . Our financial results can be expected to be directly impacted by substantial increases in product costs due to commodity cost increases or general inflation, which could lead to a reduction in our sales as well as greater margin pressure as costs may not be able to be passed on to consumers. To date, changes in commodity prices and general inflation have not materially impacted our business. In response to increasing commodity prices or general inflation, we seek to minimize the impact of such events by sourcing our merchandise from different vendors, changing our product mix or increasing our pricing when necessary.
Refinancings . We used the proceeds of the IPO to repay indebtedness under our Second Lien Facility, which reduced our cost of capital and debt service obligations.
53rd week . Our fiscal year 2017 consisted of 53 weeks and our fiscal years 2016 and 2015 each consisted of 52 weeks. Fiscal years in which there are 53 weeks will see increased net sales and expenses from the additional week.
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Adoption of Accounting Standards Codification No. 606, Revenue from Contracts with Customers, and related amendments (ASC 606). We adopted ASC 606 effective February 4, 2018 using the modified retrospective method. The amounts reported in the consolidated statement of operations for the thirteen weeks and thirty-nine weeks ended November 3, 2018 and the consolidated balance sheet as of November 3, 2018 reflect this adoption. According to the modified retrospective method, all financial information before February 4, 2018 was not restated. See Note 3 to our unaudited consolidated financial statements included elsewhere in this prospectus for more information regarding our adoption of ASC 606.
How We Assess the Performance of Our Business
In assessing our performance, we consider a variety of performance and financial measures. The key GAAP measures include net sales, membership fee income, cost of sales and selling, general and administrative expenses. In addition, we also review other important metrics such as Adjusted EBITDA, comparable club sales and merchandise comparable club sales, which exclude gasoline sales.
Net sales
Net sales are derived from direct retail sales to customers in our clubs and online, net of merchandise returns and discounts. Growth in net sales is impacted by opening new clubs and increases in comparable club sales.
Comparable club sales
Comparable club sales, also known as same store sales, is an important measure throughout the retail industry. In determining comparable club sales, we include all clubs that were open for at least 13 months at the beginning of the period and were in operation during all of both periods being compared, including relocated clubs and expansions. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales. As a result, data in this prospectus regarding our comparable club sales may not be comparable to similar data made available by other retailers.
Comparable club sales allow us to evaluate how our club base is performing by measuring the change in period-over-period net sales in clubs that have been open for the applicable period. Various factors affect comparable club sales, including consumer preferences and trends, product sourcing, promotional offerings and pricing, customer experience and purchase amounts, weather and holiday shopping period timing and length.
Comparable club sales excluding gasoline sales
Comparable club sales excluding gasoline sales is calculated by excluding sales from our gasoline operations from comparable club sales for the applicable period.
Membership fee income
Membership fee income reflects the amount collected from our customers to be a member of our clubs. Membership fee income is recognized in revenue on a straight-line basis over the life of the membership, which is typically twelve months.
Cost of sales
Cost of sales consists primarily of the direct cost of merchandise and gasoline sold at our clubs, including the following:
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costs associated with operating our distribution centers, including payroll, payroll benefits, occupancy costs and depreciation; |
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freight expenses associated with moving merchandise from vendors to our distribution centers and from our distribution centers to our clubs; and |
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vendor allowances, rebates and cash discounts. |
Selling, general and administrative expenses
Selling, general and administrative expenses (SG&A) consist of various expenses related to supporting and facilitating the sale of merchandise in our clubs, including the following:
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payroll and payroll benefits for club and corporate employees; |
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rent, depreciation and other occupancy costs for retail and corporate locations; |
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advertising expenses; |
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tender costs, including credit and debit card fees; |
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amortization of intangible assets; and |
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consulting, legal, insurance and other professional services expenses. |
SG&A includes both fixed and variable components and, therefore, is not directly correlated with net sales. In addition, the components of our SG&A expenses may not be comparable to those of other retailers. We expect that our SG&A expenses will increase in future periods due to investments to spur comparable club sales growth, our continuing club growth and in part due to additional legal, accounting, insurance and other expenses that we expect to incur as a result of being a public company, including compliance with the Sarbanes-Oxley Act. In addition, any increase in future stock option or other stock-based grants or modifications will increase our stock-based compensation expense included in SG&A.
Adjusted EBITDA
Adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, net, provision (benefit) for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including compensatory payments related to options, stock-based compensation expense, preopening expenses, management fees, non-cash rent, strategic consulting expenses, severance, asset retirement obligations, offering costs and other adjustments. For a reconciliation of Adjusted EBITDA to income from continuing operations, the most directly comparable GAAP measure, see Non-GAAP Financial Measures.
Non-GAAP Financial Measures
Adjusted EBITDA
We present Adjusted EBITDA, which is not a recognized financial measure under GAAP, because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. We define Adjusted EBITDA as income (loss) from continuing operations before interest expense, net, provision (benefit) for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including compensatory payments related to options, stock-based compensation expense, preopening expenses, management fees, non-cash rent, strategic consulting, severance, offering-related expenses, and other adjustments. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be considered as alternative to any other performance measure derived in accordance with GAAP and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation
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of Adjusted EBITDA in the future, and any such modification may be material. In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries. Additionally, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for any analysis of our results as reported under GAAP. For more information, see Non-GAAP Financial Measures.
Management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation; to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and to compare our performance against that of other peer companies using similar measures. The following is a reconciliation of our income from continuing operations to Adjusted EBITDA for the periods presented:
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Income (loss) from continuing operations |
$ | 24,654 | $ | 44,700 | $ | 51,975 | $ | (16,099 | ) | $ | 63,379 | |||||||||
Interest expense, net |
150,093 | 143,351 | 196,724 | 150,211 | 137,787 | |||||||||||||||
Provision (benefit) for income taxes |
12,049 | 27,968 | (28,427 | ) | (6,575 | ) | (7,595 | ) | ||||||||||||
Depreciation and amortization |
177,483 | 178,325 | 164,061 | 123,404 | 122,434 | |||||||||||||||
Compensatory payments related to options (a) |
1,497 | 6,143 | 77,953 | 77,953 | | |||||||||||||||
Stock-based compensation expense (b) |
2,265 | 11,828 | 9,102 | 7,649 | 55,985 | |||||||||||||||
Preopening expenses (c) |
6,458 | 2,749 | 3,004 | 2,156 | 4,065 | |||||||||||||||
Management fees (d) |
8,139 | 8,053 | 8,038 | 6,073 | 3,333 | |||||||||||||||
Noncash rent (e) |
8,976 | 7,138 | 5,391 | 4,381 | 3,591 | |||||||||||||||
Strategic consulting (f) |
14,619 | 26,157 | 30,316 | 24,402 | 22,569 | |||||||||||||||
Severance (g) |
7,488 | 2,320 | 9,065 | | 960 | |||||||||||||||
Asset retirement obligations (h) |
(7,044 | ) | | | | | ||||||||||||||
Offering Costs (i) |
| | | | 3,143 | |||||||||||||||
Other adjustments (j) |
(685 | ) | (1,406 | ) | 6,305 | 1,954 | 3,406 | |||||||||||||
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Adjusted EBITDA |
$ | 405,992 | $ | 457,326 | $ | 533,507 | $ | 375,509 | $ | 413,057 | ||||||||||
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Adjusted EBITDA as a percentage of net sales |
3.3 | % | 3.8 | % | 4.3 | % | 4.2 | % | 4.4 | % | ||||||||||
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(a) |
Represents payments to holders of our stock options made pursuant to antidilution provisions in connection with dividends paid to our shareholders. |
(b) |
Represents total stock-based compensation expense and includes one-time expenses related to certain restricted stock and stock option awards issued in connection with the IPO. |
(c) |
Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred. |
(d) |
Represents management fees paid to our Sponsors (or advisory affiliates thereof) in accordance with our management services agreement, which terminated upon closing of the IPO. See Certain Relationships and Related Party TransactionsManagement Services Agreement. |
(e) |
Consists of an adjustment to remove the non-cash portion of rent expense, which has been recorded on a straight-line basis in accordance with GAAP. |
(f) |
Represents fees paid to external consultants for two strategic initiatives of limited duration. |
(g) |
Represents termination costs associated with voluntary and involuntary workforce reductions that occurred in January 2016, incremental severance expense to former executives, voluntary workforce reductions that occurred in February 2018, and termination costs to a former executive in the thirty-nine weeks ended November 3, 2018. |
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(h) |
Represents non-cash gain related to a change in the estimated removal costs of our tanks and other infrastructure at our gasoline stations that has been accounted for as an asset retirement obligation. |
(i) |
Represents one-time costs related to the IPO and September Offering. See Initial Public Offering. |
(j) |
Other non-cash or discrete items as determined by management, including amortization of a deferred gain from sale lease back transactions in 2013, non-cash accretion expense on asset retirement obligations, obligations associated with our post-retirement medical plan and incremental expense to former executives, corporate impairment charges related to transaction costs and a club that we relocated in 2018. |
See Non-GAAP Financial Measures for more information on our use of Adjusted EBITDA.
Free cash flow
We present free cash flow, which is not a recognized financial measure under GAAP, because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity. Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We define free cash flow as net cash provided by operating activities net of capital expenditure.
The following is a reconciliation of our net cash from operating activities to free cash flow for the periods presented:
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Net cash from operating activities |
$ | 159,361 | $ | 297,428 | $ | 210,085 | $ | 100,359 | $ | 250,893 | ||||||||||
Less: Capital expenditures |
112,363 | 114,756 | 137,466 | 86,122 | 103,340 | |||||||||||||||
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Free cash flow |
$ | 46,998 | $ | 182,672 | $ | 72,619 | $ | 14,237 | $ | 147,553 | ||||||||||
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Results of Operations
The following tables summarize key components of our results of operations for the periods indicated:
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Statement of Operations Data: |
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Net sales |
$ | 12,220,215 | $ | 12,095,302 | $ | 12,495,995 | $ | 9,006,022 | $ | 9,380,640 | ||||||||||
Membership fee income |
247,338 | 255,235 | 258,594 | 192,578 | 209,825 | |||||||||||||||
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Total revenues |
12,467,553 | 12,350,537 | 12,754,589 | 9,198,600 | 9,590,465 | |||||||||||||||
Cost of sales |
10,476,519 | 10,223,017 | 10,513,492 | 7,578,790 | 7,858,515 | |||||||||||||||
Selling, general and administrative expenses |
1,797,780 | 1,908,752 | 2,017,821 | 1,490,117 | 1,534,314 | |||||||||||||||
Preopening expenses |
6,458 | 2,749 | 3,004 | 2,156 | 4,065 | |||||||||||||||
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Operating income |
186,796 | 216,019 | 220,272 | 127,537 | 193,571 | |||||||||||||||
Interest expense, net |
150,093 | 143,351 | 196,724 | 150,211 | 137,787 | |||||||||||||||
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Income (loss) from continuing operations before income taxes |
36,703 | 72,668 | 23,548 | (22,674 | ) | 55,784 | ||||||||||||||
Provision (benefit) for income taxes |
12,049 | 27,968 | (28,427 | ) | (6,575 | ) | (7,595 | ) | ||||||||||||
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Income (loss) from continuing operations |
24,654 | 44,700 | 51,975 | (16,099 | ) | 63,379 | ||||||||||||||
Loss from discontinued operations, net of income taxes |
(550 | ) | (476 | ) | (1,674 | ) | (308 | ) | (425 | ) | ||||||||||
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Net (loss) income |
$ | 24,104 | $ | 44,224 | $ | 50,301 | $ | (16,407 | ) | $ | 62,954 | |||||||||
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Operational Data: |
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Total clubs at end of period |
213 | 214 | 215 | 215 | 216 | |||||||||||||||
Comparable club sales |
(4.2 | )% | (2.6 | )% | 0.8 | % | 0.3 | % | 4.1 | % | ||||||||||
Comparable club sales excluding gasoline sales |
(0.5 | )% | (2.3 | )% | (0.9 | )% | (1.7 | )% | 2.0 | % | ||||||||||
Adjusted EBITDA (in thousands) |
$ | 405,992 | $ | 457,326 | $ | 533,507 | $ | 375,509 | $ | 413,057 | ||||||||||
Free cash flow (in thousands) |
$ | 46,998 | $ | 182,672 | $ | 72,619 | $ | 14,237 | $ | 147,553 |
Fiscal Year Ended February 3, 2018 Compared to Fiscal Year Ended January 28, 2017
Net Sales
Net sales for fiscal year 2017 were $12.5 billion, a 3.3% increase from net sales reported in fiscal year 2016 of $12.1 billion. The increase was due to a 0.8% increase in comparable club sales, incremental sales from two new clubs opened since the beginning of last year and the impact of the 53rd week in fiscal year 2017. Adjusting for the additional week, net sales increased by approximately 1.3% to $12.3 billion from fiscal year 2016 to fiscal year 2017.
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Comparable club sales
Fiscal Year Ended | ||||||||
January 28,
2017 |
February 3,
2018 |
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Comparable club sales |
(2.6 | )% | 0.8 | % | ||||
Less: contribution from gasoline sales |
(0.3 | )% | 1.7 | % | ||||
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Comparable club sales excluding gasoline sales |
(2.3 | )% | (0.9 | )% | ||||
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Comparable club sales increased 3.4%, to 0.8% in fiscal year 2017 from (2.6)% in fiscal year 2016. The increase in comparable club sales includes a favorable contribution from gasoline sales of 1.7% primarily due to price inflation.
Comparable club sales excluding gasoline sales decreased 0.9% in fiscal year 2017 due to decreases in sales of edible grocery and perishables of approximately 2%, partially offset by an increase in sales of general merchandise of approximately 1%. The decline in edible grocery sales was driven by decreased sales of beverages, candy and breakfast foods partially offset by increases in specialty foods and water. The decrease in perishable sales was driven by lower sales of frozen meat and fresh produce, partially offset by increased sales in prepackaged meat and full-service deli. Non-edible grocery sales were flat due to better sales of household chemicals, offset by lower sales in pet care. Finally, the sales increase in general merchandise was driven by strong sales of apparel and home office supplies, slightly offset by lower sales in electronics.
Membership fee income
Membership fee income was $258.6 million in fiscal year 2017 versus $255.2 million in fiscal year 2016, a 1.3% increase. The growth was driven by a 5.8% increase in membership fee income on a cash basis, an increase in our renewal rate and incremental member acquisition efforts. The increase also reflects one month of our membership fee increase that became effective January 2, 2018.
Cost of sales
Costs of sales was $10.5 billion, or 84.1% of net sales, in fiscal year 2017, compared to $10.2 billion, or 84.5% of net sales, in fiscal year 2016. The decrease of 0.4% was due to successful procurement efforts, assortment optimization and better sales penetration of private label items. Private label penetration increased to 19% in fiscal year 2017 from 18% in fiscal year 2016.
Selling, general and administrative expenses
SG&A expenses were $2.0 billion, or 16.2% of net sales in fiscal year 2017, compared to $1.9 billion, or 15.8% of net sales, in fiscal year 2016. The 0.4% increase was driven primarily by $78.0 million in compensatory payments to stock option holders pursuant to antidilution provisions in connection with dividends paid to our Sponsors and $9.1 million of severance expense associated with a voluntary reduction in force in February 2018. Excluding these items, SG&A expense as a percent of net sales decreased by approximately 0.3% due primarily to lower credit card related expenses of 0.1% and lower payroll benefits expense of 0.2% due mostly to lower medical and bonus expense.
Total payroll and payroll benefits expense, excluding the compensatory dividend payments and severance expense described above, increased by $23.7 million in fiscal year 2017, compared to fiscal year 2016. Total payroll and payroll benefits represented approximately 43% of total SG&A expense in fiscal year 2017 compared to 45% in fiscal year 2016.
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Preopening expenses
Preopening expenses were $3.0 million in fiscal year 2017, compared to $2.7 million in fiscal year 2016. Preopening expenses for fiscal year 2017 include charges for one new club, two new gasoline stations and one club relocation that occurred in the first quarter of fiscal year 2018. Preopening expenses for fiscal 2016 includes expenses for one new club and three gasoline stations.
Preopening expenses vary due to the number of club openings and the timing of those openings within the fiscal year. The average capital outlay for a new or relocated club is approximately $4 million which represents the cost of construction and equipment to bring the leased premises to operative. We expect these expenditures to be financed primarily with cash from operations.
Interest expense
Interest expense was $196.7 million in fiscal year 2017, compared to $143.4 million in fiscal year 2016. Interest expense for fiscal year 2017 includes interest of $163.2 million related to debt service on outstanding borrowings, $8.5 million of amortization expense on deferred financing costs and original issue discounts on our outstanding borrowings, $21.1 million of charges related to debt refinancing loss on extinguishment of debt and $3.9 million of other interest charges.
Interest expense for fiscal year 2016 includes interest of $122.2 million related to debt service on outstanding borrowings, $17.1 million of amortization expense on deferred financing costs and original issue discounts on our outstanding borrowings and $4.1 million of other interest charges.
Provision for income taxes
Our effective tax rate during the twelve months ended February 3, 2018 was impacted by the TCJA, which was enacted into law on December 22, 2017. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, effective as of January 1, 2018; limitation of the tax deduction for interest expense; limitation of the deduction for net operating losses to 80% of annual taxable income and elimination of net operating loss carrybacks (though any such tax losses may be carried forward indefinitely); and modifying or repealing many business deductions and credits.
Income tax effects resulting from changes in tax laws are provisional and accounted for by the Company in accordance with the authoritative guidance, which requires that these tax effects be recognized in the period in which the law is enacted and the effects are recorded as a component of provision for income taxes from continuing operations. As a result, the effective tax rate from continuing operations was a benefit of (120.7%) in fiscal year 2017 compared to a rate of 38.5% in fiscal year 2016, primarily driven by a one-time adjustment of $32.1 million for the revaluation of the Companys net deferred tax liabilities, and other non-recurring items in fiscal year 2017 including a solar tax credit net tax benefit of $3.1 million, and a stock option windfall tax benefit of $1.3 million. Further, our effective tax rate in future periods will be favorably impacted by the lower federal statutory corporate income tax rate of 21%.
Loss from discontinued operations
Loss from discontinued operations (net of income tax benefit) was $1.7 million in fiscal year 2017, compared to $0.5 million in fiscal year 2016. The loss for both periods consists of post-tax accretion expense on lease obligations related to two closed locations. The loss in fiscal year 2017, includes a charge of $2.1 million to the reserve due to a change in our estimated sublease income for the locations.
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Fiscal Year Ended January 28, 2017 Compared to Fiscal Year Ended January 30, 2016
Net Sales
Net sales for fiscal year 2016 were $12.1 billion, a 1.0% decrease compared to net sales for fiscal year 2015 of $12.2 billion. The decrease was driven by a decrease in comparable club sales of 2.6%, partially offset by incremental sales from seven new clubs opened since the beginning of fiscal year 2015.
Comparable club sales
Fiscal Year Ended | ||||||||
January 30,
2016 |
January 28,
2017 |
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Comparable club sales |
(4.2 | )% | (2.6 | )% | ||||
Less: contribution from gasoline sales |
(3.7 | )% | (0.3 | )% | ||||
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Comparable club sales excluding gasoline sales |
(0.5 | )% | (2.3 | )% | ||||
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The 2.6% decrease in comparable club sales in fiscal year 2016 includes an unfavorable contribution from gasoline sales of 0.3% due to price deflation. Comparable club sales excluding gasoline sales decreased 2.3% in fiscal year 2016, comprised of decreases in sales of approximately 4% in perishables, 1% in non-edible grocery, 1% in edible grocery and flat sales in general merchandise. Sales results were directly impacted by increased deflation, particularly in the meat and dairy categories. We also experienced indirect pressure from deflation, as it enabled grocery competitors to advertise aggressive pricing in these categories in order to drive traffic. We also took steps during the year that negatively impacted sales in favor of greater profitability, primarily by reducing sales of certain low-margin merchandise items, such as bulk cigarettes, at our clubs and by closing cafes operated in many clubs and replacing them with Dunkin Donuts franchises pursuant to a license agreement. Efforts such as growing our private label penetration had a positive impact on margins and a discrete impact on sales dollars.
Comparable club sales attributable to gasoline remained flat in fiscal year 2016, compared to a decrease of 3.7% in fiscal year 2015, which was primarily to due to lower gasoline prices over the course of the year.
Membership fee income
Membership fee income was $255.2 million in fiscal year 2016 compared to $247.3 million in fiscal year 2015, a 3.2% increase. The growth was driven primarily by an increase in total members due to new club openings and an increase in member renewals.
Cost of sales
Cost of sales was $10.2 billion, or 84.5% of net sales in fiscal year 2016, compared to $10.5 billion, or 85.7% of net sales in fiscal year 2015. The decrease of 1.2% was attributable primarily to successful assortment optimization and better sales penetration of private label items.
Selling, general and administrative expenses
SG&A expenses were $1.9 billion, or 15.8% of net sales in fiscal year 2016, compared to $1.8 billion, or 14.7% of net sales in fiscal year 2015. The 1.1% increase was driven by higher bonus expense of 0.3% due to the Company exceeding fiscal year 2016 bonus targets, higher rent and occupancy costs of 0.2% mainly attributable to new club and gas station openings, increased advertising costs of 0.2%, increased strategic consulting costs of 0.1%, non-recurring credit card related expense of 0.1%, higher stock compensation expense of 0.1% due to a modification of existing awards and the impact of a non-cash gain recorded last year related to a change in estimated asset retirement obligations of 0.1%.
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Total payroll and payroll benefits expense increased by $44.5 million in fiscal year 2016, compared to fiscal year 2015 due primarily to increased bonus and stock compensation expense. Total payroll and payroll benefits represented approximately 45% of total SG&A expense in both periods.
Preopening expenses
Preopening expenses were $2.7 million in fiscal year 2016 compared to $6.5 million in fiscal year 2015. Preopening expenses for fiscal year 2016 include expenses for one new club and 3 new gas stations. Preopening expenses for fiscal year 2015 include expenses for six new club openings and seven new gas stations.
Preopening expenses vary due to the number of club openings and the timing of those openings within the fiscal year. The average capital outlay for a new or relocated club is approximately $4 million which represents the cost of construction and equipment to bring the leased premises to operative. We expect these expenditures primarily to be financed with cash from operations.
Interest expense
Interest expense was $143.4 million in fiscal year 2016 compared to $150.1 million in fiscal year 2015. Interest expense for fiscal year 2016 included interest of $122.2 million related to debt service on outstanding borrowings, $17.1 million of amortization expense on the deferred financing costs and original issue discounts on our outstanding borrowings and $4.1 million of other interest charges.
Interest expense for fiscal year 2015 included interest of $127.3 million related to debt service on outstanding borrowings, $16.8 million of amortization expense on the deferred financing costs and original issue discounts on our outstanding borrowings and $6.0 million of other interest charges.
Provision for income taxes
Our effective tax rate from continuing operations was 38.5% in fiscal year 2016 compared to 32.8% in fiscal year 2015. The increase in our effective income tax rate was due primarily to the increase in our pre-tax income and a decrease in discrete tax benefits associated with the reversal of liabilities for uncertain tax positions resulting from the expiration of statutes of limitations.
Loss from discontinued operations
Loss from discontinued operations (net of income tax benefit) was $0.5 million in fiscal year 2016 compared to $0.6 million in fiscal year 2015. The loss for both periods consists of post-tax accretion expense on lease obligations related to two closed locations.
Seasonality
Our business is moderately seasonal in nature. Historically, our business has realized a slightly higher portion of net sales, operating income and cash flows from operations in the second and fourth fiscal quarters, attributable primarily to the impact of the summer and year-end holiday season, respectively. Our quarterly results have been and will continue to be affected by the timing of new club openings and their associated preopening costs. As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.
Thirteen Weeks Ended November 3, 2018 (third quarter) Compared to Thirteen Weeks Ended October 28, 2017 (third quarter)
Net Sales
Net sales for the third quarter of fiscal year 2018 were $3.2 billion, a 4.3% increase from net sales reported for the third quarter of fiscal year 2017 of $3.0 billion. The increase was due primarily to a 3.6% increase in comparable club sales.
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Comparable club sales
Thirteen Weeks Ended | ||||||||
October 28,
2017 |
November 3,
2018 |
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Comparable club sales |
2.8 | % | 3.6 | % | ||||
Less: contribution from gasoline sales |
2.4 | % | 1.7 | % | ||||
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Comparable club sales excluding gasoline sales |
0.4 | % | 1.9 | % | ||||
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The increase in comparable club sales includes a favorable contribution from gasoline sales of 1.7% due mainly to price inflation.
Comparable club sales excluding gasoline sales increased 1.9% in the third quarter of 2018. The increase was driven by growth in general merchandise of approximately 5%, an increase in sales of non-edible groceries of approximately 3% and an increase in sales of edible groceries of approximately 1%. Sales of perishables were approximately flat for the quarter.
The increase in general merchandise sales was driven by strong sales of television and apparel. The increase in sales of non-edible groceries was due to better sales of laundry care and health and beauty products. Sales of edible groceries increased due to stronger sales of water and specialty beverages, partially offset by decreases in juice and breakfast items. Our perishable comparable club sales were flat for the quarter. Unit growth during the quarter was offset by the impact of deflation. Sales in key fresh categories such as fresh beef and pork, fresh fruits and vegetables all experienced deflationary pressure during the quarter.
Membership fee income
Membership fee income was $71.4 million in the third quarter of fiscal year 2018 versus $64.9 million in the third quarter of fiscal year 2017, a 10.1% increase. The growth in membership fee income was due to the membership fee increase implemented in January 2018 and successful member acquisition efforts.
Cost of sales
Costs of sales was $2.6 billion, or 83.5% of net sales, in the third quarter of fiscal year 2018, compared to $2.5 billion, or 83.6% of net sales, in the third quarter of fiscal year 2017. The decrease as a percentage of net sales of 0.1% was driven primarily by merchandise margin gains from the continued progress in our category profitability improvement program, partially offset by higher penetration of gasoline sales which lowers our overall margin rate.
Selling, general and administrative expenses
SG&A increased 4.0% to $499.6 million in the third quarter of fiscal year 2018 from $480.3 million in the third quarter of fiscal year 2017. Excluding expenses associated with our secondary offering and other one-time expenses, SG&A increased 4.6% to $496.2 million compared to $474.2 million in the third quarter last fiscal year. The increase reflects continued investments in membership marketing and payroll expenses to drive our strategic priorities.
Preopening expenses
Preopening expenses were $2.2 million in the third quarter of fiscal year 2018, compared to $0.1 million in the third quarter of fiscal year 2017. Preopening expenses for the third quarter of fiscal year 2018 include charges for one new club that opened in the third quarter of fiscal year 2018 and one new club that is expected to open in the first quarter of fiscal year 2019.
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Interest expense
Interest expense was $33.0 million for the third quarter of fiscal year 2018, compared to $42.3 million for the third quarter of fiscal year 2017. Interest expense for the third quarter of fiscal year 2018 includes interest expense of $24.5 million related to debt service on outstanding borrowings, $6.2 million of charges related to the repricing of our outstanding borrowings, $1.3 million of amortization expense on deferred financing costs and original issue discounts on our outstanding borrowings, and $1.0 million of other interest charges.
Interest expense for the third quarter of fiscal year 2017 includes interest of $26.8 million related to debt service on outstanding borrowings, $14.2 million of interest on the Second Lien Term Loan, and $1.3 million of other interest charges.
Provision for income taxes
The Companys effective income tax rate from continuing operations was 4.8% for the third quarter of fiscal year 2018, compared to 40.2% for the third quarter of fiscal year 2017. The change in effective tax rate for the quarter ended November 3, 2018, was due to a significant stock option windfall tax benefit recorded in the third quarter of fiscal year 2018; a reduction in the U.S. federal statutory tax rate from 35.0% to 21.0% as part of the TCJA that was enacted in December 2017; the reversal of liabilities for uncertain tax positions resulting from the expiration of the statute of limitations related thereto and an adjustment to the remeasurement of the Companys deferred tax balances due to the TCJA. The Company projects the estimated annual effective tax rate for fiscal year 2018 to be approximately 27% excluding the tax effect of discrete events.
Loss from discontinued operations
Loss from discontinued operations (net of income tax benefit) was $0.1 million in the third quarters of both fiscal years 2018 and 2017. The loss for both periods consists of post-tax accretion expense on lease obligations related to two closed locations.
Thirty-Nine Weeks Ended November 3, 2018 (first nine months) Compared to Thirty-Nine Weeks Ended October 28, 2017 (first nine months)
Net Sales
Net sales for the first nine months of fiscal year 2018 were $9.4 billion, a 4.2% increase compared to net sales for the first nine months of fiscal year 2017 of $9.0 billion. The increase was driven by an increase in comparable club sales of 4.1%.
Comparable club sales
Thirty-Nine Weeks Ended | ||||||||
October 28,
2017 |
November 3,
2018 |
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Comparable club sales |
0.3 | % | 4.1 | % | ||||
Less: contribution from gasoline sales |
2.0 | % | 2.1 | % | ||||
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Comparable club sales excluding gasoline sales |
(1.7 | )% | 2.0 | % | ||||
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The increase in comparable club sales includes a favorable contribution from gasoline sales of 2.1% due to price inflation. Comparable club sales excluding gasoline sales increased 2.0% in the first nine months of fiscal year 2018 due to increases of approximately 2% in general merchandise and non-edible groceries and increases of approximately 1% in the sales of edible groceries and perishables.
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The increase in sales of general merchandise was due to stronger sales of apparel and televisions. The increase in non-edible grocery sales was due to growth in household cleaning and beauty care, partially offset by decreases in shaving products. Edible grocery sales improved due to increased sales of water, specialty beverages and salty snacks, partially offset by decreased sales of breakfast items. Perishables sales increased due to higher sales of eggs, bakery items and fresh and frozen seafood, partially offset by lower sales of fresh meat and dairy.
Membership fee income
Membership fee income was $209.8 million for the first nine months of fiscal year 2018 compared to $192.6 million for the first nine months of fiscal year 2017, a 9.0% increase. The growth was driven by the membership fee increase that was effective January 2, 2018 and successful member acquisition efforts.
Cost of sales
Cost of sales was $7.9 billion, or 83.8% of net sales, for the first nine months of fiscal year 2018, compared to $7.6 billion, or 84.2% of net sales, for the first nine months of fiscal year 2017. The decrease as a percentage of net sales of 0.4% was attributable primarily to procurement savings from our assortment optimization efforts.
Selling, general and administrative expenses
SG&A expenses were $1.5 billion, or 16.4% of net sales, for the first nine months of fiscal year 2018, compared to $1.5 billion, or 16.6% of net sales, for the first nine months of fiscal year 2017. The 0.2% decrease was driven by higher expenses in last years quarter due to compensatory payments to option holders of $78.0 million. SG&A for the first nine months of fiscal year 2018 also include stock-based compensation related to the IPO of $48.9 million, $4.0 million of asset impairment charges on a club that was relocated and public offering costs of $3.1 million in connection with the IPO and September Offering.
Preopening expenses
Preopening expenses were $4.1 million for first nine months of fiscal year 2018 compared to $2.2 million for first nine months of fiscal year 2017. Preopening expenses for fiscal year 2018 include expenses for one new club, one relocated club, one new gas station and a new club expected to open in the first quarter of fiscal year 2019. Preopening expenses for the first nine months of fiscal year 2017 include expenses for one new club.
Interest expense
Interest expense was $137.8 million for the first nine months of fiscal year 2018, compared to $150.2 million for the first nine months of fiscal year 2017. Interest expense for the first nine months of fiscal year 2018 included interest of $80.3 million related to debt service on outstanding borrowings, $25.4 million of non-recurring charges related to the repricing of our outstanding borrowings in the third quarter and the extinguishment of the Second Lien Term Loan in the second quarter, $24.3 million of interest on the Second Lien Term Loan incurred prior to extinguishment, $4.8 million of amortization expense on deferred financing costs and original issue discounts on our outstanding borrowings, and $3.0 million of other interest charges.
Interest expense for the first nine months of fiscal year 2017 included interest of $79.1 million related to debt service on outstanding borrowings, $41.8 million of interest on the Second Lien Term Loan, $21.1 million of charges related to debt refinancing, $5.3 million of amortization expense on the deferred financing costs and original issue discounts on our outstanding borrowings, and $2.9 million of other interest charges.
Provision for income taxes
The Companys effective income tax rate from continuing operations was (13.6)% for the first nine months of fiscal year 2018, compared to 29.0% for the same period last year. The change in effective tax rate for the first
64
nine months of fiscal year 2018, is due to stock option windfall tax benefits recorded in the current year; a reduction in the U.S. federal statutory tax rate from 35.0% to 21.0% as part of the TCJA that was enacted in December 2017, the reversal of liabilities for uncertain tax positions resulting from the expiration of the statute of limitations related thereto and an adjustment to the remeasurement of the Companys deferred tax balances due to the TCJA. The Company projects the estimated annual effective tax rate for fiscal year 2018 to be approximately 27% excluding the tax effect of discrete events.
Loss from discontinued operations
Loss from discontinued operations (net of income tax benefit) was $0.4 million for the first nine months of fiscal year 2018, compared to $0.3 million for the first nine months of fiscal year 2017. The loss for both periods consists of post-tax accretion expense on lease obligations related to two closed locations.
Seasonality
Our business is moderately seasonal in nature. Historically, our business has realized a slightly higher portion of net sales, operating income and cash flows from operations in the second and fourth fiscal quarters, attributable primarily to the impact of the summer and year-end holiday season, respectively. Our quarterly results have been and will continue to be affected by the timing of new club openings and their associated preopening costs. As a result, of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.
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Quarterly Results of Operations
The following table sets forth certain financial and operating information for each quarter during fiscal years 2016 and 2017 and the first three quarters of fiscal year 2018. The quarterly information includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the information presented. This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this prospectus. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
Fiscal Year 2016 | Fiscal Year 2017 | Fiscal Year 2018 | ||||||||||||||||||||||||||||||||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
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(dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Net sales |
$ | 2,929,287 | $ | 3,077,141 | $ | 2,922,385 | $ | 3,166,489 | $ | 2,883,298 | $ | 3,103,335 | $ | 3,019,389 | $ | 3,489,973 | $ | 2,993,742 | $ | 3,236,664 | $ | 3,150,234 | ||||||||||||||||||||||
Membership fees |
63,765 | 64,335 | 63,810 | 63,325 | 63,530 | 64,192 | 64,856 | 66,016 | 67,955 | 70,441 | 71,429 | |||||||||||||||||||||||||||||||||
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Total revenues |
2,993,052 | 3,141,476 | 2,986,195 | 3,229,814 | 2,946,828 | 3,167,527 | 3,084,245 | 3,555,989 | 3,061,697 | 3,307,105 | 3,221,663 | |||||||||||||||||||||||||||||||||
Cost of sales |
2,488,855 | 2,596,291 | 2,456,204 | 2,681,667 | 2,441,306 | 2,614,187 | 2,523,297 | 2,934,702 | 2,510,338 | 2,718,602 | 2,629,575 | |||||||||||||||||||||||||||||||||
Selling, general and administrative expenses |
475,622 | 472,729 | 475,483 | 484,918 | 532,499 | 477,333 | 480,285 | 527,704 | 485,572 | 549,188 | 499,554 | |||||||||||||||||||||||||||||||||
Preopening expenses |
333 | 607 | 1,455 | 354 | 807 | 1,226 | 123 | 848 | 1,217 | 641 | 2,207 | |||||||||||||||||||||||||||||||||
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Operating
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28,242 | 71,849 | 53,053 | 62,875 | (27,784 | ) | 74,781 | 80,540 | 92,735 | 64,570 | 38,674 | 90,327 | ||||||||||||||||||||||||||||||||
Interest expense, net |
36,632 | 35,880 | 35,484 | 35,355 | 64,070 | 43,820 | 42,321 | 46,513 | 45,203 | 59,555 | 33,029 | |||||||||||||||||||||||||||||||||
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Income (loss) from continuing operations before income taxes |
(8,390 | ) | 35,969 | 17,569 | 27,520 | (91,854 | ) | 30,961 | 38,219 | 46,222 | 19,367 | (20,881 | ) | 57,298 | ||||||||||||||||||||||||||||||
Provision (benefit) for income taxes |
(3,293 | ) | 14,118 | 6,317 | 10,826 | (33,067 | ) | 11,146 | 15,346 | (21,852 | ) | 5,066 | (15,391 | ) | 2,730 | |||||||||||||||||||||||||||||
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Income (loss) from continuing
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(5,097 | ) | 21,851 | 11,252 | 16,694 | (58,787 | ) | 19,815 | 22,873 | 68,074 | 14,301 | (5,490 | ) | 54,568 | ||||||||||||||||||||||||||||||
Loss from discontinued operations, net of income taxes |
(123 | ) | (122 | ) | (117 | ) | (114 | ) | (107 | ) | (103 | ) | (98 | ) | (1,366 | ) | (164 | ) | (124 | ) | (137 | ) | ||||||||||||||||||||||
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Net income
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$ | (5,220 | ) | $ | 21,729 | $ | 11,135 | $ | 16,580 | $ | (58,894 | ) | $ | 19,712 | $ | 22,775 | $ | 66,708 | $ | 14,137 | $ | (5,614 | ) | $ | 54,431 | |||||||||||||||||||
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Operational data: |
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Total clubs at end of period |
213 | 213 | 213 | 214 | 214 | 215 | 215 | 215 | 215 | 215 | 216 | |||||||||||||||||||||||||||||||||
Comparable club sales |
(1.3)% | (3.2)% | (4.0)% | (1.9)% | (2.0)% | 0.1% | 2.8% | 2.2% | 3.5% | 5.0% | 3.6% | |||||||||||||||||||||||||||||||||
Comparable club sales excluding gasoline
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0.5% | (1.7)% | (3.9)% | (3.6)% | (4.5)% | (0.9)% | 0.4% | 1.2% | 2.0% | 2.0% | 1.9% | |||||||||||||||||||||||||||||||||
Adjusted EBITDA (in thousands) |
$ | 86,815 | $ | 129,109 | $ | 113,752 | $ | 127,650 | $ | 98,684 | $ | 135,741 | $ | 141,084 | $ | 157,998 | $ | 121,403 | $ | 143,036 | $ | 148,618 | ||||||||||||||||||||||
Free cash flow (in thousands) |
$ | 21,230 | $ | 57,691 | $ | 23,697 | $ | 80,054 | $ | (89,581 | ) | $ | 97,298 | $ | 6,520 | $ | 58,382 | $ | 23,212 | $ | 104,341 | $ | 20,000 |
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The following is a reconciliation of our income from continuing operations to Adjusted EBITDA for the periods presented:
Fiscal Year 2016 | Fiscal Year 2017 |
Fiscal Year
2018 |
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First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
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(in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations |
$ | (5,097 | ) | $ | 21,851 | $ | 11,252 | $ | 16,694 | $ | (58,787 | ) | $ | 19,815 | $ | 22,873 | $ | 68,074 | $ | 14,301 | $ | (5,490 | ) | $ | 54,568 | |||||||||||||||||||
Interest expense, net |
36,632 | 35,880 | 35,484 | 35,355 | 64,070 | 43,820 | 42,321 | 46,513 | 45,203 | 59,555 | 33,029 | |||||||||||||||||||||||||||||||||
Provision (benefit) for income taxes |
(3,293 | ) | 14,118 | 6,317 | 10,826 | (33,067 | ) | 11,146 | 15,346 | (21,852 | ) | 5,066 | (15,391 | ) | 2,730 | |||||||||||||||||||||||||||||
Depreciation and amortization |
45,223 | 45,681 | 45,329 | 42,092 | 41,071 | 41,216 | 41,117 | 40,657 | 41,422 | 41,076 | 39,936 | |||||||||||||||||||||||||||||||||
Compensatory payments related to options (a) |
746 | 1,489 | 1,886 | 2,022 | 71,574 | 2,126 | 4,253 | | | | | |||||||||||||||||||||||||||||||||
Stock-based compensation expense (b) |
1,300 | 2,632 | 2,930 | 4,966 | 3,662 | 2,078 | 1,909 | 1,453 | 970 | 52,395 | 2,620 | |||||||||||||||||||||||||||||||||
Preopening expenses (c) |
333 | 607 | 1,455 | 354 | 807 | 1,226 | 123 | 848 | 1,217 | 641 | 2,207 | |||||||||||||||||||||||||||||||||
Management fees (d) |
2,001 | 2,000 | 2,015 | 2,037 | 2,051 | 2,017 | 2,005 | 1,965 | 2,000 | 1,333 | | |||||||||||||||||||||||||||||||||
Noncash rent (e) |
1,873 | 1,849 | 1,782 | 1,634 | 1,497 | 1,500 | 1,384 | 1,010 | 1,223 | 1,218 | 1,150 | |||||||||||||||||||||||||||||||||
Strategic consulting (f) |
7,194 | 3,696 | 5,800 | 9,467 | 6,121 | 10,833 | 7,448 | 5,914 | 6,949 | 6,299 | 9,321 | |||||||||||||||||||||||||||||||||
Severance (g) |
| | | 2,320 | | | | 9,065 | | 960 | | |||||||||||||||||||||||||||||||||
Offering Costs (h) |
| | | | | | | | | 761 | 2,382 | |||||||||||||||||||||||||||||||||
Other adjustments (i) |
(97 | ) | (694 | ) | (498 | ) | (117 | ) | (315 | ) | (36 | ) | 2,305 | 4,351 | 3,052 | (321 | ) | 675 | ||||||||||||||||||||||||||
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Adjusted EBITDA |
$ | 86,815 | $ | 129,109 | $ | 113,752 | $ | 127,650 | $ | 98,684 | $ | 135,741 | $ | 141,084 | $ | 157,998 | $ | 121,403 | $ | 143,036 | $ | 148,618 | ||||||||||||||||||||||
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(a) |
Represents payments to holders of our stock options made pursuant to antidilution provisions in connection with dividends paid to our shareholders. |
(b) |
Represents total stock-based compensation expense and includes one-time expenses related to certain restricted stock and stock option awards issued in connection with the IPO. |
(c) |
Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred. |
(d) |
Represents management fees paid to our Sponsors (or advisory affiliates thereof) in accordance with our management services agreement, which terminated upon closing of the IPO. See Certain Relationships and Related Party TransactionsManagement Services Agreement. |
(e) |
Consists of an adjustment to remove the non-cash portion of rent expense, which has been recorded on a straight-line basis in accordance with GAAP. |
(f) |
Represents fees paid to external consultants for two strategic initiatives of limited duration. |
(g) |
Represents termination costs associated with voluntary and involuntary workforce reductions that occurred in January 2016, incremental severance expense to former executives, voluntary workforce reductions that occurred in February 2018, and termination costs to a former executive in the thirty-nine weeks ended November 3, 2018. |
(h) |
Represents one-time costs related to the IPO and September Offering. See Initial Public Offering. |
(i) |
Other non-cash or discrete items as determined by management, including amortization of a deferred gain from sale lease back transactions in 2013, non-cash accretion expense on asset retirement obligations, obligations associated with our post-retirement medical plan and incremental expense to former executives, corporate impairment charges related to transaction costs and a club that we relocated in 2018. |
See Non-GAAP Financial Measures for more information on our use of Adjusted EBITDA.
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The following is a reconciliation of our net cash from operating activities to free cash flow for the periods presented:
Fiscal Year 2016 | Fiscal Year 2017 | Fiscal Year 2018 | ||||||||||||||||||||||||||||||||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
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(in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 43,668 | $ | 84,209 | $ | 66,413 | $ | 103,138 | $ | (65,148 | ) | $ | 119,118 | $ | 46,389 | $ | 109,726 | $ | 65,357 | $ | 137,862 | $ | 47,674 | |||||||||||||||||||||
Less: Capital expenditures |
22,438 | 26,518 | 42,716 | 23,084 | 24,433 | 21,820 | 39,869 | 51,344 | 42,145 | 33,521 | 27,677 | |||||||||||||||||||||||||||||||||
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Free cash flow |
$ | 21,230 | $ | 57,691 | $ | 23,697 | $ | 80,054 | $ | (89,581 | ) | $ | 97,298 | $ | 6,520 | $ | 58,382 | $ | 23,212 | $ | 104,341 | $ | 19,997 | |||||||||||||||||||||
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Liquidity and Capital Resources
Our primary sources of liquidity are cash flows generated from club operations and borrowings from our ABL Facility. Cash and cash equivalents totaled $31.5 million as of November 3, 2018. We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under our ABL Facility (as defined below) will be sufficient to finance our operations, meet our current debt obligations, and fund anticipated capital expenditures.
Summary of Cash Flows
A summary of our cash flows from operating, investing and financing activities is presented in the following table:
Fiscal Year Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
January 30,
2016 |
January 28,
2017 |
February 3,
2018 |
October 28,
2017 |
November 3,
2018 |
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(in thousands) | (unaudited) | (unaudited) | ||||||||||||||||||
Net cash provided by operating activities |
$ | 159,361 | $ | 297,428 | $ | 210,085 | $ | 100,359 | $ | 250,893 | ||||||||||
Net cash used in investing activities |
(112,363 | ) | (114,756 | ) | (137,466 | ) | (86,122 | ) | (103,340 | ) | ||||||||||
Net cash used in financing activities |
(46,236 | ) | (188,118 | ) | (69,629 | ) | (14,456 | ) | (151,005 | ) | ||||||||||
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Net increase (decrease) in cash and cash equivalents |
$ | 762 | $ | (5,446 | ) | $ | 2,990 | $ | (219 | ) | $ | (3,452 | ) | |||||||
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Net Cash from Operating Activities
Net cash provided by operating activities was $210.1 million in fiscal year 2017, compared to $297.4 million in fiscal year 2016. The decrease in operating cash flow was primarily due to non-recurring costs of $88.2 million related to the dividend transaction in February 2017, including the compensatory payments related to stock options and debt issuance costs that could not be deferred. Excluding those items, operating cash flow increased by $0.9 million in fiscal year 2017.
Average inventory per club decreased 1.7% from fiscal year 2016 due to strong fourth quarter sales results and improved inventory turns in fiscal year 2017.
Net cash provided by operating activities was $297.4 million in fiscal year 2016 versus $159.4 million in fiscal year 2015. The increase in operating cash flow was due to increased operating income from improved margin rates and increased membership fee income and a favorable change in working capital due to improved inventory levels and quicker collections of accounts receivable.
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Average inventory per club decreased 3.3% from 2015. We focused on maintaining optimal inventory levels throughout 2016 by better managing presentation levels and reordering quantities as well as taking markdowns where it made sense to move unproductive merchandise.
Net cash provided by operating activities was $250.9 million for the first nine months of fiscal year 2018, compared to $100.4 million for the first nine months of fiscal year 2017. The increase in operating cash flow was primarily due to higher operating income from improved margin rates and increased membership fee income, lower interest payments due to the pay down of the Second Lien Term Loan, and strong working capital management including better management of inventory levels and faster collection of receivables. In addition, result for the first nine months of fiscal 2017 includes $73.7 million of compensatory payments to stock option holders.
Net Cash from Investing Activities
Cash used for capital expenditures was $137.5 million in fiscal year 2017, compared to $114.8 million in fiscal year 2016. The increase is due to more investment in club renovations and IT projects.
Cash used for capital expenditures was $114.8 million in fiscal year 2016 versus $112.4 million in fiscal year 2015. The increase is due mainly to more investment in club renovations compared to the prior year.
Cash used for capital expenditures was $103.3 million for the first nine months of fiscal year 2018, compared to $86.1 million for the first nine months of fiscal year 2017. The increase is due to more investments in technology and more spending on new and relocated clubs compared to the prior year.
Net Cash from Financing Activities
Cash used in financing activities in fiscal year 2017 was $69.6 million and includes net borrowings of $162.0 million on the ABL Facility and net borrowings of $533.1 million on the Term Loan Facilities, partially offset by dividend payments of $735.5 million and debt issuance costs of $24.6 million.
Cash used in financing activities in fiscal year 2016 was $188.1 million and includes $44.7 million of principal payments on the First Lien Facility, $20.5 million of principal payments on the Second Lien Facility and net payments of $121.0 million on the Prior ABL Facility.
Cash used in financing activities in fiscal year 2015 was $46.2 million and includes $15.0 million of principal payments on the Prior First Lien Facility and $1.8 million of net payments on the Prior Second Lien Facility and net payments of $30.0 million on the Prior ABL Facility.
Cash used in financing activities for the first nine months of fiscal year 2018 was $151.0 million, compared to $14.5 million for the first nine months of fiscal year 2017. The increase over last year is due mainly to the extinguishment of the Second Lien Term Loan in the second quarter and the partial paydown of the First Lien Term Loan in conjunction with its repricing in the third quarter. Net proceeds from the ABL Facility were $207.0 million in both periods.
Financing Obligations
On February 3, 2017, we entered into the ABL Facility and the Term Loan Facilities, in part to amend our Prior ABL Facility and refinance our Prior Term Loan Facilities. The Second Lien Term Loan was fully repaid on July 2, 2018 in connection with the closing of the IPO. See Description of Certain Indebtedness.
On August 13, 2018, the Company refinanced its First Lien Term Loan and reduced the principal on the loan. The Company drew $350.0 million under its ABL Facility to fund the transaction. As amended, the First
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Lien Term Loan has an initial principal amount of $1,537.7 million and interest is calculated either at LIBOR plus 275 to 300 basis points or a base rate plus 175 to 200 basis points based on the Company achieving a net leverage ratio of 3.00 to 1.00. The Company paid debt costs of $1.8 million and accrued interest of $1.2 million at closing.
On August 17, 2018, we amended the ABL Facility to extend the maturity date from February 3, 2022 to August 17, 2023 and reduce the applicable interest rates and letter of credit fees on the facility. As amended, interest on the revolving credit facility is calculated either at LIBOR plus a range of 125 to 175 basis points or a base rate plus a range of 25 to 75 basis points; and interest on the term loan is calculated at LIBOR plus a range of 200 to 250 basis points or a base rate plus a range of 100 to 150 basis points, in all cases based on excess availability. The applicable spread of LIBOR and base rate loans at all levels of excess availability steps down by 12.5 basis points upon achieving total net leverage of 3.00 to 1.00. The Company paid debt costs of approximately $1.0 million at closing.
Contractual Obligations
The Companys contractual obligations consist primarily of long-term debt obligations, interest payments, operating leases and purchase orders for merchandise inventory. These contractual obligations impact the Companys short-term and long-term liquidity and capital needs. The table below is presented as of February 3, 2018. As of the date of this prospectus, there were no material changes to our contractual obligations with the exception of Long Term Debt. See Note (1) below.
Total | 2018 |
2019 to
2020 |
2021 to
2022 |
2023 and
thereafter |
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Long term debt (1) |
$ | 2,752,563 | $ | 219,750 | $ | 38,500 | $ | 88,500 | $ | 2,405,813 | ||||||||||
Operating leases |
3,425,408 | 302,622 | 596,029 | 548,619 | 1,978,138 | |||||||||||||||
Capital and financing leases |
63,168 | 4,791 | 9,317 | 9,727 | 39,333 | |||||||||||||||
Closed store lease obligations |
12,686 | 2,122 | 4,266 | 4,298 | 2,000 | |||||||||||||||
Purchase obligations (2) |
635,937 | 608,375 | 21,266 | 6,296 | | |||||||||||||||
Other long term liabilities (3) |
91,738 | 733 | 19,606 | 19,525 | 51,874 | |||||||||||||||
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Total |
$ | 6,981,500 | $ | 1,138,393 | $ | 688,984 | $ | 676,965 | $ | 4,477,158 | ||||||||||
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(1) |
Long Term debt changed materially due to the payoff of the Second Lien Term Loan of $623.3 million on July 2, 2018 with the use of IPO proceeds and subsequent refinancing transactions. The Second Lien Term Loan would have matured on February 3, 2025. On August 13, 2018, we borrowed $350.0 million against the ABL Facility to repay $350.0 million of the then existing First Lien Term Loan, which would have matured on February 3, 2024, and refinanced the remainder of the First Lien Term Loan. On August 17, 2018, we amended the ABL Facility to extend the maturity date from February 3, 2022 to August 17, 2023 and to reduce the applicable interest rates and fees on the facility. |
Subsequent to the payoff and refinancing, the remaining principal balance on long term debt is $1,980.7 million, which matures $400.6 million in 2018, $30.8 million in 2019 to 2020, $30.8 million in 2021 to 2022 and $1,518.5 million in 2023 and thereafter. Total interest payments associated with these borrowings are estimated to be $461.8 million based on the LIBOR interest rate of 2.07% plus the applicable margin as of the August 2018 refinancings, which are floating rate instruments. Interest estimates also include a quarterly required commitment fee of .25% per annum on the daily unused amount of the ABL Facility.
(2) |
Includes our significant contractual unconditional purchase obligations. For cancellable agreements, any penalty due upon cancellation is included. These commitments do not exceed our projected requirements and are in the normal course of business. Examples include firm commitments for merchandise purchase orders, gasoline and IT. |
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(3) |
Other long-term liabilities include long-term obligations recorded on our combined balance sheet as of November 3, 2018 that are not presented separately within the table above. They include the fair value of contingent payment liabilities associated with post-retirement medical benefits, workers compensation, general insurance, and gas station disposals. |
Off-Balance Sheet Arrangements
We have not entered into off-balance sheet arrangements. We do enter into operating lease commitments, letters of credit and purchase obligations in the normal course of our operations.
Critical Accounting Policies and Use of Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We review our estimates on an ongoing basis and make judgments about the carrying value of assets and liabilities based on a number of factors. These factors include historical experience and assumptions made by management that are believed to be reasonable under the circumstances. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could vary materially from estimates based on assumptions used in the preparation of our consolidated financial statements. This section summarizes critical accounting policies and the related judgments involved in their application.
The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, estimating vendor rebates and allowances; estimating the value of inventory; impairment assessments for goodwill and other indefinite-lived intangible assets, and long-lived assets; self-insurance reserves and estimating equity-based compensation expense. Our significant accounting policies related to these accounts in the preparation of our consolidated financial statements are described below. See Note 2 to our audited consolidated financial statements presented elsewhere in this prospectus for additional information regarding our critical accounting policies.
Revenue Recognition
We recognize revenue from the sale of merchandise, net of estimated returns, at the time of purchase by the customer in the club. In the limited instances when the customer is not able to take delivery at the point of sale, revenue from the sale of merchandise is not recognized until title and risk of loss pass to the customer. For sales of merchandise on our website, revenue is also recognized when title and risk of loss pass to the customer, which is normally at the time the merchandise is received by the customer.
Sales incentives redeemable only at BJs, such as coupons and instant rebates, are recorded as a reduction of net sales. Membership fee revenue is recognized on a straight-line basis over the life of the membership, which is typically twelve months. Consideration from manufacturers incentives (such as rebates or coupons) is recorded gross in net sales when the incentive is generic and can be tendered by a consumer at any reseller and the Company receives direct reimbursement from the manufacturer, or clearinghouse authorized by the manufacturer, based on the face value of the incentive. If these conditions are not met, such consideration is recorded as a decrease in cost of sales.
The Companys BJs Perks Rewards ® members earn 2% cash back, up to a maximum of $500 per year, on all qualified purchases made at BJs. The Companys My BJs Perks Mastercard holders earn 3% or 5% cash back on all qualified purchases made with the card at BJs and 1% to 2% cash back on purchases made with the
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card outside of BJs. Cash back is in the form of electronic awards issued in $20 increments that may be used in-club at the register and expire six months from the date of issuance. Cash back may be requested in the form of a check before awards expire. The Company accounts for the Awards as a reduction in net sales, with the related liability being classified within other current liabilities.
BJs gift cards are available for purchase at all of our clubs. We do not charge administrative fees on unused gift cards, and gift cards do not have an expiration date. Revenue from gift card sales is recognized upon redemption of the gift card. We record revenue from gift card breakage when the likelihood of the gift card being redeemed is remote and we do not have a legal obligation to escheat the value of unredeemed gift cards to the relevant jurisdictions.
In the ordinary course of business, sales taxes are collected on items purchased by the members that are taxable in the jurisdictions when the purchases take place. These taxes are then remitted to the appropriate taxing authority. These taxes collected are excluded from revenues in the financial statements.
At the beginning of fiscal year 2018, we adopted the provisions of ASC No. 606, Revenue from Contracts with Customers, and related amendments (ASC 606) using the modified retrospective method. As a result of the adoption, our revenue recognition policy as of February 4, 2018 reflects the following major changes:
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Recognition of e-commerce sales when control is transferred to the customer |
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Recognition of royalty revenue in connection with our co-brand credit card program as variable consideration |
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Recognition of gift card breakage in proportion to gift card redemptions |
See Note 3 to our unaudited financial statements for further information.
Vendor Rebates and Allowances
We receive various types of cash consideration from vendors, principally in the form of rebates and allowances that typically do not exceed a one-year time period. We recognize such vendor rebates and allowances as a reduction of cost of sales based on a systematic and rational allocation of the cash consideration offered to the underlying transaction that results in progress by BJs toward earning the rebates and allowances, provided the amounts to be earned are probable and reasonably estimable. We review the status of all rebates and allowances at least once per quarter and update our estimates, if necessary, at that time. We believe that our review process has allowed us to avoid material adjustments in estimates of vendor rebates and allowances.
Inventory
Merchandise inventories are stated at the lower of cost, determined under the average cost method, or net realizable value. We recognize the write-down of slow-moving or obsolete inventory in cost of sales when such write-downs are probable and estimable. Records are maintained at the stock keeping unit (SKU) level. We utilize various reports that allow our merchandising staff to make timely markdown decisions to ensure rapid inventory turnover, which is essential in our business. The carrying value of any SKU whose selling price is marked down to below cost is immediately reduced to that selling price.
We take physical inventories of merchandise on a cycle basis at every location at least once every 18 months, relying on our weekly cycle counting programs in the intervening periods. A physical inventory is taken at the end of the year at selected locations that dont meet our targeted accuracy rates or are experiencing unusual shrink activity. We write down inventory for estimated shrinkage for the period between physical inventories. This estimate is based on historical results of previous physical inventories, shrinkage trends or other judgments management believes to be reasonable under the circumstances. We have not had material adjustments between our estimated shrinkage percentages and actual results.
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Impairment of Goodwill, Indefinite-Lived and Long-Lived Assets
Goodwill
We evaluate goodwill annually to determine whether it is impaired. Goodwill is also tested more frequently if an event occurs or circumstances change that would indicate that the fair value of a reporting unit is less than its carrying amount. We have identified one reporting unit and selected the fourth fiscal quarter to perform our annual goodwill impairment testing. Goodwill impairment guidance provides entities an option to perform a qualitative assessment (commonly known as step zero) to determine whether further impairment testing is necessary before performing the two-step test. The qualitative assessment requires significant judgments by management about economic conditions including the entitys operating environment, its industry and other market considerations, entity-specific events related to financial performance or loss of key personnel and other events that could impact the reporting unit. If management concludes, based on assessment of relevant events, facts and circumstances, that it is more likely than not that a reporting units fair value is greater than its carrying value, no further impairment testing is required.
If managements assessment of qualitative factors indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step quantitative assessment is performed. We also have the option to bypass the qualitative assessment described above and proceed directly to the two-step quantitative assessment. In the first step, we compare the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting units goodwill. If the carrying value of a reporting units goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.
To assess for impairment, we performed a step-zero test for the years ended January 28, 2017 and February 3, 2018. Our tests for impairment of goodwill resulted in a determination that the fair value of the reporting unit exceeded the carrying value of our net assets and no impairment was recorded in the years ended January 28, 2017 and February 3, 2018. The Company does not believe our reporting unit is considered at risk of failing the impairment test as the fair value of the reporting unit significantly exceeded the carrying value of the reporting unit. We do not anticipate any material impairment charges in the near term.
Indefinite-Lived Intangible Assets
We consider the BJs trade name to be an indefinite-lived intangible asset, as we currently anticipate that this trade name will contribute cash flows to us indefinitely. We evaluate whether the trade name continues to have an indefinite life on an annual basis. Our trade name is reviewed for impairment annually in the fourth fiscal quarter and may be reviewed more frequently if indicators of impairment are present. If the recorded carrying value of the intangible asset exceeds its estimated fair value, we record a charge to write the intangible asset down to its estimated fair value. Calculating the fair value requires significant judgment. We determine the fair value of our trade name using the relief from royalty method, a variation of the income approach. The use of different assumptions, estimates or judgments, such as the estimated future cash flows, the discount rate used to discount such cash flows or the estimated royalty rate, could significantly increase or decrease the estimated fair value of the intangible asset.
We assessed the recoverability of the BJs trade name and determined that its estimated fair value exceeded its carrying value and that no impairment was recorded in the years ended January 28, 2017 and February 3, 2018.
Long-Lived Assets
We review the realizability of our long-lived assets at the lowest level for which identifiable cash flows are present, our club level, periodically and whenever events or changes in circumstances indicate that their carrying
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amounts may not be recoverable. We monitor our club portfolio to identify clubs that are underperforming. When we identify an underperforming club, we perform a review to reassess the future cash flows of the club. Current and expected operating results and cash flows and other factors are considered in connection with our reviews. Significant judgments are made in projecting future cash flows and are based on a number of factors, including the maturity level of the club, historical experience of clubs with similar characteristics, recent sales, margin and other trends and general economic assumptions. Our estimates of future cash flows are based on our experience, knowledge and judgments. These estimates can be affected by factors that are difficult to predict including future revenue, operating results and economic conditions. While we believe our estimates are reasonable, different assumptions regarding future cash flows could affect our analysis and result in future impairment. Impairment losses are measured and recorded as the difference between the carrying amount and the fair value of the assets. No impairment charges were recorded in the years ended January 28, 2017 and February 3, 2018.
Self-Insurance Reserves
We are primarily self-insured for workers compensation, general liability claims and medical claims. Reported reserves for these claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. Estimates are based on historical claims experience and other actuarial assumptions believed to be reasonable under the circumstances.
Income Taxes
We pay income taxes to federal, state and municipal taxing authorities. We are subject to audit by these jurisdictions and maintain reserves for those uncertain tax positions which we believe may be subject to challenge. Our reserves are based on our estimate of the likely outcome of these audits, and are revised periodically based on changes in tax law and court cases involving taxpayers with similar circumstances.
We recognize the financial statement impact for uncertain income tax positions based on a two-step process. We recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. If the tax position meets the more-likely-than-not recognition threshold, the tax effect is recognized at the largest amount of the benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. In future periods, changes in facts, circumstances and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in income tax expense and liability in the period in which such changes occur.
Share-Based Compensation
We recognize compensation cost for employee stock options awards based on the estimated fair value of the awards on the grant date. Compensation cost is recognized over the period during which the employee is required to provide service in exchange for the awards, which is typically the vesting period. For awards that contain only a service vesting feature, we use straight-line attribution to recognize the cost of the awards. For awards with a performance condition feature, we recognize compensation cost ratably over the awards expected vesting periods when achievement of the performance condition is deemed probable.
We estimate the fair value of our stock option awards using the Black-Scholes option pricing model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the expected term of the award, the risk-free interest rate and expected dividends. The risk free interest rate was based on United States Treasury yields in effect at the time of the grant for notes with terms comparable to the awards. Expected volatility was determined based on the historical and implied volatilities of comparable companies. We use the simplified method to calculate the expected term for options granted to employees. The expected dividend yield is assumed to be zero as we do not have current plans to pay any dividends on common stock.
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Determination of Fair Value of Common Stock
As there was no public market for our common stock prior to the IPO, the estimated fair value of our common stock was determined by our Board as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock and our Boards assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
In estimating the fair value of our common stock, we estimated the aggregate fair value of the Company and then allocate this aggregate value to our capital structure. In determining the fair value, we used a combination of the income approach and the market approach. Under the income approach, fair value is estimated based on the discounted present value of the cash flows that the business can be expected to generate in the future. The most significant estimates and assumptions inherent in this approach are based on the estimated present value of future net cash flows the business is expected to generate over a forecasted period and an estimate of the present value of cash flows beyond that period, which is referred to as the terminal value. The estimated present value is calculated using a discount rate, which is based on rates of return available from alternative investments of similar type and quality as of the date of value, which accounts for the time value of money and the appropriate degree of risks inherent in the business. Under the market approach, fair value is estimated using the guideline public company method. The guideline public company method uses a peer group of publicly traded companies and considers multiples of financial metrics to derive a range of indicated values. Determination of the peer group is based on factors including, but not limited to, the similarity of their industry, growth rate and stage of development, business model and financial risk. To derive our fair value we summed a 50% weighting of the fair value derived by the income approach and a 50% weighting of the market approach.
After the IPO, the fair value of our common stock is determined based on the trading price on the NYSE.
Recent Accounting Pronouncements
See Note 2 to our audited financial statements and unaudited interim financial statements included elsewhere in this prospectus for information regarding recently issued accounting pronouncements.
Quantitative and Qualitative Disclosures about Market Risks
We are exposed to changes in market interest rates and these changes in rates will impact our net interest expense and our cash flow from operations. Substantially all our borrowings carry variable interest rates. An increase in interest rates could have a material impact on our cash flow. As of November 3, 2018, a 100-basis point increase in assumed interest rates for our variable interest credit facilities, before impact of any hedges, would have had an annual impact of approximately $19.6 million on interest expense. We do not have any interest rate swaps or other hedging arrangements to mitigate interest rates in fiscal year 2018. In November 2018, the Company entered into three forward starting interest rate swaps. Through these arrangements, which are effective on February 13, 2019, the Company has fixed the LIBOR component of $1,200.0 million of its floating rate debt at a rate of approximately 3.0%.
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Our Company
BJs Wholesale Club is a leading warehouse club operator on the east coast of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services to deliver a differentiated shopping experience that is further enhanced by our omnichannel capabilities.
Over the last three years, we have hired Chris Baldwin as Chairman, President and Chief Executive Officer and have made multiple senior management hires and changes, adding consumer packaged goods, digital and consulting experience to our leadership team. This new leadership team has implemented significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJs more convenient. These changes have delivered results rapidly, evidenced by positive comparable club sales over the last six quarters and net income growth of over 109% and Adjusted EBITDA growth of 31% in aggregate from fiscal year 2016 to fiscal year 2017. We believe that these changes will continue to impact sales, profit margins and free cash flow performance favorably in the future. In fiscal year 2017, we generated total revenues, net income and Adjusted EBITDA of $12.8 billion, $50 million and $534 million, respectively.
Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 216 large-format, high volume warehouse clubs spanning 16 states. In our core New England markets, which have high population density and generate a disproportionate part of U.S. GDP, we operate almost three times the number of clubs compared to the next largest warehouse club competitor. In addition to shopping in our clubs, members are able to shop when and how they want through our website, www.bjs.com; our highly-rated mobile app and our integrated Instacart same-day delivery offering.
Our goal is to offer our members significant value and a meaningful return, in savings, on their annual membership fee. We have more than five million members paying annual fees to gain access to savings on groceries, consumables, general merchandise, gas and ancillary services. The annual membership fee for our Inner Circle ® Membership is $55 per year, and our BJs Perks Rewards ® Membership, which offers additional value-enhancing features, costs $110 annually. We believe that members can save over ten times their $55 Inner Circle membership fee versus what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJs on manufacturer-branded groceries. In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality. Our two private label brands, Wellsley Farms ® and Berkley Jensen ® , represent over $2 billion in sales, and are the largest brands we sell. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth. Our membership fee income was $259 million for fiscal year 2017, and represents approximately half of our Adjusted EBITDA.
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Our approach to merchandising positions us between other warehouse clubs and grocery retailers. We sell a wide range of products, combining the bulk savings of a warehouse club with a broader assortment and selectively smaller pack sizes in perishable and grocery products than our club competitors. We have more stock keeping units (SKUs) than other warehouse retailers (around 7,200 versus around 4,500 for other warehouse retailers), which allows us to offer a greater selection while still enabling us to manage our inventory more efficiently than supermarket and mass-market competitors (which can carry 40,000 or upwards of 100,000 SKUs, respectively). We also offer a treasure-hunt experience with exciting finds in apparel, electronics, home goods and seasonal merchandise, as well as ancillary services such as tire installation, vision care, travel and insurance at attractive values. Our 138 gas stations provide members with additional savings and convenience, which we believe drive more trips and reinforce our strong value proposition. We believe our continuously refreshed assortment, expanded perishable offerings and differentiated value proposition drive strong member loyalty and our warehouse club industry-leading average shopping frequency of 22 trips to BJs annually. Our membership renewal rate for members with two or more years of tenure, a key indicator of member satisfaction and loyalty, was at an all-time high of 86% during fiscal year 2017.
Our target members care about value, quality and convenience and shop at warehouse clubs for their family needs. Our target members are a price sensitive demographic with large household sizes, representing nine million households in our trade areas. While we believe that we appeal to households with a wide range of incomes, we target households with an average annual income of approximately $75,000. We believe this group represents a historically underserved demographic in our core markets. Our membership offerings include the BJs Online Access SM Membership, our core Inner Circle ® Membership and three enhanced levels of membership and affiliation through our BJs Perks Rewards ® Membership and our My BJs Perks ® Mastercard ® offerings, which offer benefits such as cash back on purchases and discounted gasoline prices. These value-added membership tiers and affiliations further consolidate our members spend and improve customer loyalty and renewal rates, which ultimately increase the lifetime value of the member. The membership model allows us to capture more comprehensive data about our members, which we proactively use to optimize price, promotion and assortment to evolve with changing consumer demands.
Recent Strategic Initiatives
Led by Chris Baldwin, who became our Chief Executive Officer in February 2016 and Chairman in 2018, we have implemented significant changes to corporate culture and business operations over the last three years, modernizing the tools we use to compete in a rapidly evolving retail environment, including:
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Next Generation Leadership Team and Reinvigorated Culture: Our leadership team is led by Chris Baldwin, who we hired as President and Chief Operating Officer in 2015 and became our Chief Executive Officer in 2016 and Chairman in 2018, and Bob Eddy, who has been our Executive Vice President and Chief Financial Officer since January 2011 and took on the expanded responsibility of Chief Financial and Administrative Officer in February 2018. Our leadership team comprises management talent from diverse disciplines and backgrounds across all aspects of our business. We |
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have recently hired, promoted or added responsibility for all 13 of our executive officers. The diverse backgrounds of our management team reflect experience in retail, consumer packaged goods (CPG), digital, audit and consulting, at leading companies such as Hess, Procter & Gamble, Nabisco, Bain & Company, PricewaterhouseCoopers, eBay and Dicks, among others. The diversity of backgrounds supports various aspects of strategic initiatives across our company. For example, our leadership teams experience in the CPG industry provides well-informed insight that helps position BJs as a key partner with suppliers and drive value for our customers while growing volume and margins. Our new leadership team has instilled a more proactive culture and approach to many facets of corporate decision making, which has rapidly delivered results. |
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Relentless Focus on Our Consumer: Our membership program provides us access to comprehensive data on consumer behavior and purchasing patterns. To capitalize on this data, we have used rich, data-driven analytics to drive improved decision-making in all aspects of our business, including procurement, merchandising, product positioning, club openings, marketing and promotion campaigns, among others. As a result, we have been able to implement a range of assortment initiatives such as supplier renegotiations, competitive contract options, SKU optimization and brand switching. We are also using our data to better target member acquisition and retention efforts for existing and new clubs. While we have made substantial progress, we believe there are opportunities to further develop our data analytics capabilities. |
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Enterprise-Wide Cost Discipline and Improved Profitability: We have created a culture of cost discipline across both member- and non-member facing functions. In 2015, we launched our category profitability improvement (CPI) program to address our procurement spending, and during fiscal years 2016 and 2017 and in the first three fiscal quarters of 2018 we negotiated over $300 million in expected annual procurement savings. We drove these savings by improving dialogue with our national brand and private label suppliers to educate them on the value proposition we offer to our members and by implementing competitive bidding throughout our buying process. In partnership with our suppliers, we are now using our data to maximize marketing campaigns, creating a symbiotic relationship that provides benefits to both parties. We further lowered our cost of goods sold by recalibrating and streamlining our portfolio of private label brands from 13 to two focused brands and by emphasizing our value proposition versus national brand equivalents, which increased our private label penetration from 10% of total merchandise sales in fiscal year 2012 to approximately 20% in the thirty-nine weeks ended November 3, 2018. We have also focused on staying disciplined in our overhead cost structure and have been able to hold addressable SG&A expenses relatively flat, allowing topline growth and gross profit expansion to translate into Adjusted EBITDA growth. We believe these cost savings will allow us to drive our next wave of growth through thoughtful investments in our business. |
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Technology-Driven Improvements to Customer Experience and Convenience: We have invested in omnichannel initiatives to boost convenience for our members. Powered by substantial back-end IT investments, we now offer, alongside in-store shopping, the enhanced convenience of an omnichannel shopping experience. We have launched mobile apps with Add-to-Card Coupons and Express Scan capabilities, have added Shop BJs.comPick Up in-Club capability, and have rolled out same-day delivery of certain grocery items with no mark-up to item pricing, providing our members convenient ways to shop when and how they feel most comfortable. |
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These strategic initiatives have delivered results rapidly, as evidenced by several key operating metrics:
BJs Wholesale Club is a leading player in the large and growing U.S. warehouse club channel, a retail channel characterized by highly discounted prices and a curated selection of SKUs and services offered in a warehouse format. According to the Warehouse Club Intelligence Center, our channel generated $167 billion of sales in 2017 and has grown at a compound annual growth rate (CAGR) of 4.5% since 2007. This pace of growth exceeded that of the grocery and GAFO (General Merchandise, Apparel and Accessories, Furniture and Other Sales) retail channels, which experienced CAGRs of 2.7% and 1.1%, respectively, during this period, according to the U.S. Census.
Source: Warehouse Club Intelligence Center-2017 Warehouse Club Guide
The warehouse club model maintains several structural advantages over other retail formats that enable operators to provide significant value and a differentiated experience for the customer while also achieving an attractive return on invested capital. These advantages include:
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membership fee subscriptions that provide stable cash flows while driving consolidation of customer spend and encouraging buy more, save more behavior; |
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comprehensive customer purchasing data, enabling operators to analyze customer spend more effectively and meet consumer demand; |
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low operating costs per square foot due to high inventory turnover, low club labor requirements and efficient distribution networks; and |
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limited and bulk-sized SKUs, and a no-frills warehouse environment, which deliver a clear value proposition to consumers who are increasingly focusing on savings and price transparency. |
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According to the Warehouse Club Intelligence Center, the U.S. warehouse club channel is projected to grow at a five year CAGR of 4.0% from 2017 through 2022. Our channel is well-positioned to continue taking market share from a variety of other retail channels, including supermarkets, mass, convenience, department, specialty and variety stores. In recent years, fundamental changes in consumer shopping behavior have contributed to significant disruptions in the retail industry. Among these key changes is a growing consumer focus on value, driven by multiple factors including the growth of ecommerce, an increase in price transparency and demographic trends such as household-forming millennials and retiring baby boomers. Together, these factors favor retailers that offer strong value propositions, including warehouse clubs, where value is a fundamental part of the consumer perception. Additional tailwinds for the channel include recent retail store closures and bankruptcies that, we believe, provide an opportunity to take incremental market share. Warehouse clubs are also well-positioned against e-commerce retailers due to competitive pricing, an emphasis on fresh food, differentiated service offerings including gasoline, and the treasure hunt experience of the warehouse club trip. We believe that warehouse club customers view online retail and club visits as complementary for their shopping needs, with club visits providing great value in essential needs and online retail filling in for one-off purchases not available at warehouse clubs.
Our Competitive Strengths
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Differentiated Shopping Experience: We believe our business model enables us to provide significant value to our members versus non-warehouse club competitors. We define providing value in multiple ways. First, BJs consistently offers prices that are 25% lower on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. Second, we offer a continuously refreshed assortment of on-trend general merchandise, competitively-priced gas and a variety of ancillary services that our non-warehouse club competitors generally do not provide. We believe that members can save over ten times their $55 Inner Circle membership fee compared to what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJs on manufacturer-branded groceries. Our clubs also carry 950 fresh food SKUs in selectively smaller pack sizes, whereas other warehouse club competitors offer significantly fewer SKUs in predominantly larger pack sizes. Together, we believe our significant value proposition and broader offering drive increased customer loyalty and higher trip frequency, positioning us to compete more effectively for weekly shopping market share. |
Well-Positioned Footprint and Flexible New Club Model: We are a leading warehouse club operator on the east coast of the United States, where our 216 clubs and 138 gas stations are well-positioned in some of the most attractive markets in the United States. In our core New England markets, we operate almost three times the number of clubs when compared to the next largest warehouse club competitor. Nearly all of our clubs generate positive club-level EBITDA. Many of our clubs are located in densely populated, high traffic locations that are difficult to replicate due to expensive and limited real estate. In 2016, the markets in |
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which we operate delivered GDP contribution, population growth and household incomes above the respective U.S. averages. Our club sizes range from 63,000 sq. ft. to 150,000 sq. ft., with newer clubs primarily made up of our 85,000 sq. ft. model. We have also recently implemented a more data-driven model for new club site selection and member acquisition. This model, combined with our wide range of warehouse club sizes, allows for a flexible real estate expansion strategy that can be customized for infill or adjacent markets. We operate or contract for six distribution centers that serve our existing club base and have capacity to support up to about 100 additional clubs in the eastern United States. |
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Large and Loyal Membership Base: Our business model creates a virtuous cycle of member spending, savings and loyalty, which drives our large and loyal membership base. We have over five million paid memberships, made up of more than 10 million total members, as of fiscal year 2017. Our target member represents the largest segment of warehouse club shoppers in BJs trade areas with 9 million households and $7 billion of annual club channel grocery spend. The strong loyalty of our membership base is reflected in our all-time high renewal rate of 86% during fiscal year 2017. Additionally, as our membership base is price sensitive, our value proposition resonates even more during economic downturns, as evidenced by our stronger comparable club sales results versus other warehouse clubs during these historical periods. |
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Attractive Strong Free Cash Flow across Economic Cycles: Our membership model, low operating cost structure and disciplined capital spending allow us to generate predictable, strong free cash flow. Membership fees provide us with a stable stream of high margin revenue that is independent of merchandise sales, accounting for approximately half of Adjusted EBITDA in 2017, and positions us advantageously versus non-warehouse competitors. This income stream has grown every year over the past two decades. Additionally, our low club labor requirements and efficient distribution network result in low operating costs per square foot. We maintain a disciplined working capital strategy focused on sustaining low receivable levels and inventory turnover that matches or exceeds payment terms. Our clubs typically require a limited amount of maintenance capital expenditures to operate. Our business model enabled cash flow from operating activities to grow by 32%, from $159 million to $210 million, and free cash flow to grow by 55%, from $47 million to $73 million, from fiscal year 2015 to fiscal year 2017. Our strong and steady free cash flow allows us to invest growth-focused capital in new clubs and initiatives, which we believe will generate positive returns on investment. |
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Experienced Management Team with a Proven Track Record: Our management team is led by Chairman, President and Chief Executive Officer Chris Baldwin, who we appointed Chief Executive Officer in February 2016 and Chairman in 2018. Chris has over 30 years of experience in retail and consumer products and, given his significant experience in the consumer products industry, brings a differentiated, consumer-oriented approach to retail. Chris also serves as the Chairman of the National Retail Federation, where he gains valuable insight into the broader retail industry. Chris collaborates closely with Bob Eddy, our Executive Vice President and Chief Financial and Administrative Officer. Bob is among the longest serving members of the BJs executive team, joining BJs in 2007, becoming Executive Vice President and Chief Financial Officer in 2011, and taking on the expanded responsibility of Chief Financial and Administrative Officer in February 2018. We also recently bolstered our team by appointing Lee Delaney as Chief Growth Officer in May 2016. Lee took on the expanded responsibility of Chief Commercial Officer in May 2018. Prior to joining BJs, Lee was a Partner in the Consumer Products practice at Bain & Company, where he gained a deep understanding of retailer-supplier dynamics. Other members of the BJs management team include recent outside hires and internal promotions. Our current management team has driven BJs recent performance momentum and is implementing a culture of operational discipline with processes and procedures focused on long-term, profitable growth. |
Our Growth Strategies
We believe we can drive sustainable sales and profit growth by executing on the following strategies:
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Grow Our Member Base: We benefit from access to comprehensive data on our members shopping behaviors that, we believe, is instrumental in implementing targeted, data-driven marketing and merchandising initiatives that improve the in-club shopping experience, grow wallet share and increase new member acquisition. We have invested significantly in augmenting our member acquisition and retention strategies, including investments in member segmentation and marketing, with the aim of driving a shift towards greater member engagement and membership renewals. For example, by recently upgrading our prospecting strategy from rigid, analog, semiannual mass campaigns to personalized, digital, always on campaigns, we believe we can continue to grow our member base. |
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We have been successful in driving members into higher tiers of membership and affiliation, growing by 316% the number of members holding one of our My BJs Perks Mastercard offerings from fiscal year 2014 through fiscal year 2017. We are continually investing in our membership program to increase new member acquisition rates and drive renewals through value added membership and affiliation tiers. We believe we have the potential to significantly increase the penetration levels of our value-added membership and affiliation tiers. We are developing models to predict our members likelihood to renew so that we can proactively market to at-risk members, highlighting the value of their membership while encouraging breadth of shop and trip frequency with targeted promotions. We recently launched checkout lane prompting of premium membership awards and are rolling out checkout lane credit card approvals to expedite the application process.
Our ongoing efforts also include increasing our use of social media, optimizing direct mail, converting promotional offer members into paid memberships, engaging young families and facilitating ease of membership renewals. We grew our BJs Easy Renewal ® penetration from 18% in fiscal year 2015 to 37% in fiscal year 2017. We believe we can grow our BJs Easy Renewal penetration further. We expect to leverage our membership data and deep analytics to dynamically optimize offers, providing a platform that, we believe, enables us to more effectively engage our members, transition them into value added membership and affiliation tiers and deliver greater share of wallet.
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Relentlessly Focus on the Consumer to Drive Sales: We intend to continue our efforts to optimize our product assortment and positioning and plan to expand our current product offerings into new and adjacent categories, including a broader apparel assortment, enhanced perishable offerings, tools and new family-oriented categories. We also have ongoing initiatives to enhance our private label offerings, deliver novel in-club experiences by continuously refreshing our assortment, improve workforce training and management through scheduling algorithms and provide services that enhance the overall member experience. We intend to continue initiatives aimed at growing comparable club sales through advancing member engagement, tailoring promotional offerings, improving the convenience of accessing our offering and allowing our members to complete their shopping in less time. We utilize social media, including via personalized outreach, to enhance our understanding both of member engagement and of the implications for shopping at our clubs and online. We are leveraging our learning to deliver greater value to our members and drive improved engagement. We also plan to expand our gas penetration and have identified opportunities to expand on-site and near-site gas stations at existing clubs and optimize pricing and loyalty programs. We focus our efforts on supporting the ease and consistency of each members experience, increasing trips to our clubs and enhancing the appeal of our clubs as a shopping destination. |
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Improve Trip Convenience and Differentiate Omnichannel Offering: During the Sponsors tenure as our owners, we invested over $230 million in IT initiatives, including the implementation of SAP, which we believe is a key enabler in our ability to collect and utilize our data and further build our omnichannel capabilities. We are currently expanding several technology initiatives to enhance our omnichannel capabilities over the next two years. These initiatives include: |
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mobile apps with Add-to-Card (which allows users to add digital coupons to their membership card) and Express Scan functionalities (which allows members to use smart phones to scan bar codes as they shop the club to facilitate quick checkout); |
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Shop BJs.comPick Up in-Club (which allows members to buy products online and pick-up in club within two hours); and |
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a same-day delivery offering, which allows members to shop our clubs from the convenience of BJs.com, and have orders delivered the same day for a nominal delivery fee. |
We are also aggressively advancing our digital capabilities to enhance personal outreach to our members. We have already added experienced and accomplished omnichannel and IT leadership talent to our team to facilitate these efforts and will continue to invest in our omnichannel capabilities and data analytics. We
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believe these initiatives will result in a more seamless, convenient shopping experience for our members and will drive financial results.
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Expand Our Strategic Footprint: We believe the six existing Company-operated and contracted distribution centers that serve our clubs are sufficient to support the opening of about 100 additional clubs in the eastern United States, and we plan to open a total of 15-20 new clubs over the next five years. We will focus this expansion on infill and markets adjacent to our existing locations. We also expect to benefit from recent club and department store closures in several of our markets and adjacent markets. In fiscal years 2016 and 2017, we implemented a data-driven approach to club openings with results in our latest pilot clubs that included new membership at club opening that was 240% greater than our average new club opening in fiscal year 2015. |
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Continue to Enhance Profitability: Over the last three years, our management team led a number of operational improvements at BJs and delivered significant savings. For example, under our CPI program, which we launched in fiscal year 2015 to address procurement spend across 70 product categories, we implemented initiatives such as supplier renegotiations, SKU optimization and brand switching. During fiscal years 2016 and 2017, and the first three fiscal quarters of 2018 we negotiated over $300 million in expected annual procurement savings, with over $200 million of those savings impacting our cost of sales during those fiscal years and another $60 million scheduled to impact our cost of sales during fiscal year 2018. We are continuing to review additional product categories through our CPI program, which we believe can deliver significant incremental procurement savings. |
In January 2018, we increased our membership fees by 10%, consistent with our historical practice of raising membership fees every five years. Additionally, we have been focused on controlling our Selling, General and Administrative spend, and we will continue to invest in technologies to drive efficiencies in the club.
We believe we have opportunities to drive further productivity savings in the near- to medium-term through additional procurement savings, greater private label penetration and continued cost discipline. We believe our Adjusted EBITDA and free cash flow will improve further as we capture additional benefits from initiatives both already undertaken and to come.
Industry and Competition
Warehouse clubs offer a relatively narrow assortment of food and general merchandise items within a wide range of product categories. In order to achieve high sales volumes and rapid inventory turnover, merchandise selections are generally limited to items that are brand name leaders in their categories alongside an assortment of private label brands. Since warehouse clubs sell a diversified selection of product categories, they attract customers from a wide range of other wholesale and retail distribution channels, such as supermarkets, supercenters, internet retailers, gasoline stations, hard discounters, department and specialty stores and operators selling a narrow range of merchandise. These higher cost distribution channels have traditionally been unable to match the low prices offered by warehouse clubs over long periods.
Warehouse clubs eliminate many of the merchandise handling costs associated with traditional multiple-step distribution channels by purchasing full truckloads of merchandise directly from manufacturers and by storing merchandise on the sales floor rather than in central warehouses. By operating no-frills, self-service warehouse facilities, warehouse clubs have fixturing and operating costs substantially below those of traditional retailers. Because of their higher sales volumes and rapid inventory turnover, warehouse clubs generate cash from the sale of a large portion of their inventory before they are required to pay merchandise vendors. As a result, a greater percentage of the inventory is financed through vendor payment terms than by working capital. Two broad groups of customers, individual households and small businesses, have been attracted to the savings made possible by the high sales volumes and operating efficiencies achieved by warehouse clubs. Customers at warehouse clubs are generally limited to members who pay an annual fee.
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Our Clubs
As of November 3, 2018, we operated 216 clubs ranging in size from 63,000 square feet to 150,000 square feet. We aim to locate our larger clubs in high density, high traffic locations that are difficult to replicate. We design our smaller format clubs to serve markets whose population is not sufficient to support a larger club or that are in locations, such as urban areas, where there is inadequate real estate space for a larger club. Including space for parking, the amount of land required for a BJs club generally ranges from 8 acres to approximately 14 acres. The use of garage parking can in some cases reduce the amount of land necessary for a club. Our clubs are located in both free-standing locations and shopping centers.
We buy most of our merchandise directly from manufacturers and route it to cross-docking consolidation points (distribution centers) or directly to our clubs. Our company-operated and contracted distribution centers receive large shipments from manufacturers and quickly ship these goods to individual clubs. This process creates freight volume and handling efficiencies, eliminating many costs associated with traditional multiple-step distribution channels.
A summary of our club locations by market is set forth in the table below.
Market | Store Count | |||
New York |
44 | |||
Florida |
31 | |||
Massachusetts |
25 | |||
New Jersey |
23 | |||
Pennsylvania |
17 | |||
Connecticut |
13 | |||
Virginia |
13 | |||
Maryland |
12 | |||
North Carolina |
10 | |||
New Hampshire |
6 | |||
Ohio |
6 | |||
Georgia |
5 | |||
Delaware |
4 | |||
Maine |
3 | |||
Rhode Island |
3 | |||
South Carolina |
1 |
Merchandising
We service our existing members and attract new members by providing a broad range of high quality, brand name and private label merchandise at prices that are consistently lower than the prices of traditional retailers, including discount retailers, supermarkets, supercenters and specialty retail operations. We limit the items offered in each product line to fast selling styles, sizes and colors, carrying approximately 7,200 active stock keeping units (SKUs). By contrast, supermarkets normally carry an average of 40,000 SKUs, and supercenters may stock 100,000 SKUs or more. We work closely with manufacturers to develop packaging and sizes that are best suited for selling through the warehouse club format in order to minimize handling costs and ensure value to our members.
We group our merchandise offerings into perishables, edible grocery, non-edible grocery and general merchandise categories.
|
Perishables : consist of our meat, produce, dairy, bakery, deli and frozen products, and constituted approximately 33% of our merchandise sales for fiscal year 2017. |
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Edible grocery : consists of packaged foods (including breakfast foods, salty snacks and candy) and beverages (including juices, water, beer, wine and liquor) and constituted approximately 27% of our merchandise sales for fiscal year 2017. |
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Non-edible grocery : consists of detergents, disinfectants, paper products, beauty care, adult and baby care and pet foods, and constituted approximately 24% of our merchandise sales for fiscal year 2017. |
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General merchandise : consists of small appliance, lighting, television, electronics, imaging and apparel and constituted approximately 15% of our merchandise sales for fiscal year 2017. |
BJs consumer-focused private label products, sold under Wellsley Farms ® and Berkley Jensen ® brands, comprised approximately 20% of total merchandise sales in the thirty-nine weeks ended November 3, 2018, an increase from 10% in fiscal year 2012. These products are primarily premium quality and generally are priced below the branded competing product. We focus both on a group of core private label products that compete with national brands that have among the highest market share and yield high margins and on differentiated products that drive member loyalty.
We also offer a number of specialty services that are designed to enable members to complete more of their shopping at our clubs and to encourage more frequent trips to the clubs. Certain of these services are provided by outside operators under license from us. Specialty services include full-service optical centers; full-service cellular phone service centers; home improvement services; travel services; garden and storage sheds; patios and sunrooms; a propane tank filling service; an automobile buying service; a car rental service; tire installation services; payment processing services; and protection plans.
As of November 3, 2018, we had 136 gasoline stations in operation at or near our clubs. The gas stations are generally self-service, with some locations also accepting cash. Both regular and premium gasoline are available. We generally maintain our gas prices below the average prices in each market as a means of illustrating a favorable price image to existing and prospective members.
Omnichannel Offering
Our e-commerce business, www.bjs.com, provides hundreds of our general merchandise products as well as thousands of additional products generally not found in our clubs. We provide delivery of these products to our members home or office. Items sold on our website include electronics, computers, office supplies and equipment, products for the home, health and beauty aids, sporting goods, outdoor living, baby products, toys and jewelry. In addition, we offer, through third party providers, services such as tire installation, travel and insurance and more. In addition to e-commerce capabilities, our highly-rated mobile apps offers Add-to-Card Coupons functionality, which alleviates the hassle of paper coupons by allowing members to digitally save our own and national brand coupons and offers directly onto the app, and Express Scan capability, which enables our members to self-checkout by scanning purchases on their smartphone. We have also rolled out an integrated same-day delivery offering with club pricing and a fixed delivery fee.
Membership
Paid membership is an essential element of the warehouse club concept. In addition to providing a source of revenue which permits us to offer low prices, membership reinforces customer loyalty. We have a large base of five million paid memberships, made up of more than 10 million total members, as of fiscal year 2017. Our target customers care about value, quality and convenience and shop at warehouse clubs for their family needs. Our target customers are a price sensitive demographic with large household sizes, representing the largest segment of warehouse club shoppers in BJs trade areas, with 9 million households and $7 billion of annual club channel grocery spend. While we believe we also appeal to a wider range of household incomes, we target households with an average annual income of approximately $75,000. We believe this group represents an historically underserved demographic in our core markets.
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We offer two core types of memberships: Inner Circle ® memberships and business memberships. We generally charge $55 per year for a primary Inner Circle membership that includes one additional card for a household member. Primary members may purchase up to three supplemental memberships for $30 each. A primary business membership costs $55 per year and includes one free supplemental membership. Business members may purchase up to eight additional supplemental business memberships at $30 each. U.S. military personnelactive and veteranwho enroll at a BJs club location can do so for a reduced membership fee. We had over five million paid members at November 3, 2018. The prices above reflect a 10% increase in the list prices of our primary membership tiers, which went into effect on January 1, 2018.
BJs Perks Rewards ® , our higher tier of membership, offers members the opportunity to earn 2% cash back on most in-Club and www.bjs.com purchases. The annual fee for a BJs Perks Rewards Membership is $110 per year. We also offer our co-branded My BJs Perks ® Mastercard ® program. This program provides members with the opportunity to earn up to five percent cash back on purchases made at our clubs or online at bjs.com and a 10-cent per gallon discount on gasoline when paying with a My BJs Perks Mastercard at our BJs Gas locations. We offer among the most competitive gasoline prices in our markets, evidenced by GasBuddy naming BJs Gas among the top 10 on its 100 U.S. Best Value Brands for 2016 list. Since fiscal year 2014, we have grown co-branded Mastercard holders by 316%. In fiscal year 2017, BJs Perks Rewards members and co-branded Mastercard members accounted for 21% of members and 38% of spend.
Advertising and Public Relations
We promote customer awareness of our clubs primarily through social media, direct mail, public relations efforts, radio advertising, community involvement, new club marketing programs and various publications sent to our members periodically throughout the year. We also employ dedicated marketing personnel who solicit potential business members and who contact other selected organizations to increase the number of members. We also run free promotional membership and initially discounted membership promotions to attract new members, with the objective of converting them to paid members. These programs result in low marketing expenses compared to typical retailers.
Club Operations
Our ability to achieve profitable operations depends upon high sales volumes and the efficient operation of our warehouse clubs. We buy most of our merchandise from manufacturers for shipment either to a BJs cross-dock facility or directly to our clubs. This eliminates many of the costs associated with traditional multiple-step distribution channels, including distributors commissions and the costs of storing merchandise in central distribution facilities.
We route the majority of our purchases through cross-dock facilities which break down truckload quantity shipments from manufacturers and reallocates these goods for shipment to individual clubs, generally within 24 hours. Our efficient distribution systems result in reduced freight expenses and lower handling costs compared to other retailers. We contract with a third party that operates three perishables distribution centers for us.
We work closely with manufacturers to minimize the amount of handling required once merchandise is received at a club. Merchandise for sale is generally displayed on pallets containing large quantities of each item, thereby reducing labor required for handling, stocking and restocking. Back-up merchandise is generally stored in steel racks above the sales floor.
Information Systems
We strive to use information systems and technology to improve the control and the efficiency of our business model. We completed an implementation of SAP enterprise resource planning software in fiscal year 2015 and are focused on leveraging the efficiency benefits of SAP as well as implementing new checkout technologies to improve member convenience.
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Sales data is generally analyzed daily for replenishment decision making. Detailed purchasing data permits the buying staff and club managers to track changes in members buying behavior. Detailed shrinkage information by SKU by club allows management to quickly identify inventory shrinkage problems and formulate effective action plans.
Employees
As of November 3, 2018, we had approximately 26,700 full-time and part-time employees, whom we refer to as team members. None of our team members is represented by a union. We consider our relations with our team members to be good.
Segments
Our club retail operations, which represent substantially all of our consolidated total revenues, are our only reportable segment. All of our identifiable assets are located in the United States. We do not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented.
Real Estate
We lease the substantial majority of our retail properties, each of our three Company-operated distribution centers and our corporate office. Our main office is located in Westborough, Massachusetts and is leased under a lease agreement expiring in 2026.
We operate three cross-dock distribution centers for non-perishable items and also have three perishable item distribution centers operated by a third party. Our cross-dock distribution centers are leased under lease agreements expiring between 2031 and 2033, and range between 480,000 and 630,000 square feet in size. The third-party perishable distribution centers range between 210,000 and 264,000 square feet in size.
As of November 3, 2018, we operated 216 clubs and 136 gas stations in 16 states. The majority of our clubs are leased from third parties under lease agreements expiring at various dates from 2018 to 2040.
The following table summarizes the real property that we own and lease as of November 3, 2018.
Type | Number | |||
Clubs owned |
11 | |||
Clubs leased |
205 | |||
Building leases |
185 | |||
Ground leases |
20 | |||
Gas stations owned |
2 | |||
Gas stations leased |
134 | |||
Distribution centers leased |
3 | |||
Corporate office leased |
1 |
Intellectual Property
We believe that, to varying degrees, our trademarks, trade names, copyrights, proprietary processes, trade secrets, patents, trade dress, domain names and similar intellectual property add significant value to our business and are important to our success. We have invested significantly in the development and protection of our well-recognized brands, including our private label brands, Wellsley Farms ® and Berkley Jensen ® . We believe that products sold under our private label brands are high quality, offered to our members at prices that are generally lower than those for comparable national brand products and help lower costs, differentiate our merchandise offerings from other retailers and generally earn higher margins. We expect to continue to increase the sales penetration of our private label items.
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We rely on trademark and copyright laws, trade-secret protection, and confidentiality, license and other agreements with our suppliers, employees and others to protect our intellectual property rights. The availability and duration of trademark registrations vary by country; however, trademarks are generally valid and may be renewed indefinitely as long as they are in use and their registrations are properly maintained.
Government Regulation
We are subject to labor and employment laws, laws governing truth-in-advertising, privacy laws, environmental laws, safety regulations and other laws, including consumer protection regulations that regulate retailers and govern the promotion and sale of merchandise and the operation of clubs, warehouses and Company-operated and contracted distribution center facilities.
Our clubs are also subject to various local, state and federal laws, regulations and administrative practices affecting our business. We must comply with provisions regulating health and sanitation standards, food labeling, equal employment, minimum wages, environmental protection, licensing for the sale of food and, in many clubs, licensing for beer and wine or other alcoholic beverages. Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products are subject to regulation by various federal agencies, including the Food and Drug Administration (the FDA), the FTC, the U.S. Department of Agriculture (the USDA), the Consumer Product Safety Commission (the CPSC) and the Environmental Protection Agency. We rely on contractual provisions to ensure compliance by our vendors.
Food
The FDA has comprehensive authority to regulate the safety of food and food ingredients (other than meat, poultry, catfish and certain egg products), as well as dietary supplements under the Federal Food, Drug, and Cosmetic Act (the FDCA). Similarly, the USDAs Food Safety Inspection Service is the public health agency responsible for ensuring that the nations commercial supply of meat, poultry, catfish and certain egg products is safe, wholesome and correctly labeled and packaged under the Federal Meat Inspection Act and the Poultry Products Inspection Act.
Congress amended the FDCA in 2011 through passage of the Food Safety Modernization Act (the FSMA), which greatly expanded the FDAs regulatory obligations over all actors in the supply chain. Industry actors continue to determine the best pathways to implement FSMAs regulatory mandates and the FDAs promulgating regulations throughout supply chains, as most requirements are now in effect. Such regulations mandate that risk-based preventive controls be observed by the majority of food producers. This authority applies to all domestic food facilities and, by way of imported food supplier verification requirements, to all foreign facilities that supply food products.
The FDA also exercises broad jurisdiction over the labeling and promotion of food. Labeling is a broad concept that, under certain circumstances, extends even to product-related claims and representations made on a companys website or similar printed or graphic medium. All foods, including dietary supplements, must bear labeling that provides consumers with essential information with respect to standards of identity, net quantity, nutrition facts labeling, ingredient statement and allergen disclosures. The FDA also regulates the use of structure/function claims, health claims and nutrient content claims.
Dietary Supplements
The FDA has comprehensive authority to regulate the safety of dietary supplements, dietary ingredients, labeling and current good manufacturing practices. Congress amended the FDCA in 1994 through passage of the Dietary Supplement Health and Education Act (the DSHEA), which greatly expanded FDAs regulatory authority over dietary supplements. Through DSHEA, dietary supplements became their own regulated commodity while also allowing structure/function claims on products. However, no statement on a dietary supplement may expressly or implicitly represent that it will diagnose, cure, mitigate, treat or prevent a disease.
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Food and Dietary Supplement Advertising
The FTC exercises jurisdiction over the advertising of foods and dietary supplements. The FTC has the power to institute monetary sanctions and the imposition of consent decrees and penalties that can severely limit a companys business practices. In recent years, the FTC has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims.
Compliance
As is common in our industry, we rely on our suppliers and contract manufacturers, including those of our private label products, to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements. We do not directly manufacture any goods. In general, we seek certifications of compliance, representations and warranties, indemnification or insurance from our suppliers and contract manufacturers. However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in products we sell. In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from our clubs. In order to comply with applicable statutes and regulations, our suppliers and contract manufacturers have from time to time reformulated, eliminated or relabeled certain of their products, and we have revised certain provisions of our sales and marketing program.
We monitor changes in these laws and believe that we are in material compliance with applicable laws.
Legal Proceedings
We are subject to various litigations, claims and other proceedings that arise from time to time in the ordinary course of business. We believe these actions are routine and incidental to the business. While the outcome of these actions cannot be predicted with certainty, we do not believe that any will have a material adverse impact on our business.
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Executive Officers and Directors
The following table sets forth information about our executive officers and directors, including their ages as of February 6, 2019. With respect to our directors, each biography contains information regarding the persons service as a director, business experience, director positions held currently or at any time during the past five years, information regarding involvement in certain legal or administrative proceedings and the experience, qualifications, attributes or skills that caused our board of directors to determine that the person should serve as a director of our Company.
Name |
Age |
Position |
||||
Executive Officers |
||||||
Christopher J. Baldwin |
56 |
Chairman, President & Chief Executive Officer |
||||
Lee Delaney |
47 |
Executive Vice President, Chief Commercial Officer |
||||
Jeff Desroches |
41 |
Executive Vice President, Club Operations Officer |
||||
Robert W. Eddy |
46 |
Executive Vice President, Chief Financial and Administrative Officer |
||||
Scott Kessler |
52 |
Executive Vice President, Chief Information Officer |
||||
Brian Poulliot |
44 |
Executive Vice President, Chief Membership Officer |
||||
Laura L. Felice |
37 |
Senior Vice President, Controller |
||||
Caroline Glynn |
50 |
Senior Vice President, Internal Audit and Asset Protection |
||||
Graham Luce |
49 |
Senior Vice President, General Counsel and Secretary |
||||
Rafeh Masood |
39 |
Senior Vice President, Chief Digital Officer |
||||
Kirk Saville |
56 |
Senior Vice President, Corporate Communications |
||||
Kristyn M. Sugrue |
50 |
Senior Vice President, Treasurer |
||||
William C. Werner |
41 | Senior Vice President, Strategic Planning and Investor Relations | ||||
Directors |
||||||
Cameron Breitner |
44 |
Director |
||||
Nishad Chande |
43 |
Director |
||||
J. Kristofer Galashan |
41 |
Director |
||||
Lars Haegg |
53 |
Director |
||||
Ken Parent |
60 |
Director |
||||
Christopher H. Peterson |
52 |
Director |
||||
Jonathan A. Seiffer |
47 |
Director |
||||
Robert Steele |
63 |
Director |
||||
Judith L. Werthauser |
53 |
Director |
Christopher J. Baldwin is Chairman, President & Chief Executive Officer. Mr. Baldwin joined BJs in September 2015 as President and Chief Operating Officer and Director and was promoted to Chief Executive Officer in February 2016 and Chairman in 2018. Prior to joining BJs, he was Chief Executive Officer of Hess Retail Corporation, a spin-off of Hess Corporation (Hess Retail) from 2010. Under Mr. Baldwins leadership, Hess Retail operated more than 1,300 convenience stores and served over a million customers daily. Before joining Hess Retail, he held executive roles at Kraft Foods from 2007 to 2010, and The Hershey Company from 2004 to 2007. Earlier in his career, Mr. Baldwin also held various roles at Nabisco and Procter and Gamble. Mr. Baldwin is the Chairman of the National Retail Federation, the worlds largest retail trade association. Mr. Baldwin is also active in the community, serving as an executive board member at Harlem Lacrosse and Leadership, a school-based nonprofit that provides educational intervention, leadership training and lacrosse for at-risk youth. Mr. Baldwin graduated from Siena College in Loudonville, New York with a B.S. in Economics. Mr. Baldwin has unique familiarity with our business and significant experience in the retail industry which qualifies him to serve on our board of directors.
Lee Delaney is Executive Vice President, Chief Commercial Officer of BJs Wholesale Club, Inc. Mr. Delaney is responsible for the Companys merchandising, marketing and supply chain organization, and BJs
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services businesses, including travel, optical and home improvement. Mr. Delaney joined BJs in 2016 as Executive Vice President, Chief Growth Officer. Prior to joining BJs, he was a partner in the Boston office of Bain & Company (Bain) from 1996 to 2016. While at Bain, Mr. Delaney advised clients on corporate strategy, created new market entry plans, supported client acquisitions and advised on large cost reduction programs. He has extensive experience with direct consumer and retail marketing. Before joining Bain, he led consulting engagements for Electronic Data Systems and Deloitte Consulting. Mr. Delaney attended business school at Carnegie Mellon University, earning an MBA with top honors. He is also a graduate of the University of Massachusetts where he received a B.S. with a double major in computer science and mathematics. Mr. Delaney is also a member of the board of directors of PDC Brands Inc.
Jeff Desroches is Executive Vice President, Club Operations Officer of BJs Wholesale Club, Inc. Mr. Desroches was named to this position in 2018 and leads all operations, Club Team Members, Regional Field Staff, and policies and procedures at the Companys 216 clubs and 138 fuel stations. Mr. Desroches joined BJs in 2001 as Regional Asset Protection Manager for the Metro NY market and became the Vice President of Asset Protection in 2007. In 2010 Mr. Desroches was named Senior Vice President of Supply Chain. As the Senior Vice President of Supply Chain, he was responsible for all aspects of supply chain operations including domestic and international transportation, reverse logistics, inventory planning and allocation, vendor compliance master data and more. Prior to BJs, Mr. Desroches held various operational and warehousing roles at Service Merchandise Company, Inc. from 1993 to 2000 and Kmart Corporation from 2000 to 2001. He holds a B.S. in Criminal Justice and Law Enforcement Administration from American Intercontinental University.
Robert W. Eddy is Executive Vice President, Chief Financial and Administrative Officer of the Company. He is responsible for the Companys finance, risk management, real estate and human resources teams. He also leads the teams charged with pricing and procurement, asset protection, as well as the legal team. Mr. Eddy was named Chief Financial and Administrative Officer in 2018. He joined BJs in 2007 as Senior Vice President, Finance and was named Executive Vice President and Chief Financial Officer in 2011. Prior to joining BJs, Mr. Eddy served multinational manufacturing, technology, retail and consumer products companies as a member of the audit and business advisory practice of PwC in Boston and San Francisco. From 2012 to 2017, Mr. Eddy chaired the Financial Executives Council of the National Retail Federation. He is also a member of the Board of Trustees of The Boston Childrens Hospital. Mr. Eddy is a graduate of Babson College in Wellesley, Massachusetts, and Phillips Academy in Andover, Massachusetts.
Scott Kessler is Executive Vice President, Chief Information Officer of BJs Wholesale Club, Inc. He joined BJs in this position in 2017 and is responsible for IT, ensuring that the Company has the technology, systems and people in place to support the Companys transformation. Prior to joining the Company, he was Executive Vice President, Chief Information Officer, at Belk, a $4 billion department store chain with nearly 300 stores from 2014 to 2016. Prior to that, Mr. Kessler was Senior Vice President, Products Technology, at GSI Commerce from 2004 to 2013. Mr. Kessler holds an MBA and a B.S. degree from Fairleigh Dickenson University.
Brian Poulliot is Executive Vice President, Chief Membership Officer of BJs Wholesale Club, Inc. Mr. Poulliot was named to this position in 2016 and is responsible for overseeing all aspects of the Companys membership programs, including acquisition, retention, engagement and analytics capabilities. From 2012 to 2016, Mr. Poulliot was Senior Vice President, Strategic Planning & Analysis, overseeing corporate financial planning and analysis, strategic pricing, category profitability and site selection research for the Company. He joined BJs in 2010 as Vice President of Financial Accounting and Reporting. In 2006, Mr. Poulliot joined ThermoFisher Scientific through the merger of Fisher Scientific and Thermo Electron. In 2004, he joined Fisher Scientific International where he led the companys technical accounting operations. Mr. Poulliot earned his CPA license in 1999. He graduated from Merrimack College in North Andover, Massachusetts in 1996 with a B.S. in Business Administration with a concentration in accounting.
Laura L. Felice is Senior Vice President, Controller of the Company. She joined BJs in this position in 2016 and is responsible for the integrity of our financial records. Prior to joining BJs, Ms. Felice held positions
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at Clarks Americas, Inc. from 2008 to 2016 and PwC from 2003 to 2008. She holds a Master of Accounting and a B.S. in Finance and Accounting from Boston College. She is also CPA.
Caroline Glynn is Senior Vice President, Internal Audit and Asset Protection of BJs Wholesale Club, Inc. She has been with BJs for more than 28 years and is responsible for assessing risks, controls and process improvement opportunities as well as leading the safety and asset protection teams. Ms. Glynn has held various positions at BJs in club operations, inventory control and internal audit. She holds a B.S. in Finance from Merrimack College and an MBA from Southern New Hampshire University. She is also a CPA, a Certified Internal Auditor and a Certified Information Systems Auditor.
Graham Luce is Senior Vice President, General Counsel and Secretary of BJs Wholesale Club, Inc. Mr. Luce joined BJs in this position in 2015 and provides senior management with strategic advice on Company initiatives, complex business transactions and litigation, as well as counsel on all corporate governance related matters. He also serves as secretary to the board of directors. Prior to joining the Company, Mr. Luce worked at Bain from 2000 to 2015 and Goodwin Procter LLP from 1995 to 2000. He holds a J.D. from Boston University School of Law and holds a B.A. in Political Science and a B.S. in Electrical Engineering from Tufts University.
Rafeh Masood is Senior Vice President, Chief Digital Officer of BJs Wholesale Club, Inc. He joined BJs in this position in May 2017 and is responsible for driving the Companys vision and strategy for its e-commerce and omnichannel efforts. Mr. Masood held various leadership positions at Dicks Sporting Goods from 2013 to 2017 and Sears Holdings from 2010 to 2013. He holds an MBA and a B.S. in Information Systems from DePaul University.
Kirk Saville is Senior Vice President, Corporate Communications of BJs Wholesale Club, Inc. He joined BJs in this position in 2016 and is responsible for corporate communications, public relations, internal communications, social media and community relations. Prior to joining the Company, Mr. Saville held senior communications positions at Staples, Inc. from 2012 to 2017 and The Hershey Company from 2003 to 2012. He holds a Master of Journalism and a B.A. in Soviet Studies from the University of California, Berkeley.
Kristyn M. Sugrue is Senior Vice President, Treasurer of the Company. Ms. Sugrue joined BJs in 2011 as Vice President of Tax and was named Senior Vice President, Treasurer in 2017. She is responsible for managing the Companys treasury functions, including the banking, risk management, insurance and tax groups. Prior to joining BJs, Ms. Sugrue held various finance management positions from 1998 to 2011 at publicly traded companies including Virtusa Corporation, Akamai Technologies, Inc. and Staples, Inc. and was a member of the tax practice at both Ernst & Young LLP and Arthur Andersen LLP in Boston from 1990 to 1998. She holds a B.S. in Accounting from Boston College and is a CPA.
William C. Werner is Senior Vice President, Strategic Planning and Investor Relations of BJs Wholesale Club, Inc. and is responsible for building the Companys strategic priorities to drive growth and investor relations. He joined BJs in 2012 as Vice President, Accounting and Financial Reporting, was promoted to Senior Vice President, Finance in 2013 and assumed his current position in 2016. Prior to joining the Company, Mr. Werner was a Director in the Deals practice at PwC from 2007 to 2012. He holds a B.A. in Mathematics and Accounting from the College of the Holy Cross and is a CPA.
Cameron Breitner has been a director of the Company since 2011. Mr. Breitner is a Partner at CVC. He is the head of CVCs San Francisco office and leads CVCs U.S. Business Services, Consumer and Retail investing activities. Prior to joining CVC in 2007, Mr. Breitner worked at Centre Partners where he was Managing Director and had worked since 1998. Prior to Centre Partners, Mr. Breitner worked in M&A at Bowles Hollowell Conner & Co. He received a B.A. in Psychology from Duke University. His experience in the retail industry qualifies him to serve on our board of directors.
Nishad Chande has been a director of the Company since 2018. Mr. Chande is a Senior Managing Director at CVC, which he joined in 2016 as a member of the Consumer/Retail team. Prior to joining CVC, Mr. Chande
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worked at Centre Partners from 2005 to 2016, Bain & Company from 2003 to 2005, Raymond James Capital from 1999 to 2001 and Schroders from 1997 to 1999. He holds an MBA from the Wharton School at the University of Pennsylvania and a B.A. in Economics and Mathematics from Dartmouth College. His experience in the retail industry qualifies him to serve on our board of directors.
J. Kristofer Galashan has been a director of the Company since 2011. Mr. Galashan is a Partner at Leonard Green, which he joined as an associate in 2002. Prior to joining Leonard Green, he worked in the Investment Banking Division of Credit Suisse First Boston (formerly DLJ) in their Los Angeles office. Mr. Galashan presently serves on the board of directors of The Container Store and serves as a director of various privately held companies. Mr. Galashan earned a B.A. in Business Administration, with honors, from the Richard Ivey School of Business at the University of Western Ontario. His experience in the retail industry qualifies him to serve on our board of directors.
Lars Haegg has been a director of the Company since 2012. Mr. Haegg is a Partner at CVC since 2012, where he is a member of the CVC Operations team, and based in New York. Prior to joining CVC, Mr. Haegg spent over 14 years with Investcorp where he was Head of Post-Acquisition activities in North America. Before Investcorp, he worked at McKinsey & Company where he served retail, media and technology clients. Mr. Haegg holds an MBA from Harvard Business School and a B.A. in Business Administration from The University of Texas, Austin. His experience in the retail industry qualifies him to serve on our board of directors.
Ken Parent has been a director of the Company since 2011. Mr. Parent is president of Pilot Flying J, the largest travel center operator in North America. In this role, he oversees all company functions, including human resources, technology, finance, real estate and construction. Mr. Parent also leads strategic initiatives on behalf of Pilot. Named Chief Operating Officer of Pilot in 2014, Mr. Parent also managed store and restaurant operations, marketing, sales, transportation and supply and distribution. Prior to that, Mr. Parent served as the companys Senior Vice President of Operations, Marketing and Human Resources from 2001 to 2014. Mr. Parent holds an MBA and a B.S. in marketing from San Diego State University. Mr. Parent has experience in the retail industry which qualifies him to serve on our board of directors.
Christopher H. Peterson has been a director of the Company since 2018. Mr. Peterson is currently the Executive Vice President and Chief Financial Officer of Newell Brands. Prior to this role, he was Chief Operating Officer, Operations at Revlon, Inc., leading the global Supply Chain, Finance and IT functions from 2017 to 2018. From 2012 to 2016, Mr. Peterson was at Ralph Lauren, where he was recruited as Senior Vice President, Chief Financial Officer and later served as President, Global Brands, with responsibility for Legal, Corporate Facilities, Global Real Estate and Corporate Services. Prior to his time at Ralph Lauren, he spent 20 years at Procter & Gamble in various roles of increasing responsibility, the latest of which was Vice President and Chief Financial Officer, Global Household Care. Mr. Peterson has a B.S. from Cornell University in Operations Research and Industrial Engineering. His experience in the retail industry qualifies him to serve on our board of directors.
Jonathan A. Seiffer has been a director of the Company since 2011. Mr. Seiffer is a Senior Partner at Leonard Green, which he joined in 1994. Mr. Seiffer is a board observer for Signet Jewelers and serves as a director of various privately held companies. He previously served on the board of Whole Foods from 2008 to 2017. Mr. Seiffer earned a Bachelor of Applied Sciences in Systems Engineering and a B.S. in Economics from the University of Pennsylvania. His experience in the retail industry qualifies him to serve on our board of directors.
Robert Steele has been a director of the Company since 2016. Mr. Steele is on an advisory board for CVC. From 2007 to 2011, Mr. Steele served as Vice Chairman of Global Health and Well-being at Procter & Gamble (P&G), retiring in 2011. Mr. Steele spent 35 years with P&G, where he served as group president of global household care, group president of North America, VP North America home care and in a range of brand management and sales positions. Mr. Steele formerly served on the board of Kellogg Co. from 2007 to 2012; the
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board of Beam Co. from 2012 to 2014; the board of Keurig Green Mountain, Inc. from 2013 to 2016; and as trustee of The St. Joseph Home for Handicapped Children from 1995 to 2012. He is currently on the board of directors of Newell Brands, Berry Global and the board of directors of LSI Industries, Inc., which he joined in 2016. Mr. Steele holds an MBA from Cleveland State University and a B.A. in Economics from the College of Wooster. Mr. Steele has experience serving on the boards of a number of large corporations across various industries, which qualifies him to serve on our board of directors.
Judith L. Werthauser has been a director of the Company since 2018. Ms. Werthauser most recently served until January 2019 as Executive Vice President, Chief People Officer at Dominos Pizza, Inc. Prior to joining Dominos in 2016, Ms. Werthauser was Senior Vice President of Human Resources at Target Corporation, where she helped lead Targets transformation from a traditional to an omnichannel retailer. Earlier in her career she was Senior Vice President of Human Resources for U.S. Bancorp in Minneapolis. She held senior HR positions at Marshall Fields department stores. She holds a masters degree in organization leadership and a bachelors degree in industrial psychology from the University of Minnesota. Her experience in the retail industry qualifies her to serve on our board of directors.
Composition of the Board of Directors
Our business and affairs are managed under the direction of the board of directors. Our board of directors currently consists of 10 directors.
Pursuant to the Voting Agreement described under Certain Relationships and Related Party TransactionsVoting Agreement, the Sponsors are entitled to designate individuals to be included in the slate of nominees recommended by our board of directors for election to our board of directors as follows:
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so long as CVC Beacon LP owns, in the aggregate, (i) at least 70% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, CVC Beacon LP will be entitled to nominate three directors, (ii) less than 70%, but at least 40% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, it will be entitled to nominate two directors, (iii) less than 40% but at least 10% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, it will be entitled to nominate one director and (iv) less than 10% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, it will not be entitled to nominate a director; and |
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so long as Leonard Green owns, in the aggregate, (i) at least 70% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, Leonard Green will be entitled to nominate three directors, (ii) less than 70%, but at least 40% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, it will be entitled to nominate two directors, (iii) less than 40% but at least 10% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, it will be entitled to nominate one director and (iv) less than 10% of the total outstanding shares of our common stock owned by it immediately following the consummation of the IPO, it will not be entitled to nominate a director. |
The Sponsors have agreed to vote their shares in favor of the directors nominated as set forth above.
CVC Beacon LP nominated Cameron Breitner and Lars Haegg for election to our board of directors and Leonard Green nominated Jonathan A. Seiffer and J. Kristofer Galashan for election to our board of directors.
In accordance with our amended and restated certificate of incorporation and the Voting Agreement, our board of directors has been divided into three classes with staggered three year terms. At each annual meeting of stockholders after the initial classification, the successors to the directors whose terms will then expire will be
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elected to serve from the time of election and qualification until the third annual meeting following their election. Our directors are divided among the three classes as follows:
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the Class I directors are Nishad Chande, Judith L. Werthauser and Christopher H. Peterson, and their terms will expire at the annual meeting of stockholders to be held in 2019; |
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the Class II directors are Cameron Breitner, J. Kristofer Galashan, Lars Haegg and Jonathan A. Seiffer, and their terms will expire at the annual meeting of stockholders to be held in 2020; and |
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the Class III directors are Christopher J. Baldwin, Ken Parent and Robert Steele, and their terms will expire at the annual meeting of stockholders to be held in 2021. |
Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our Company.
Pursuant to the terms of the Voting Agreement, directors nominated by the Sponsors may only be removed at the request of the party entitled to nominate such director in accordance with the bylaws of the Company then in effect. In all other cases and at any other time, directors may only be removed for cause by the affirmative vote of the holders of at least a majority of our common stock.
Director Independence and Controlled Company Exception
Our board of directors has affirmatively determined that Cameron Breitner, Nishad Chande, J. Kristofer Galashan, Lars Haegg, Ken Parent, Christopher H. Peterson, Jonathan A. Seiffer, Robert Steele and Judith L. Werthauser are independent directors under the rules of the NYSE.
Following our September Offering, we are no longer a controlled company within the meaning of the NYSE corporate governance standards. The NYSE corporate governance standards require that we appoint a majority of independent directors to our board of directors within one year of the date we no longer qualify as a controlled company. The NYSE corporate governance standards also require that we have at least one independent director on each of our compensation and nominating and corporate governance committees on the date that we no longer qualify as a controlled company, at least a majority of independent directors within 90 days of such date and fully independent committees within one year of such date. During these transition periods, we are not required to have our compensation committee consist entirely of independent directors until October 2019 and we intend to continue to utilize the available exemptions from certain corporate governance requirements as permitted by the NYSE rules. See Risk FactorsRisks Relating to Ownership of our Common Stock and this OfferingFollowing our September Offering, we are no longer a controlled company within the meaning of the NYSE rules and the rules of the SEC. However, we qualify for and continue to rely on exemptions from certain corporate governance requirements during certain transition periods.
Leadership Structure of the Board of Directors
Our board of directors combined the roles of Chairman of the Board and Chief Executive Officer. These positions are held by Christopher J. Baldwin, as our Chairman, President & Chief Executive Officer. The board of directors determined that combining these positions will serve the best interests of the Company and its shareholders. The board of directors believes that the Companys Chief Executive Officer is best situated to serve as Chairman because he is the director most familiar with the Companys business and industry, and most capable of effectively identifying strategic priorities and leading the consideration and execution of strategy. The board of directors believes that the combined position of Chairman and Chief Executive Officer promotes the development of policy and plans, and facilitates information flow between management and the board of directors, which is essential to effective governance.
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Committees of the Board of Directors
Our board of directors has the following committees: the audit committee, the compensation committee and the nominating and corporate governance committee. From time to time, our board of directors may also establish any other committees that it deems necessary or desirable.
Audit Committee. We have an audit committee consisting of Christopher H. Peterson, as chair, and Ken Parent and Robert Steele. Rule 10A-3 of the Exchange Act requires us to have one independent audit committee member upon the listing of our common stock, a majority of independent directors on our audit committee within 90 days of the effective date of this registration statement and an audit committee composed entirely of independent directors within one year of the effective date of this registration statement. Christopher H. Peterson qualifies as our audit committee financial expert within the meaning of regulations adopted by the SEC. The audit committee appoints and reviews the qualifications and independence of our independent registered public accounting firm, prepares compensation committee reports to be included in proxy statements filed under SEC rules and reviews the scope of audit and non-audit assignments and related fees, the results of the annual audit, accounting principles used in financial reporting, internal auditing procedures, the adequacy of our internal control procedures, the quality and integrity of our financial statements and investigations into matters related to audit functions. The audit committee is also responsible for overseeing risk management on behalf of our board of directors. See Risk Oversight.
Compensation Committee. We have a compensation committee consisting of Jonathan A. Seiffer and Cameron Breitner, as co-chairs, and Christopher J. Baldwin and Robert Steele. The principal responsibilities of the compensation committee are to review and approve matters involving executive and director compensation, recommend changes in employee benefit programs, authorize equity and other incentive arrangements, prepare compensation committee reports to be included in proxy statements filed under SEC rules and authorize our Company to enter into employment and other employee related agreements.
Nominating and Corporate Governance Committee. We have a nominating and corporate governance committee consisting of J. Kristofer Galashan, as chair, and Lars Haegg. The nominating and corporate governance committee assists our board of directors in identifying individuals qualified to become board members, consistent with criteria approved by our board of directors and in accordance with the terms of the Voting Agreement, makes recommendations for nominees for committees, oversees the evaluation of the board of directors and management and develops, recommends to the board of directors and reviews our corporate governance principles.
Risk Oversight
Our board of directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight primarily through the audit committee. To that end, our audit committee meets quarterly with our Chief Financial and Administrative Officer and our independent auditors to receive regular updates regarding our managements assessment of risk exposures including liquidity, credit and operational risks and the process in place to monitor such risks and to review results of operations, financial reporting and assessments of internal controls over financial reporting.
Code of Ethics
We have adopted a code of ethics applicable to all of our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees. Our code of ethics is available on our website at www.bjs.com under Investor Relations. Our code of ethics is a code of ethics as defined in Item 406(b) of Regulation S-K. In the event that we amend or waive certain provisions of our code of ethics applicable to our principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, we intend to disclose the same on our website.
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Compensation Committee Interlocks and Insider Participation
None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our board of directors or compensation committee. No interlocking relationship exists between any member of our compensation committee (or other committee performing equivalent functions) and any executive, member of the board of directors or member of the compensation committee (or other committee performing equivalent functions) and of any other company. We are party to certain transactions with our Sponsors and affiliates thereof as described in Certain Relationships and Related Party Transactions.
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Compensation Discussion and Analysis
This section discusses the principles underlying the material components of our executive compensation program for our executive officers who are named in the Summary Compensation Table and the factors relevant to an analysis of these policies and decisions. These named executive officers for fiscal year 2018 are:
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Christopher J. Baldwin, who serves as Chairman, President & Chief Executive Officer (CEO) and is our principal executive officer; |
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Robert W. Eddy, who serves as Executive Vice President and Chief Financial and Administrative Officer and is our principal financial officer; |
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Lee Delaney, who serves as Executive Vice President, Chief Commercial Officer; |
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Scott Kessler, who serves as Executive Vice President, Chief Information Officer; and |
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Brian Poulliot, who serves as Executive Vice President, Chief Membership Officer. |
Specifically, this section provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each compensation component that we provide. In addition, we explain how and why the executive compensation committee of our board of directors arrived at specific compensation policies and decisions involving our named executive officers during fiscal year 2018.
Each of the key elements of our executive compensation program is discussed in more detail below. Our compensation programs are designed to be flexible and complementary and to collectively serve the principles and objectives of our executive compensation and benefits program.
Executive Compensation Philosophy and Objectives
Our executive team is critical to our success and to building value for our stockholders. The principles and objectives of our compensation and benefits programs for our executive officers are to:
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attract, engage and retain to work for us the best executives, with experience and managerial talent enabling us to be an employer of choice in highly-competitive and dynamic industries; |
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align compensation with our corporate strategies, business and financial objectives and the long-term interests of our stockholders; |
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motivate and reward executives whose knowledge, skills and performance ensure our continued success; and |
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ensure that our total compensation is fair, reasonable and competitive. |
Roles of Our Compensation Committee and Chief Executive Officer in Compensation Decisions
Historically, the initial compensation arrangements with our executive officers, including the named executive officers, have been determined in arms-length negotiations with each individual executive. Typically, our CEO has been responsible for negotiating these arrangements, except with respect to his own compensation, with the oversight and final approval of the compensation committee. The compensation arrangements have been influenced by a variety of factors, including, but not limited to:
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our financial condition and available resources; |
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our view of the strategic importance of the position to be filled; |
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our evaluation of the competitive market based on the experience of the members of the compensation committee with other companies and market information we may receive from executive search firms retained by us; |
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the length of service of an individual; and |
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the compensation levels of our other executive officers, |
each as of the time of the applicable compensation decision.
Following the completion of these arrangements, our CEO and the compensation committee have been responsible for overseeing our executive compensation program, as well as determining and approving the ongoing compensation arrangements for our CEO and other executive officers, including the other named executive officers.
The current compensation levels of our executive officers, including the named executive officers, primarily reflect the varying roles and responsibilities of each individual, as well as the length of time each executive officer has been employed by the Company.
Engagement of Compensation Consultant
The compensation committee is authorized to retain the services of one or more executive compensation advisors, in its discretion, to assist with the establishment and review of our compensation programs and related policies. Since 2011, the compensation committee had not engaged the services of an executive compensation advisor in reviewing and establishing its compensation programs and policies. The compensation committee had not previously considered formal compensation market data or formally benchmarked total executive compensation or individual compensation elements against a peer group prior to the IPO. In connection with the preparation of the IPO, the compensation committee engaged Exequity LLP (Exequity), an independent national compensation consulting firm, to provide executive compensation advisory services, help evaluate our compensation philosophy and objectives and provide guidance in administering our compensation program. Exequity does not provide any services to us other than the services provided to the compensation committee. The compensation committee believes that Exequity does not have any conflicts of interest in advising the compensation committee under applicable SEC or NYSE rules.
Compensation Philosophy
We design the principal components of our executive compensation program to fulfill one or more of the principles and objectives described above. Compensation of our named executive officers consists of the following elements:
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base salary; |
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annual Company performance-based cash compensation; |
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discretionary individual performance-based cash compensation; |
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equity incentive compensation; |
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certain severance benefits; |
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a retirement savings (401(k)) plan; and |
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health and welfare benefits and certain limited perquisites and other personal benefits. |
Each of these elements fulfills one or more of the principles and objectives noted above. We view each component of our executive compensation program as related but distinct, and we also regularly reassess the total compensation of our executive officers to ensure that our overall compensation objectives are met. Historically, not all components have been provided to all executive officers. In addition, we have determined the appropriate level for each compensation component based in part, but not exclusively, on our understanding of the competitive market based on the experience of members of the compensation committee and consistent with our recruiting and retention goals, our view of internal equity and consistency, the length of service of our executive officers, our overall performance, and other considerations the compensation committee considers relevant.
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We offer cash compensation, in the form of base salaries, annual Company performance-based bonuses and discretionary individual performance-based cash compensation, that we believe appropriately rewards our executive officers for their contributions to our business. When making awards the compensation committee considers the Companys financial and operational performance. The key component of our executive compensation program, however, is equity awards for shares of our common stock. As a privately-held company, we emphasized the use of equity to incent our executive officers to focus on the growth of our overall enterprise value and, correspondingly, the creation of value for our stockholders.
Except as described below, we have not adopted any formal or informal policy or guidelines for allocating compensation between currently-paid and long-term compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.
Each of the primary elements of our executive compensation program is discussed in more detail below. While we have identified particular compensation objectives that each element of executive compensation serves, our compensation programs are designed to be flexible and complementary and to collectively serve all of the executive compensation objectives described above. Accordingly, whether or not specifically mentioned below, we believe that, as a part of our overall executive compensation policy, each individual element, to a greater or lesser extent, serves each of our objectives.
Executive Compensation Program Components
The following describes the primary components of our executive compensation program for each of our named executive officers, the rationale for that component, and how compensation amounts are determined.
Base Salary
Annual base salaries compensate our executive officers for fulfilling the requirements of their respective positions and provide them with a level of cash income predictability and stability with respect to a portion of their total compensation. Generally, our named executive officers initial base salaries were established through arms-length negotiation at the time the individual was hired, taking into account his or her qualifications, experience and prior salary level. Thereafter, the base salaries of our executive officers, including the named executive officers, are reviewed periodically by the compensation committee and our CEO, and adjustments are made as deemed appropriate.
As of the end of fiscal year 2018, our named executive officers were entitled to the following base salaries over a 52-week fiscal year:
Named Executive Officer |
Base Salary | |||
Christopher J. Baldwin |
$ | 1,300,000 | ||
Robert W. Eddy |
$ | 725,000 | ||
Lee Delaney |
$ | 750,000 | ||
Scott Kessler |
$ | 500,000 | ||
Brian Poulliot |
$ | 450,000 |
The actual base salaries paid to the named executive officers during fiscal year 2018 are set forth in the Summary Compensation Table below.
Annual Company Performance-Based Cash Bonuses and One-Time Cash Bonuses
We use cash bonuses to motivate our executive officers to achieve our short-term financial and strategic objectives while making progress towards our longer-term growth and other goals. Pursuant to our Annual Incentive Plan, each of our named executive officers is eligible for a cash bonus based solely on the Companys
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achievement of specified EBITDA targets. The target level of the EBITDA objectives is correlated with the Companys annual growth objectives. Under the Annual Incentive Plan, each named executive officer is eligible for a target bonus amount, which reflects a percentage of their annual base salary paid in fiscal year 2017. For fiscal year 2017, the participants (including the named executive officers) were eligible to receive the full amount of their target bonus amount if the annual EBITDA target was met. If the EBITDA target was exceeded, the total bonus pool was increased by 1/3 rd of the amount the EBITDA achieved exceeded the target bonus amount, subject to certain adjustments. The maximum bonus participants could receive was 200% of the target bonus amount. If the EBITDA target was not achieved for fiscal year 2017, the total bonus pool would have been decreased by one half of the amount actual EBITDA fell short of the EBITDA target, subject to certain adjustments.
Historically, the compensation committee did not make individualized determinations of the bonus amount to be paid under the Annual Incentive Plan, but instead determined a uniform percentage of the target bonus amount to be paid to each participant in the Annual Incentive Plan based on our performance in the applicable fiscal year. In 2018, our compensation committee determined to add a weighted personal performance measure to the calculation of each participants award amount under the Annual Incentive Plan. Each personal performance measure is based on such participants performance review rating and equivalent to a set percentage modifier, which for individuals who meet or exceed expectations, ranges from 100 125%. Individuals who do not at least meet expectations are ineligible to receive an award under the Annual Incentive Plan unless they take specified remedial actions, in which case they may receive a performance modifier of up to 50% at the discretion of the Company. We believe that the inclusion of each participants individual performance as a factor in the determination of their award will serve to further strengthen our pay for performance culture. We have not yet determined the achievement levels of the Company and individual performance measures for fiscal year 2018, but we expect that the compensation committee will determine the bonus amounts to be paid to participants, including our NEOs, in March 2019.
The following table lists fiscal year 2018 target bonuses for our named executive officers.
Named Executive Officer |
Annual Incentive
Plan Target Bonus (as a % of base salary) (1) |
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Christopher J. Baldwin |
150 | % | ||
Robert W. Eddy |
100 | % | ||
Lee Delaney |
100 | % | ||
Scott Kessler |
70 | % | ||
Brian Poulliot |
70 | % |
(1) |
Fiscal year 2018 was 52 weeks long. Each executives target bonus was a percentage of their base salary earned in fiscal year 2018. |
In addition, the compensation committee awarded Messrs. Eddy, Delaney and Poulliot discretionary bonuses for their extraordinary service to the Company in fiscal year 2017. The amounts of such discretionary bonuses are set forth below:
Named Executive Officer |
Discretionary Bonus ($) | |||
Robert W. Eddy |
303,160 | |||
Lee Delaney |
340,881 | |||
Brian Poulliot |
211,353 |
Long-Term Equity Incentives
To reward and retain our executive officers in a manner that best aligns their interests with the interests of our stockholders, we use stock options as a key equity incentive vehicle. Because our executive officers are able to benefit from stock options only if the market price of our common stock increases relative to the options
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exercise price, we believe stock options provide meaningful incentives to our executive officers to achieve increases in the value of our stock over time and are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance.
Going forward, we may use stock options, restricted stock units, and other types of equity-based awards, as we deem appropriate, to offer our employees, including our named executive officers, long-term equity incentives that align their interests with the long-term interests of our stockholders.
Equity Award Decisions . Historically, when determining the amount and terms of stock option awards we considered, among other things, length of service, individual performance history, job scope, function, title, the value and size of outstanding equity awards and comparable awards granted to other individuals at similar levels. The compensation committee has also drawn upon the experience of its members and market information we may receive from executive search firms retained by us to assess the competitiveness of the market in determining equity awards. No equity awards were granted to our named executive officers in fiscal year 2018.
Outstanding Equity Awards . Each of our named executive officers has outstanding option awards. Mr. Baldwin was granted an option on September 8, 2015 that is now fully vested.
Mr. Baldwin was also granted an option on March 24, 2016, 30% of which vests over time and 70% of which vests based on the companys performance. The time-vesting portion of the option is fully vested. The performance-vesting portion of the option vests in three equal ratable installments upon the determination of EBITDA for fiscal years 2016, 2017 and 2018, respectively based on achievement of specified EBITDA targets. The installments tied to fiscal years 2016 and 2017 EBITDA have vested. Furthermore, upon a change in control that results in either our principal stockholders (i) receiving proceeds equal to at least 2.5 times their investment or (ii) an internal rate of return of at least 30%, 100% of the performance vesting portion of the option will accelerate and become fully vested immediately prior to the change in control. If a change in control occurs in which our principal stockholders do not achieve either of the above thresholds, to the extent that the change in control occurs on or prior to our board of directors determination of EBITDA for fiscal year 2018, the performance-vesting portion of the option shall become fully vested immediately prior to such change in control. If a change in control is consummated within the 90-day period following Mr. Baldwins termination for Good Reason or without Cause (each as defined in the option agreement and other than due to death or disability), the option will vest as if Mr. Baldwin had remained employed through the consummation of such change in control. If no change in control occurs in the 90 days following such a termination for Good Reason or without Cause (other than due to death or disability), the next monthly installment of the time-vesting portion of the option shall vest and the performance vesting portion of the option shall become fully vested to the extent the fiscal year 2018 EBITDA target is achieved.
Mr. Eddy received an option grant on September 30, 2011 that is now fully vested. Similarly, Mr. Kessler received an option grant on June 6, 2017 that is now fully vested and Mr. Poulliot received an option grant on September 26, 2012 that is now fully vested.
Messrs. Eddy, Delaney and Poulliot received option grants on September 20, 2016 and Mr. Poulliot received an additional grant on December 5, 2016, each of which vests pursuant to the following schedule: 60% of the option is time-vesting and 40% is performance-vesting. The time-vested portion of these options are fully vested. Half of the performance-vesting option vested in March 2018, upon the determination that the EBITDA target for fiscal year 2017 was achieved. The remaining 20% of the option is eligible to become vested upon the achievement of a specified EBITDA target for fiscal year 2018, subject to the executives continued employment by us through such date. Upon a change in control, any installment of the performance-vesting portion of the option that has not yet become eligible to vest, shall accelerate and become fully vested. If upon a change in control our principal stockholders receive proceeds greater than or equal to 2.5 times their investment or a 30% return on their investment, 100% of the option shall accelerate and become fully vested, subject to the executives continued employment by us through such change in control date.
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Mr. Delaney received two additional option grants in May 2016. The first such grant was subject to vesting only upon a change in control, if such change in control had occurred prior to May 9, 2018, subject to the executives continued employment by us. Because such a change in control did not occur, such option did not vest.
The second May 2016 grant to Mr. Delaney vests pursuant to the following schedule: 60% of the option is time-vesting and the remaining 40% of the option is performance-vesting. One-third of the time-vesting portion of the option vests on May 9 th of each year from 2017 through 2019, subject to the executives continued employment by us. One-third of the performance-vesting portion of the option vests on or within 120 days following the last day of each of the fiscal years 2016 through 2018 if the EBITDA for such fiscal year equals or exceeds the EBITDA target for such year subject to the executives continued employment by us through the last day of the fiscal year ending immediately prior to the vesting date. The portions tied to fiscal years 2016 and 2017 EBITDA have vested. Upon a change in control, the time-vesting portion of this option grant and any installment of the performance-vesting portion of this option grant that has not yet become eligible to vest shall accelerate and become fully vested, subject to the executives continued employment by us through such change in control date. If upon a change in control our principal stockholders receive proceeds greater than or equal to 2.5 times their investment or a 30% return on their investment, 100% of this option grant shall accelerate and become fully vested, subject to the executives continued employment by us through such change in control date. Upon a termination of employment by the Company without Cause or the executive for Good Reason, or due to the executives death or disability, in each case, during the three-month period immediately prior to any May 9 th on which a time-vesting installment is eligible to vest, a pro-rated percentage of the option will vest.
2018 IPO Equity Awards : In connection with the completion of the IPO, we adopted a new equity compensation plan, the 2018 Plan, as described below, which covers our employees, including our named executive officers. We granted certain employees stock options and restricted stock under the 2018 Plan in connection with the consummation of the IPO. The Company granted Mr. Baldwin 1,416,450 restricted shares of our common stock under the 2018 Plan on the completion of the IPO (the CEO IPO Equity Award). Additionally, Messrs. Baldwin, Eddy, Delaney, Kessler and Poulliot were granted 195,314; 175,000; 140,623; 131,250 and 131,250 shares of restricted stock, respectively, and options to purchase 585,935; 525,000; 421,876; 131,250 and 131,250 shares of our common stock, respectively, under the 2018 Plan.
Please see Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards TableCurrent Employment Arrangements for further information on the equity awards granted to our named executive officers in connection with the IPO and 2018 Incentive Plan for further information on the equity awards granted in connection with the consummation of the IPO.
401(k) Plan
We have established a 401(k) retirement savings plan for our employees, including the named executive officers, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees may elect to reduce their current compensation by up to the prescribed annual limit, and contribute these amounts to the 401(k) plan. This plan provides for Company matching contributions of 50% of the first 6% of an employees covered compensation.
Nonqualified Deferred Compensation Plan
We also have established an executive retirement plan (the Executive Retirement Plan), a nonqualified deferred compensation plan, for certain key employees. Under this plan, we fund annual retirement contributions of the designated participants base salary into contribution accounts, in which participants become vested after four fiscal years of service. The compensation committee has discretion to choose the percentage of contributions made, however, such amount must be at least equal to 3% of the participants base salary. The participants under this plan also receive a tax gross-up for the Companys contributions. Please see Nonqualified Deferred Compensation Table for further information on this plan.
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Employee Benefits and Perquisites
Additional benefits received by our employees, including the named executive officers, include medical and dental benefits, flexible spending accounts, short-term and long-term disability insurance and accidental death and dismemberment insurance. These benefits are provided to our named executive officers on the same general terms as they are provided to all of our full-time U.S. employees. We also provide basic life insurance coverage to our employees, as well as executive life insurance to certain key executives, including our named executive officers. Certain of our named executive officers also receive a car allowance, and we reimburse certain financial counseling and estate planning expenses for certain executives, including our named executive officers.
We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices in the competitive market.
We do not view perquisites or other personal benefits as a significant component of our executive compensation program. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation or retention purposes. All future practices with respect to perquisites or other personal benefits for our named executive officers will be approved and subject to periodic review by the compensation committee. We do not expect these perquisites to be a significant component of our compensation program.
Severance and Change in Control Benefits
We have entered into employment agreements with our named executive officers, each of which has its own terms. The material elements of these employment agreements are summarized below under Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards TableCurrent Employment Agreements and Potential Payments Upon Termination or Change in Control.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code
Generally, Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, disallows a tax deduction to any publicly held corporation for any individual remuneration in excess of $1 million paid in any taxable year to certain covered employees. Prior to 2018, covered employees included the chief executive officer and each of its other named executive officers, other than its chief financial officer. Commencing in 2018, covered employees was expanded to include the chief financial officer as well. Prior to 2018, an exception to this deduction limit applied if, among other things, the compensation qualified as performance-based compensation within the meaning of the Code.
We expect that the compensation committee will consider the potential future effects of Section 162(m) on the deductibility of executive compensation paid to our named executive officers, as applicable, and intends to qualify compensation paid to the covered named executive officers for an exemption from the deductibility limitations of Section 162(m) under the transition period applicable to the Company as a new publicly-traded company. As such, in approving the amount and form of compensation for our named executive officers in the future, the compensation committee will consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m). In appropriate circumstances, however, the compensation committee may implement programs that recognize a full range of criteria important to our success and to ensure that our executive officers are compensated in a manner consistent with our best interests and those of our stockholders, even where the compensation paid under such programs may not be deductible under Section 162(m) of the Code.
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Section 280G of the Internal Revenue Code
Section 280G of the Internal Revenue Code disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Section 4999 of the Internal Revenue Code imposes a 20% penalty on the individual receiving the excess payment. Parachute payments are compensation that is linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G based on the executives prior compensation. In approving the compensation arrangements for our named executive officers in the future, the compensation committee will consider all elements of the cost to the Company of providing such compensation, including the potential impact of Section 280G. However, the compensation committee may, in its judgment, authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent.
Section 409A of the Internal Revenue Code
Section 409A of the Internal Revenue Code requires that nonqualified deferred compensation be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income tax liabilities, penalty taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefits plans and arrangements for all of our employees and other service providers, including our named executive officers, so that they are either exempt from, or satisfy the requirements of, Section 409A.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly known as FASB No. 123(R)), or ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date fair value of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of stock options, restricted stock, restricted stock units and other equity-based awards under our equity incentive award plans will be accounted for under ASC Topic 718. The compensation committee will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
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Compensation Tables
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers for the fiscal years 2018 and 2017, as applicable:
Name and Principal Position |
Year (1) |
Salary
($) (2) |
Bonus
($) (3) |
Stock
Awards ($) (4) |
Option
Awards ($) (4) |
Non-Equity
Incentive Plan Compensation ($) (5)(6) |
All Other
Compensation ($) (7) |
Total
($) |
||||||||||||||||||||||||
Christopher J. Baldwin |
2018 | 1,230,769 | | 35,458,808 | 3,134,752 | | 28,935 | 39,853,265 | ||||||||||||||||||||||||
Chairman, President & Chief Executive Officer |
2017 | 1,019,231 | | | | 1,129,308 | 9,266,311 | 11,414,850 | ||||||||||||||||||||||||
Robert W. Eddy |
2018 | 686,923 | | 3,850,000 | 2,774,625 | | 100,996 | 7,412,544 | ||||||||||||||||||||||||
Executive Vice President and Chief Financial and Administrative Officer |
2017 | 566,443 | 303,160 | | | 376,571 | 7,255,519 | 8,501,693 | ||||||||||||||||||||||||
Lee Delaney |
2018 | 722,308 | | 3,093,706 | 2,220,474 | | 13,492 | 6,049,979 | ||||||||||||||||||||||||
Executive Vice President, Chief Commercial Officer |
2017 | 636,923 | 340,881 | | | 423,427 | 4,697,957 | 6,099,188 | ||||||||||||||||||||||||
Scott Kessler |
2018 | 490,385 | | 2,887,500 | 693,656 | | 3,746 | 4,075,287 | ||||||||||||||||||||||||
Executive Vice President, Chief Information Officer |
||||||||||||||||||||||||||||||||
Brian Poulliot |
2018 | 436,154 | | 2,887,500 | 693,656 | | 65,055 | 4,082,365 | ||||||||||||||||||||||||
Executive Vice President, Chief Membership Officer |
2017 | 394,904 | 211,353 | | | 262,532 | 3,212,737 | 4,081,526 |
(1) |
2018 refers to the 52-week year ended February 2, 2019. 2017 refers to the 53-week year ended February 3, 2018. |
(2) |
This amount reflects salary earned during the fiscal year, including any salary adjustments made during the fiscal year. |
(3) |
This amount reflects one-time discretionary cash bonuses paid for extraordinary service in 2017. Please see Annual Company Performance-Based Cash Bonuses and One-Time Cash Bonuses for further information on these bonuses. |
(4) |
Amounts set forth in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of awards granted in fiscal 2018 computed in accordance with ASC Topic 718. Please see Accounting for Stock-Based Compensation for further information. |
(5) |
This amount reflects payments pursuant to our Annual Incentive Plan. Please see Annual Company Performance-Based Cash Bonuses and One-Time Cash Bonuses for further information on these bonuses. |
(6) |
The amounts to be paid pursuant to our Annual Incentive Plan with respect to fiscal year 2018 have yet to be determined as of the date hereof, but are expected to be determined in March 2019. |
(7) |
All Other Compensation for 2018 includes: |
Name |
Executive
Retirement Plan Company Contributions ($) (a) |
Tax
Gross Ups ($) (b) |
Car
Allowance ($) |
Employer
401(k) Matching Contributions ($) (c) |
Financial
Planning ($) |
Other
($) (d) |
Total
($) (f) |
|||||||||||||||||||||
Christopher J. Baldwin |
| | | 9,250 | 3,875 | 15,810 | 28,935 | |||||||||||||||||||||
Robert W. Eddy |
35,408 | 26,712 | 15,374 | 9,250 | 10,000 | 4,252 | 100,996 | |||||||||||||||||||||
Lee Delaney |
| | | 8,250 | 3,000 | 2,242 | 13,492 | |||||||||||||||||||||
Scott Kessler |
| | | 236 | 1,245 | 2,266 | 3,746 | |||||||||||||||||||||
Brian Poulliot |
22,482 | 16,960 | 15,374 | 8,250 | | 1,988 | 65,055 |
(a) |
We contribute to the Executive Retirement Plan for certain of our named executive officers. This amount reflects the company contributions to the Executive Retirement Plan. Under this plan, we fund annual retirement contributions of a certain percentage of the designated participants base salary into contribution accounts, in which participants become vested after four fiscal years of service. |
(b) |
Amounts reflect tax gross-ups provided under our Executive Retirement Plan. |
(c) |
Our 401(k) plan provides for Company matching contributions of 50% of the first 6% of an employees covered compensation. Company matching contributions vest ratably over an employees first four years of employment. |
(d) |
Amount reflects (i) a $150 cell phone stipend for Messrs. Baldwin, Eddy, Delaney, Kessler and Poulliot, (ii) executive life insurance contributions of $7,369 for Mr. Baldwin, $4,102 for Mr. Eddy, $2,092 for Mr. Delaney, $2,116 for Mr. Kessler, and $1,838 for Mr. Poulliot, and (iii) legal services in an amount equal to $8,292 for Mr. Baldwin. |
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Grants of Plan-Based Awards in Fiscal Year 2018
The following table sets forth information regarding grants of plan-based awards made to our named executive officers during the fiscal year 2018:
Name |
Estimated future payouts under
non-equity incentive plan awards |
All other
stock awards: Number of shares of stock or units (#) (1) |
All other
option awards: Number of securities underlying options (#) (2) |
Exercise
or base price of option awards ($/SH) |
Grant date
fair value of stock and option awards (3) |
|||||||||||||||||||||||||||
Threshold
($) |
Target
($) |
Maximum
($) |
||||||||||||||||||||||||||||||
Christopher J. Baldwin |
| 1,846,154 | 3,692,308 | |||||||||||||||||||||||||||||
6/28/2018 | 1,416,450 | 31,161,900 | ||||||||||||||||||||||||||||||
6/28/2018 | 195,314 | 4,296,908 | ||||||||||||||||||||||||||||||
6/27/2018 | 585,935 | $ | 17.00 | 3,134,752 | ||||||||||||||||||||||||||||
Robert W. Eddy |
| 686,923 | 1,373,846 | |||||||||||||||||||||||||||||
6/28/2018 | 87,500 | 1,925,000 | ||||||||||||||||||||||||||||||
6/28/2018 | 87,500 | 1,925,000 | ||||||||||||||||||||||||||||||
6/27/2018 | 262,500 | $ | 17.00 | 1,370,250 | ||||||||||||||||||||||||||||
6/27/2018 | 262,500 | $ | 17.00 | 1,404,375 | ||||||||||||||||||||||||||||
Lee Delaney |
| 722,308 | 1,444,616 | |||||||||||||||||||||||||||||
6/28/2018 | 93,751 | 2,062,522 | ||||||||||||||||||||||||||||||
6/28/2018 | 46,872 | 1,031,184 | ||||||||||||||||||||||||||||||
6/27/2018 | 281,253 | $ | 17.00 | 1,468,141 | ||||||||||||||||||||||||||||
6/27/2018 | 140,623 | $ | 17.00 | 752,333 | ||||||||||||||||||||||||||||
Scott Kessler |
| 343,269 | 686,538 | |||||||||||||||||||||||||||||
6/28/2018 | 65,625 | 1,443,750 | ||||||||||||||||||||||||||||||
6/28/2018 | 65,625 | 1,443,750 | ||||||||||||||||||||||||||||||
6/27/2018 | 65,625 | $ | 17.00 | 342,563 | ||||||||||||||||||||||||||||
6/27/2018 | 65,625 | $ | 17.00 | 351,094 | ||||||||||||||||||||||||||||
Brian Poulliot |
| 305,308 | 610,616 | |||||||||||||||||||||||||||||
6/28/2018 | 65,625 | 1,443,750 | ||||||||||||||||||||||||||||||
6/28/2018 | 65,625 | 1,443,750 | ||||||||||||||||||||||||||||||
6/27/2018 | 65,625 | $ | 17.00 | 342,563 | ||||||||||||||||||||||||||||
6/27/2018 | 65,625 | $ | 17.00 | 351,094 |
(1) |
Represents restricted stock awards granted in connection with the IPO. |
(2) |
Represents stock option awards granted in connection with the IPO. |
(3) |
Amounts represent the grant date fair value of each award granted in fiscal 2018 computed in accordance with ASC Topic 718. Please see Accounting for Stock-Based Compensation for further information. |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Current Employment Arrangements
We have entered into employment agreements with certain of our named executive officers. The principal elements of these employment agreements are summarized below.
Christopher J. Baldwin
On September 1, 2015, BJs Wholesale Club, Inc. and Beacon Holding Inc. entered into an employment agreement with Mr. Baldwin, which was later amended on February 1, 2016 (the CEO Employment Agreement), pursuant to which Mr. Baldwin is employed as the Companys President and Chief Executive Officer. Pursuant to the CEO Employment Agreement, Mr. Baldwin is entitled to a base salary of $1,000,000 per
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year, subject to periodic increase from time to time as determined by the board of directors of the Company in its sole discretion, and an annual performance-based cash bonus with a target bonus opportunity equal to 100% of his annual base salary, payable based on goals established by the board of directors in its sole discretion. In connection with his transition to the role of Chief Executive Officer, Mr. Baldwin relocated to the Boston metropolitan area, and the Company agreed to pay him a relocation stipend equal to $125,000, net after applicable taxes, and reimbursed Mr. Baldwin up to $25,000 for reasonable expenses associated with Mr. Baldwins relocation. Pursuant to the CEO Employment Agreement, Mr. Baldwin is also subject to 12-month post-termination non-competition and non-solicitation covenants, as well as a perpetual confidentiality covenant.
Pursuant to the terms of the CEO Employment Agreement, the Company has certain obligations that become due in the event of termination. If Mr. Baldwins employment is terminated by the Company without Cause (as described below) or by Mr. Baldwin for Good Reason (as described below), then in addition to any accrued amounts, subject to Mr. Baldwin entering into a binding and irrevocable release of claims, Mr. Baldwin is eligible to receive (i) an amount equal to the sum of (a) his base salary for a period of 12 months after termination and (b) his target annual cash bonus, payable in substantially equal installments in such manner and at such times as the Executives base salary was being paid immediately prior to such termination (or if such termination occurs upon or following the occurrence of a change in control, such amount will be paid in a single lump sum); (ii) an amount equal to the difference between Mr. Baldwins actual Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA) premium costs and the amount Mr. Baldwin would have paid had he continued coverage as an employee under the Companys applicable health plans for up to twelve months, (iii) if such termination occurs on or after July 1st of a fiscal year, a pro rata portion of the annual cash bonus to which Mr. Baldwin would have been entitled had he remained employed by the Company until the end of the fiscal year, and (iv) any other payments or benefits arising from Mr. Baldwins participation in other Company plans to the extent such plans provide for post-termination employment benefits.
Upon a termination due to death or disability, in addition to the accrued amounts, Mr. Baldwin is eligible to receive, subject to the execution of a release of claims, (i) the annual cash bonus he would have been entitled to receive had he remained employed until the end of the fiscal year (prorated for the period of active employment during the fiscal year), and (ii) any other payments or benefits arising from Mr. Baldwins participation in other Company plans to the extent such plans provide for post-termination employment benefits.
Cause refers to the Companys termination of Mr. Baldwins employment because he has: (i) refused or willfully failed to devote his full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or he has failed to fulfill directives of the boards of the Company, (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or material policy of the Company or breach of fiduciary duty, (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Companys funds or property, (iv) been convicted of any crime which reasonably could affect in an adverse manner the reputation of the Company or his ability to perform his duties hereunder, (v) been grossly negligent in the performance of his duties, or (vi) materially breached the employment agreement.
Good Reason means the occurrence, without Mr. Baldwins prior written consent, of any of: (i) any material adverse change by the Company in Mr. Baldwins title, duties, responsibilities (including reporting responsibilities) or authority; (ii) Mr. Baldwin being required to relocate to a principal place of employment more than 50 miles from Mr. Baldwins principal place of employment with the Company on the effective date of the CEO Employment Agreement (other than any relocation to the Boston metropolitan area); (iii) the failure by the Company to reelect Mr. Baldwin as a member of the board of directors or the removal of Mr. Baldwin therefrom; (iv) the failure of the Company to obtain a satisfactory agreement from any successor to all or substantially all of the assets or business of the Company to assume and agree to perform the CEO Employment Agreement; or (v) a material breach by the Company or one of its subsidiaries of the CEO Employment Agreement or any other agreement between Mr. Baldwin and either of the Company or one of its subsidiaries entered into in connection
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with the CEO Employment Agreement; provided, that, within 30 days after the occurrence of a Good Reason event, Mr. Baldwin must provide the Company notice of his intent to resign for Good Reason and the basis therefore and allow the Company 30 days to cure the circumstances (if curable), and his employment will terminate within 60 days following the expiration of the cure period.
CEO IPO Equity Award
In connection with the IPO, the Company entered into a letter agreement with Mr. Baldwin, dated as of March 27, 2018, as amended from time to time, pursuant to which the Company agreed to grant to Mr. Baldwin an award of 1,416,450 restricted shares of our common stock (the Restricted Shares), subject to the completion of the IPO. The Restricted Shares were granted on the completion of the IPO and are subject to the terms and conditions of the 2018 Plan (as described below) and a restricted stock agreement entered into between the Company and Mr. Baldwin. The Restricted Shares became fully vested on the 30th day following the IPO. The vested Restricted Shares (net of any shares surrendered to pay withholding taxes) continue to be subject to transfer restrictions and are subject to forfeiture for no consideration if Mr. Baldwin is terminated by us for cause or if he breaches his post-employment non-compete covenant with us. So long as Mr. Baldwin is not terminated by us for cause and he does not breach his post-employment non-compete covenant with us, the transfer and forfeiture non-compete restrictions on these Restricted Shares will lapse in equal installments commencing on the last day of each calendar month ending during the period commencing on the date of grant and ending on September 30, 2020 (regardless of whether Mr. Baldwin is employed by us on the applicable transfer lapse dates).
Mr. Baldwin elected to satisfy withholding tax obligations due upon vesting of the Restricted Shares by having the Company withhold a net number of shares subject to the Restricted Share award with a fair market value equal to the maximum statutory withholding tax obligations. In addition, pursuant to the restricted stock agreement, Mr. Baldwin agreed to comply with one-year post-termination non-competition and non-solicitation covenants, as well as perpetual confidentiality and non-disparagement covenants.
Robert Eddy, Lee Delaney, Scott Kessler and Brian Poulliot
BJs Wholesale Club, Inc. has entered into employment agreements with each of Mr. Eddy, dated as of January 30, 2011; Mr. Delaney, dated as of May 9, 2016; Mr. Kessler, dated as of May 30, 2017; and Mr. Poulliot, dated as of October 16, 2011. Pursuant to such agreements, Mr. Eddy serves as Executive Vice President, Chief Financial and Administrative Officer, Mr. Delaney serves as Executive Vice President, Chief Commercial Officer, Mr. Kessler serves as Executive Vice President, Chief Information Officer and Mr. Poulliot serves as Executive Vice President, Chief Membership Officer. The initial term of Mr. Eddys employment agreement was for a period of five years, ending on January 30, 2016, after which he was to remain employed by the Company subject to the termination provisions of his agreement; none of Messrs. Delaneys, Kesslers, or Poulliots employment agreements specified a term of employment. The annual base salaries initially established in their respective employment agreements for Messrs. Eddy, Delaney, Kessler and Poulliot were $560,000, $630,000, $450,000 and $390,000 respectively. Each of the executives is also subject to 24-month post-termination non-competition and non-solicitation covenants, as well as a perpetual confidentiality covenant.
Pursuant to each employment agreement, the Company has certain obligations that become due in the event of termination. If any of the executives are terminated by the Company without Cause (as described below), then in addition to any accrued amounts, subject to the executive entering into a binding and irrevocable release of claims, each executive is eligible to receive (i) a continuation of his base salary for a period of 24 months after termination, (ii) an amount equal to the difference between the executives actual COBRA premium costs and the amount the executive would have paid had he continued coverage as an employee under the Companys applicable health plans for up to 24 months, (iii) a pro rata portion of any amounts the executive would have been entitled to receive under the Companys annual incentive compensation plan had he remained employed by the Company until the end of the fiscal year during which termination occurred and (iv) any other payments or
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benefits arising from the executives participation in other Company plans to the extent such plans provide for post-termination employment benefits.
Upon a termination due to death or disability, in addition to the accrued amounts, subject to the execution of a release of claims, each of the executives is eligible to receive (i) the annual cash bonus the executive would have been entitled to receive had he remained employed until the end of the fiscal year (prorated for the period of active employment during the fiscal year), and (ii) any other payments or benefits arising from the executives participation in other Company plans to the extent such plans provide for post-termination employment benefits.
As used in each such employment agreement, Cause has substantially the same meaning as used in the CEO Employment Agreement.
Outstanding Equity Awards as of February 2, 2019
The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer for the fiscal year 2018:
Options Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
Name |
Grant Date |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Equity
Incentive Plan Awards: Number of Securities Underlying Unearned Options (#) |
Option
Exercise Price ($) |
Option
Expiration Date |
Grant Date |
Number
of Shares or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested (#)(9) |
Number
of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Market or
Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||||||||||||||||||||||||||
Christopher J. Baldwin |
09/08/2015 | (1) | 157,500 | | | $ | 5.72 | 09/08/2025 | 06/28/2018 | (7) | 195,314 | $ | 5,169,962 | |||||||||||||||||||||||||||||||
03/24/2016 | (2) | 504,250 | | 163,338 | $ | 5.72 | 03/24/2026 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (7) | | 585,935 | | $ | 17.00 | 06/27/2028 | |||||||||||||||||||||||||||||||||||||
Robert W. Eddy |
09/30/2011 | (3) | 261,367 | | | $ | 1.79 | 09/30/2021 | 06/28/2018 | (7) | 87,500 | $ | 2,316,125 | |||||||||||||||||||||||||||||||
09/20/2016 | (4) | 224,000 | | 56,000 | $ | 5.72 | 09/20/2026 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (7) | | 262,500 | | $ | 17.00 | 06/27/2028 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (8) | 262,500 | | $ | 17.00 | 06/27/2028 | ||||||||||||||||||||||||||||||||||||||
Lee Delaney |
05/09/2016 | (5) | 171,502 | 105,000 | 70,000 | $ | 5.72 | 05/09/2026 | 06/28/2018 | (7) | 46,872 | $ | 1,240,702 | |||||||||||||||||||||||||||||||
09/20/2016 | (4) | 112,000 | | 28,000 | $ | 5.72 | 09/20/2026 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (7) | | 140,623 | | $ | 17.00 | 06/27/2028 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (8) | 281,253 | | $ | 17.00 | 06/27/2028 | ||||||||||||||||||||||||||||||||||||||
Scott Kessler |
06/05/2017 | (6) | 113,314 | | $ | 7.00 | 06/05/2027 | 06/28/2018 | (7) | 65,625 | $ | 1,737,094 | ||||||||||||||||||||||||||||||||
06/27/2018 | (7) | | 65,625 | | $ | 17.00 | 06/27/2028 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (8) | 65,625 | | $ | 17.00 | 06/27/2028 | ||||||||||||||||||||||||||||||||||||||
Brian Poulliot |
09/26/2012 | (3) | 98,275 | | $ | 4.26 | 09/26/2022 | 06/28/2018 | (7) | 65,625 | $ | 1,737,094 | ||||||||||||||||||||||||||||||||
09/20/2016 | (4) | 65,800 | | 16,450 | $ | 5.72 | 09/20/2026 | |||||||||||||||||||||||||||||||||||||
12/05/2016 | (4) | 128,000 | | 42,000 | $ | 7.00 | 12/05/2026 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (7) | | 65,625 | | $ | 17.00 | 06/27/2028 | |||||||||||||||||||||||||||||||||||||
06/27/2018 | (8) | 65,625 | | $ | 17.00 | 06/27/2028 |
(1) |
10% of the option vested on December 31, 2015, 30% of the option vested on December 31, 2016, 30% of the option vested on December 31, 2017 and the remaining portion of the option vested on December 31, 2018. Such option is now fully vested. |
(2) |
30% of the option is time-vesting and the remaining 70% of the option is performance-vesting. The time-vesting portion of the option vests as follows: 1/7 th of the time-vesting option vested on July 1, 2016 and the remaining 6/7 ths of the time-vesting option vested in equal ratable installments on the last calendar day of each month from July 2016 to December 2018. |
The performance-vesting portion of the option vests in three equal ratable installments upon the determination of EBITDA for fiscal year 2016, 2017 and 2018, respectively based on achievement of specified EBITDA targets. The fiscal year 2016 installment vested and following the end of the 2017 fiscal year, the fiscal year 2017 installment vested. The fiscal year 2018 installment will be eligible to become vested upon the release of EBITDA performance in March 2019.
(3) |
60% of the option vested in five equal installments on each of the first five anniversaries of September 30, 2011, subject to the executives continued employment by us. The remaining 40% of the option was scheduled to vest on or within 120 days following January 31 of each fiscal year 2012 through 2016, if the EBITDA as of such January 31 equaled or exceeded a specified EBITDA target. Such option is now fully vested. |
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(4) |
60% of the option is time-vesting and the remaining 40% of the option is performance-vesting. 30% of the option vested on September 30, 2017 (December 5, 2017 for Mr. Poulliots December 2016 grant), and 30% of the option vested on September 30, 2018 (December 5, 2018 for Mr. Poulliots December 2016 grant). 20% of the option vested following the end of the 2017 fiscal year because of the Companys achievement of its EBITDA target for fiscal year 2017. The remaining 20% of the option is eligible to become vested upon the achievement of a specified EBITDA target for fiscal year 2018, subject to the executives continued employment by us through such date. Please see Long-Term Equity Incentives for further information on acceleration provisions for these option grants. |
(5) |
60% of the option is time-vesting and the remaining 40% of the option is performance-vesting. One-third of the time-vesting portion of the option vests on May 9 th of each year from 2017 through 2019, subject to the executives continued employment by us. Two-thirds of the time-vesting portion of the option has now vested. One-third of the performance-vesting portion of the option vests on or within 120 days following the last day of each of the fiscal years 2016 through 2018 if the EBITDA for such fiscal year equals or exceeds the EBITDA target for such year. The fiscal year 2016 installment vested and following the end of the 2017 fiscal year, the fiscal year 2017 installment vested. Upon a termination of employment by the Company without Cause or the executive for Good Reason, or due to the executives death or disability, in each case, during the three-month period immediately prior to any May 9 th on which a time-vesting installment is eligible to vest, a pro-rated percentage of the option will vest. Please see Long-Term Equity Incentives for further information on acceleration provisions for these option grants. |
(6) |
The option vested in monthly installments from June 2017 to May 2018 and is now fully vested. |
(7) |
The option and restricted stock grants vest in three equal ratable installments on each of the first three anniversaries of the grant date, subject to the executives continued employment with us. |
(8) |
The option vested on July 27, 2018 but is subject to transferability restrictions that lapse as follows: two-thirds on the first anniversary of the grant and one third on the second anniversary of the grant. |
(9) |
Market values reflect the closing price of our common stock on the NYSE on February 1, 2019 (the last business day of fiscal year 2018), which was $26.47. |
Fiscal Year 2018 Option Exercises and Stock Vested
The following table summarizes stock option exercises by and vesting of stock applicable to our named executive officers during the fiscal year 2018:
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares
Acquired on Exercise (#) |
Value Realized on
Exercise ($)(1) |
Number of Shares
Acquired on Vesting (#) (2) |
Value Realized on Vesting
($) |
||||||||||||
Christopher Baldwin |
399,912 | 7,836,266 | 1,416,450 | 31,161,900 | ||||||||||||
Robert Eddy |
286,943 | 6,731,991 | 87,500 | 1,925,000 | ||||||||||||
Lee Delaney |
178,498 | 3,457,506 | 93,751 | 2,062,522 | ||||||||||||
Scott Kessler |
61,686 | 1,115,900 | 65,625 | 1,443,750 | ||||||||||||
Brian Poulliot |
150,605 | 3,088,426 | 65,625 | 1,443,750 |
(1) |
Represents the difference between the closing stock price on the NYSE on the day preceding the exercise date and the option exercise price multiplied by the number of shares acquired on exercise. |
(2) |
Includes shares withheld to pay taxes on the restricted stock grant. |
Nonqualified Deferred Compensation
The following table provides information regarding our Executive Retirement Plan for fiscal year 2018:
Name |
Executive
contributions in last fiscal year($) |
Company
contributions in last fiscal year($) (1) |
Aggregate
earnings in last fiscal year ($) |
Aggregate
withdrawals/ distributions ($) |
Aggregate
balance at last fiscal year end($) |
|||||||||||||||
Christopher J. Baldwin |
| 63,442 | (2) | (816 | ) | | 118,510 | |||||||||||||
Robert W. Eddy |
| 35,408 | 1,835 | | 355,065 | |||||||||||||||
Lee Delaney |
| 37,232 | (2) | (518 | ) | | 54,334 | |||||||||||||
Scott Kessler |
| 25,278 | (2) | (621 | ) | | 15,310 | |||||||||||||
Brian Poulliot |
| 22,482 | (549 | ) | | 129,697 |
(1) |
Company contributions in the last fiscal year are also reflected in the Summary Compensation Table. |
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(2) |
Messrs. Baldwin, Kessler and Delaney have not yet accrued four years of credited service. However, we have elected to make Annual Retirement Contributions on behalf of Messrs. Baldwin, Kessler and Delaney. If Messrs. Baldwin, Kessler and Delaney terminate employment prior to achieving four years of credited service, such officer will forfeit all Company contributions previously made on his behalf under the plan. Because these amounts have not yet vested and are subject to forfeiture if employment for any one of Messrs. Baldwin, Kessler and Delaney is terminated prior to achieving four years of credited service, the amounts have not been included as compensation in our current Summary Compensation Table. We expect that in the year Messrs. Baldwin, Kessler and Delaney, as applicable, achieves four years of credited service, all Company contributions to date under the Executive Retirement Plan and all related tax gross-ups will be included in the Summary Compensation Table for such year. For further information, please see Non-Qualified Executive Retirement Plan. |
Non-Qualified Executive Retirement Plan
We maintain a non-qualified executive retirement plan in which a select group of our management and highly compensated employees are eligible to participate. Participants are selected by the compensation committee and are entitled to company contributions within 60 days of fiscal year end under the plan (the Annual Retirement Contribution) if they are actively employed by the Company on the last day of a plan year or if they are terminated prior to the end of the plan year due to (i) retirement on or after the attainment of age 55 or (ii) disability. Each year the Company makes an Annual Retirement Contribution to each participant under this plan with at least four years of credited service in an amount equal to at least 3% of the participants after tax base salary earned for such year. Annual Retirement Contributions to participants with at least four years of service are considered taxable income to the participants, and we make an additional tax gross-up contribution to each of these participants each year. For participants with less than four years of service by the end of the applicable plan year, the participant will accrue the right to an Annual Retirement Contribution each year, and, subject to continued employment, in the plan year in which the participant is first credited with four years of service, the Company will make an aggregate retirement contribution on behalf of the participant equal to the amount of the Annual Retirement Contribution for the applicable plan year and the previous three plan years (along with a tax gross-up contribution). Notwithstanding the foregoing, we have elected to make Annual Retirement Contributions on behalf of Messrs. Baldwin and Delaney, though they have not yet achieved four years of credited service. If Mr. Baldwins or Mr. Delaneys employment is terminated prior to achieving four years of credited service, such officer will forfeit any Company contributions made under the plan. No tax gross up payments have been made to Messrs. Baldwin or Delaney to date. Upon a change of control, each participant with less than four years of credited service will become fully vested in any benefit accrued under the plan, and each participant will receive an Annual Retirement Contribution for the year in which the change of control occurs.
Participants generally may elect to invest their balance under the Executive Retirement Plan in a variety of different tax-deferred investment vehicles. However, the Company selects the investments with respect to Annual Retirement Contributions made on behalf of Mr. Baldwin and Mr. Delaney since they have not yet achieved four years of credited service.
Potential Payments Upon Termination or Change in Control
As discussed above, we have entered into employment agreements and option agreements with our named executive officers, which provide for certain payments upon a qualifying termination of employment or a change in control.
Summary of Potential Payments Upon a Termination or Change in Control
The following table summarizes the payments that would be made to our named executive officers upon the occurrence of a qualifying termination of employment or change in control, assuming that each named executive officers termination of employment with the Company or a change in control occurred on February 1, 2019.
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Amounts shown do not include (i) accrued but unpaid salary through the date of termination, and (ii) other benefits earned or accrued by the named executive officer during his or her employment that are available to all salaried employees, such as accrued vacation.
Name |
Benefit |
Termination
without Cause ($) |
Termination
due to death or Disability ($) |
Change in
Control ($) |
Qualifying
Termination without Cause in connection with a Change in Control ($) |
|||||||||||||
Christopher J. Baldwin |
Severance Benefit (1) | 3,250,000 | | | 2,600,000 | |||||||||||||
Continuation of Health Benefits (2) | 35,451 | | | 35,451 | ||||||||||||||
Value of Accelerated Stock Options (3) | | | 3,389,264 | 14,108,030 | ||||||||||||||
Annual Bonus (4) | | 1,950,000 | | | ||||||||||||||
Other (7) | | | | 364,213 | ||||||||||||||
Robert W. Eddy |
Severance Benefit (5) | 1,450,000 | | | 1,450,000 | |||||||||||||
Continuation of Health Benefits (6) | 35,451 | | | 35,451 | ||||||||||||||
Value of Accelerated Stock Options (3) | | | 1,162,000 | 5,964,000 | ||||||||||||||
Annual Bonus (4) | 725,000 | 725,000 | | | ||||||||||||||
Other (7) | | | | 65,563 | ||||||||||||||
Lee Delaney |
Severance Benefit (5) | 1,500,000 | | | 1,500,000 | |||||||||||||
Continuation of Health Benefits (6) | 33,103 | | | 33,103 | ||||||||||||||
Value of Accelerated Stock Options (3) | | | 4,212,250 | 6,784,652 | ||||||||||||||
Annual Bonus (4) | 750,000 | 750,000 | | | ||||||||||||||
Other (7) | | | | 191,720 | ||||||||||||||
Scott Kessler |
Severance Benefit (5) | 1,000,000 | | | 1,000,000 | |||||||||||||
Continuation of Health Benefits (6) | 34,302 | | | 34,302 | ||||||||||||||
Value of Accelerated Stock Options (3) | | | | 2,358,563 | ||||||||||||||
Annual Bonus (4) | 350,000 | 350,000 | | | ||||||||||||||
Other (7) | | | | 95,955 | ||||||||||||||
Brian Poulliot |
Severance Benefit (5) | 900,000 | | | 900,000 | |||||||||||||
Continuation of Health Benefits (6) | 35,451 | | | 35,451 | ||||||||||||||
Value of Accelerated Stock Options (3) | | | 1,159,078 | 3,517,640 | ||||||||||||||
Annual Bonus (4) | 315,000 | 315,000 | | | ||||||||||||||
Other (7) | | | | 40,695 |
(1) |
Such amount includes twelve months base salary and the executives target annual cash bonus, payable in substantially equal installments for twelve months after termination and in a single lump sum in respect of a qualifying termination occurring on or following a change in control. This amount is also payable upon a termination by Mr. Baldwin for Good Reason. |
(2) |
Such amount includes the difference between the executives actual COBRA premium costs and the amount the executive would have paid had he continued coverage as an employee under the Companys applicable health plans for twelve months. This amount is also payable upon a termination by Mr. Baldwin for Good Reason. |
(3) |
Includes options and shares of restricted stock. The value of unvested options was calculated by multiplying the number of shares underlying unvested options by $26.47, the closing price of our common stock on the NYSE on February 1, 2019 (the last trading day prior to February 3, 2019), and then deducting the aggregate exercise price for the options. The value of unvested shares of restricted stock was calculated by multiplying the number of shares of unvested restricted stock by $26.47. |
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Please see Long-Term Equity Incentives for further information on the accelerated vesting provisions of our option grants.
(4) |
This amount reflects a pro rata portion of the annual cash bonus to which the executive would have been entitled had he remained employed by the Company until the end of the fiscal year. This amount is also payable upon a termination by Mr. Baldwin for Good Reason. |
(5) |
Such amount includes 24 months base salary, payable in substantially equal installments for 24 months after termination. |
(6) |
Such amount includes the difference between the executives actual COBRA premium costs and the amount the executive would have paid had he continued coverage as an employee under the Companys applicable health plans for twenty-four months. |
(7) |
This amount reflects the value of the Annual Retirement Contribution under the executive retirement plan for each of the named executive officers except for Messrs. Baldwin, Delaney and Kessler. For Mr. Baldwin the amount reflects the value of the Annual Retirement Contribution and accelerated vesting under the executive retirement plan ($359,711) and the value of accelerated vesting under the 401(k) plan ($4,502). For Mr. Delaney the amount reflects the value of the Annual Retirement Contribution and the accelerated vesting under the executive retirement plan ($187,794) and the value of accelerated vesting under the 401 (k) plan ($3,927). For Mr. Kessler the amount reflects the value of the Annual Retirement Contribution and accelerated vesting under the executive retirement plan ($95,784) and the value of accelerated vesting under the 401(k) plan ($171). Please see Non-Qualified Executive Retirement Plan for further information on the Annual Retirement Contributions. |
Director Compensation
The following table sets forth information concerning the compensation of our non-employee directors during fiscal year 2018:
Name |
Fees
Earned or Paid in Cash($) (1) |
Stock
Awards($) (2) |
Total($) | |||||||||
Cameron Breitner |
| | | |||||||||
Nishad Chande |
| | | |||||||||
J. Kristopher Galashan |
| | | |||||||||
Lars Haegg |
| | | |||||||||
Ken Parent |
86,042 | 139,986 | 226,028 | |||||||||
Christopher H. Peterson |
9,167 | 72,484 | 81,651 | |||||||||
Jonathan A. Seiffer |
| | | |||||||||
Laura Sen (3) |
| | | |||||||||
Christopher J. Stadler (4) |
| | | |||||||||
Robert Steele |
91,875 | 139,986 | 231,861 | |||||||||
Judith L. Werthauser |
21,250 | 91,268 | 112,518 | |||||||||
Tommy Yin (5) |
| | |
(1) |
Mr. Baldwin serves as our President and Chief Executive Officer and as Chairman of our board of directors. His compensation is fully reflected in the Summary Compensation Table, and, therefore, he is not included in the Director Compensation table. |
(2) |
Amounts set forth represent the aggregate grant date fair value of awards granted in fiscal year 2018 computed in accordance with ASC Topic 718. Please see Accounting for Stock-Based Compensation for further information. |
(3) |
Ms. Sen resigned as a member of our board of directors on March 29, 2018. |
(4) |
Mr. Stadler resigned as a member of our board of directors on October 31, 2018. |
(5) |
Mr. Yin resigned as a member of our board of directors on December 18, 2018. |
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Messrs. Breitner, Galashan, Haegg, Seiffer, Stadler and Yin are affiliates of our Sponsors and did not receive any compensation from us for their services as non-employee directors. As of the end of fiscal year 2018, Mr. Parent and Mr. Steele held 35,004 and 18,900 outstanding options in the company, respectively. None of our other non-employee directors held any outstanding options in the Company.
Narrative Disclosure to Director Compensation Table
We historically have compensated non-employee members of our board of directors who are not affiliated with our Sponsors for their service as directors in the form of a retainer of $70,000 per year and a grant of nonqualified stock options. In fiscal year 2018, each non-employee member of our board of directors was paid the prorated amount of $70,000 up until the Non-Employee Director Compensation Policy as described below was adopted. We did not grant any nonqualified stock option awards to non-employee members of our board of directors in fiscal year 2018 prior to the adoption of the policy.
In connection with the IPO, our board of directors adopted the Non-Employee Director Compensation Policy, the Director Stock Ownership Guidelines, and the Executive Stock Ownership Guidelines, pursuant to which each independent director will receive an annual cash retainer of $85,000 and an annual equity grant with a fair market value on the date of grant of $140,000 per year. The equity grant will either be in the form of RSUs that vest on the first anniversary of the date of grant, deferred shares or stock grants. Eligible non-employee directors will be entitled to receive such equity grants as of the annual meeting of the Companys stockholders in 2019. A non-employee director serving as a lead independent director will receive an additional annual retainer of $30,000. Committee chairs and committee members will also receive additional cash retainers for their service. The chairs of the audit committee, compensation committee and nominating and corporate governance committee will receive additional retainers of $25,000, $20,000 and $15,000 per year, respectively. Members of the audit committee, compensation committee and nominating and corporate governance committee (other than the chair) will receive additional retainers of $12,500, $10,000 and $7,500 per year, respectively. Retainers are to be paid in quarterly installments. The board also adopted the Director Stock Ownership Guidelines, and the Executive Stock Ownership Guidelines, pursuant to which independent directors are required to own equity in the Company at least equal to 5 times their retainer within five years and executive officers are required to own equity in the Company equal to at least one to five times their annual base salary depending on their position.
The Company also reimburses those directors for any travel or other business expenses related to their service as a director.
Nishad Chande was appointed to our board of directors in May 2018. He is affiliated with our Sponsors, and, therefore, he does not receive any compensation for his service as a non-employee director.
Effective September 4, 2018, the Company granted Ken Parent and Robert Steele an award of restricted stock units under the 2018 Plan with a fair market value on the date of grant of $140,000. Such awards were intended to compensate Mr. Parent and Mr. Steele for their service on our board of directors from the period commencing on the date of the IPO through the date of the annual meeting of the Companys stockholders in 2019, and were equivalent to the annual equity grants provided for in the Non-Employee Director Compensation Policy. Each award will vest on the earlier to occur of the first anniversary of the date of grant or immediately prior to the annual meeting of the Companys stockholders in 2019.
Judith L. Werthauser was appointed to the Board in November 2018. She is not affiliated with our Sponsors, and, therefore, will receive compensation for her service as a director. She has been designated as a Class I director. Effective October 30, 2018 the Board granted Ms. Werthauser an award of restricted stock units under the 2018 Plan. The award is equivalent to the prorated annual equity grant provided for in the Non-Employee Director Compensation Policy based on Ms. Werthausers commencement of service. The fair market value of such award was based on the closing price of our common stock on the NYSE on November 1, 2018 which was $22.58. The award will vest on the earlier to occur of the first anniversary of the grant date or immediately prior to the annual meeting of the Companys stockholders in 2019.
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Christopher H. Peterson was appointed to the Board in December 2018. He is not affiliated with our Sponsors, and, therefore, will receive compensation for his service as a director. He has been designated as a Class I director. Effective December 19, 2018, the Board granted Mr. Peterson an award of restricted stock units under the 2018 Plan. The award is equivalent to the prorated annual equity grant provided for in the Non-Employee Director Compensation Policy, based on Mr. Petersons commencement of service. The fair market value of such award was based on the closing price of our common stock on the NYSE on January 31, 2019 which was $26.31. The award will vest on the earlier to occur of the first anniversary of the grant date or immediately prior to the annual meeting of the Companys stockholders in 2019.
Non-Executive Chairman Agreement with Laura Sen
On January 6, 2016, the Company entered into an agreement, effective as of January 31, 2016, with Ms. Sen who previously served as our chief executive officer, effective as of January 31, 2016, pursuant to which Ms. Sen would serve as the non-executive chairman of our board of directors. The term of Ms. Sens service under the agreement was for a period of two years beginning on January 31, 2016. Ms. Sen was entitled to a base salary of $1,050,625 per year, and an annual cash bonus with respect to the fiscal year ending on January 31, 2016. Ms. Sen was also subject to 24-month post-termination non-competition and non-solicitation covenants commencing on the effective date of such agreement. Ms. Sen resigned from our board of directors on March 29, 2018.
Incentive Award Plans
2011 Plan
We currently sponsor the Fourth Amended and Restated 2011 Stock Option Plan of BJs Wholesale Club Holdings, Inc., or the 2011 Plan, in order to incentivize our employees, consultants and independent directors. The 2011 Plan permits the grant of non-qualified and incentive stock options. When initially adopted, an aggregate 4,241,307 shares were reserved for issuance, but the 2011 Plan was amended to increase the total number of shares available for issuance under the 2011 Plan to 10,757,614 shares. As of February 3, 2018, options to purchase 8,879,220 shares of our common stock, at a weighted average exercise price per share of $3.99, were outstanding under the 2011 Plan. No further grants will be made under the 2011 Plan, though existing rewards remain outstanding.
Administration . The compensation committee administers the 2011 Plan and the stock options granted under it. Notwithstanding the foregoing, the full board of directors conducts the general administration of the 2011 Plan with respect to options granted to independent directors. Under the 2011 Plan, the compensation committee has the authority to select employees and consultants to be granted options, determine the number of shares to be subject to such options and determine the terms and conditions of such options.
Acquisitions . The 2011 Plan provides that immediately prior to a qualifying change in control, the compensation committee will grant options to purchase a number of shares of common stock equal to 720,300, less the number of shares subject to options granted after the closing of our acquisition by our Sponsors (and excluding certain grants to our Vice Presidents and new hires) to individuals who received options on the closing of our acquisition by our Sponsors (in amounts as determined by the compensation committee in its sole discretion). Such options will be fully and solely exercisable upon the consummation of the qualifying change in control.
The 2011 Plan provides that in the event of any stock split, spin-off, share combination, reclassification, recapitalization, liquidation, dissolution, reorganization, merger, change in control, payment of a dividend or distribution or other similar transaction or occurrence which affects our equity securities or the value thereof, the compensation committee shall (i) adjust the number and kind of shares subject to the 2011 Plan and available for or covered by options, (ii) adjust the exercise prices related to outstanding options, and/or (iii) take such other action (including, without limitation providing for payment of a cash amount to holders of outstanding options and adjusting performance targets) as it deems reasonably necessary to address, on an equitable basis, the effect of the applicable corporate event on the 2011 Plan and any outstanding options.
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Transferability . Options granted under the 2011 Plan are generally not transferable other than by will or the laws of descent and distribution.
Plan Amendment or Termination . The compensation committee or our board of directors has the authority to amend, suspend or terminate the 2011 Plan, although certain material amendments require the approval of our stockholders, and amendments that would impair the rights of any participant require the consent of that participant.
2012 Director Plan
We currently sponsor the 2012 Director Stock Option Plan of BJs Wholesale Club Holdings, Inc., as amended, or the 2012 Director Plan, in order to incentivize our independent directors. The 2012 Director Plan permits the grant of non-qualified stock options only and an aggregate of 175,000 shares were initially reserved for issuance and 350,000 are now reserved. As of February 3, 2018, options to purchase 73,500 shares of our common stock, at a weighted average exercise price per share of $4.02, were outstanding under the 2012 Director Plan. No further grants will be made under the 2012 Director Plan, though existing rewards remain outstanding.
Administration . Our board of directors conducts the general administration of the 2012 Director Plan with respect to options granted to independent directors. Our board of directors has the authority to select the independent directors to be granted options, determine the number of shares to be subject to such options and determine the terms and conditions of such options.
Acquisitions . The 2012 Director Plan provides that in the event of any stock split, spin-off, share combination, reclassification, recapitalization, liquidation, dissolution, reorganization, merger, change in control, payment of a dividend or distribution or other similar transaction or occurrence which affects our equity securities or the value thereof, our board of directors shall (i) adjust the number and kind of shares subject to the 2012 Director Plan and available for or covered by options, (ii) adjust the exercise prices related to outstanding options, and/or (iii) take such other action (including, without limitation, providing for payment of a cash amount to holders of outstanding options and adjusting performance targets) as it deems reasonably necessary to address, on an equitable basis, the effect of the applicable corporate event on the 2012 Director Plan and any outstanding options.
Transferability . Options granted under the 2012 Director Plan are generally not transferable other than by will or the laws of descent and distribution.
Plan Amendment or Termination . Our board of directors has the authority to amend, suspend or terminate the 2012 Director Plan, although any amendments that would impair the rights of any participant require the consent of that participant.
2018 Plan
We adopted the 2018 Plan, under which we may grant cash and equity-based incentive awards to eligible service providers in order to attract, motivate and retain the talent for which we compete. The material terms of the 2018 Plan are summarized below.
Eligibility and Administration. Our employees, consultants and directors, and employees, consultants and directors of our subsidiaries are eligible to receive awards under the 2018 Plan. The 2018 Plan is administered by our board of directors with respect to awards to non-employee directors and by the compensation committee with respect to other participants, each of which may delegate its duties and responsibilities to committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to certain limitations that may be imposed under Section 16 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and/or stock exchange rules, as applicable. The plan administrator has the authority to make all determinations
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and interpretations under, prescribe all forms for use with, and adopt rules for the administration of, the 2018 Plan, subject to its express terms and conditions. The plan administrator also sets the terms and conditions of all awards under the 2018 Plan, including any vesting and vesting acceleration conditions.
Limitation on Awards and Shares Available. The aggregate number of shares of our common stock that is available for issuance under awards granted pursuant to the 2018 Plan is the sum of (i) 12,162,689 and (ii) any shares which as of June 27, 2018 were available for issuance under the 2011 Plan or 2012 Director Plan (985,369 shares), or are subject to awards under the 2011 Plan or 2012 Director Plan which are forfeited or lapse unexercised and which following the effective date are not issued under the 2011 Plan or 2012 Director Plan, provided, however, no more than 13,148,058 shares may be issued upon the exercise of incentive stock options (which includes the 12,162,689 shares reserved under the 2018 Plan plus the 985,369 shares reserved but not yet issued under the 2011 Plan and 2012 Director Plan). The shares may be authorized but unissued shares, or shares purchased in the open market. If an award under the 2018 Plan, 2011 Plan or 2012 Director Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the 2018 Plan. Additionally, shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award under the 2018 Plan, the 2011 Plan or the 2012 Director Plan will be added to the shares authorized for grant. The following shares may not be used again for grant under the 2018 Plan: (1) shares subject to a stock appreciation right, or SAR, that are not issued in connection with the stock settlement of the SAR on its exercise and (2) shares purchased on the open market with the cash proceeds from the exercise of options under the 2018 Plan, 2011 Plan or 2012 Director Plan.
Awards granted under the 2018 Plan upon the assumption of, or in substitution for, awards authorized or outstanding under a qualifying equity plan maintained by an entity with which we enter into a merger or similar corporate transaction will not reduce the shares available for grant under the 2018 Plan. The sum of the grant date fair value of equity-based awards and the amount of any cash-based awards that may be granted to any non-employee director pursuant to the 2018 Plan during any calendar year may not exceed $750,000.
Awards. The 2018 Plan provides for the grant of stock options, including incentive stock options, or ISOs, and nonqualified stock options, or NSOs, restricted stock, dividend equivalents, stock payments, restricted stock units, or RSUs, performance shares, other incentive awards, stock appreciation rights, or SARs, and cash awards. In addition to the CEO IPO Equity Award (Please see Executive Compensation Program Components2018 IPO Equity Awards), the Board determined to grant 1,526,637 shares of restricted stock in the aggregate and options to purchase 2,510,263 shares of our common stock in the aggregate to certain of our employees (including our named executive officers) upon the consummation of the IPO. Certain awards under the 2018 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards. All awards under the 2018 Plan will be set forth in award agreements, which will detail all terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards other than cash awards generally will be settled in shares of our common stock, but the plan administrator may provide for cash settlement of any award. A brief description of each award type follows.
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Stock Options . Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute options granted in connection with a corporate transaction. The term of a stock option may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). Vesting conditions determined by the plan administrator may apply to stock options and may include continued service, performance and/or other conditions. |
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SARs. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The exercise price of a SAR may not be less than 100% of the fair market value of the underlying share on the date of grant (except with respect to certain substitute SARs granted in connection with a corporate transaction) and the term of a SAR may not be longer than ten years. Vesting conditions determined by the plan administrator may apply to SARs and may include continued service, performance and/or other conditions. |
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Restricted Stock, RSUs and Performance Shares . Restricted stock is an award of nontransferable shares of our common stock that remain forfeitable unless and until specified conditions are met, and which may be subject to a purchase price. RSUs are contractual promises to deliver shares of our common stock in the future, which may also remain forfeitable unless and until specified conditions are met. Delivery of the shares underlying RSUs may be deferred under the terms of the award or at the election of the participant, if the plan administrator permits such a deferral. Performance shares are contractual rights to receive a range of shares of our common stock in the future based on the attainment of specified performance goals, in addition to other conditions which may apply to these awards. Conditions applicable to restricted stock, RSUs and performance shares may be based on continuing service, the attainment of performance goals and/or such other conditions as the plan administrator may determine. |
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Stock Payments, Other Incentive Awards and Cash Awards . Stock payments are awards of fully vested shares of our common stock that may, but need not, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. Other incentive awards are awards other than those enumerated in this summary that are denominated in, linked to or derived from shares of our common stock or value metrics related to our shares, and may remain forfeitable unless and until specified conditions are met. Cash awards are cash incentive bonuses subject to performance goals. |
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Dividend Equivalents . Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of our common stock and may be granted alone or in tandem with awards. Dividend equivalents are credited as of dividend record dates during the period between the date an award is granted and the date such award vests, is exercised, is distributed or expires, as determined by the plan administrator. |
Certain Transactions. The plan administrator has broad discretion to take action under the 2018 Plan, as well as make adjustments to the terms and conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations and other corporate transactions. In addition, in the event of certain non-reciprocal transactions with our stockholders known as equity restructurings, the plan administrator will make equitable adjustments to the 2018 Plan and outstanding awards. In the event of a change in control of our company (as defined in the 2018 Plan), if an award is continued, assumed or replaced by the surviving entity, and a participant incurs a termination of service without cause (as such term is defined in the discretion of the plan administrator or as set out in an award agreement) upon or within twenty-four months following the change in control, the participants award shall become fully vested. To the extent that the surviving entity declines to continue, convert, assume or replace outstanding awards, then the plan administrator may cause all such awards to become fully vested and exercisable in connection with the transaction or to terminate in exchange for cash, rights or other property. Upon or in anticipation of a change of control, the plan administrator may cause any outstanding awards to terminate at a specified time in the future and give the participant the right to exercise such awards during a period of time determined by the plan administrator in its sole discretion. Individual award agreements may provide for additional accelerated vesting and payment provisions.
Foreign Participants, Claw-Back Provisions, Transferability, and Participant Payments. The plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards,
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subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. All awards will be subject to the provisions of any claw-back policy implemented by us to the extent set forth in such claw-back policy and/or in the applicable award agreement. With limited exceptions for estate planning, domestic relations orders, certain beneficiary designations and the laws of descent and distribution, awards under the 2018 Plan are generally non-transferable prior to vesting, and are exercisable only by the participant. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2018 Plan, the plan administrator may, in its discretion, accept cash or check, shares of our common stock that meet specified conditions, a market sell order or such other consideration as it deems suitable.
Plan Amendment and Termination. Our board of directors may amend or terminate the 2018 Plan at any time; however, except in connection with certain changes in our capital structure, stockholder approval will be required for any amendment that increases the number of shares available under the 2018 Plan, reprices any stock option or SAR, or cancels any stock option or SAR in exchange for cash or another award when the option or SAR price per share exceeds the fair market value of the underlying shares. No award may be granted pursuant to the 2018 Plan after the tenth anniversary of the date on which our board of directors adopted the 2018 Plan.
Section 162(m) Reliance Period. The 2018 Plan provides that to the maximum extent permitted under applicable law, all awards granted pursuant to the 2018 Plan shall be interpreted to qualify for any post-public offering reliance period deduction limit exception set forth in U.S. Treasury Regulation 1.162-27(f) (or any successor thereto). Under current law, for newly public companies, Section 162(m) offers a transition relief period during which time the $1,000,000 deduction limitation does not apply to certain plans or arrangements that existed before the company became publicly held. A company may generally rely on this transition relief period until the earliest of (i) the expiration of the plan; (ii) the material modification of the plan; (iii) the issuance of all employer stock and other compensation allocated under the plan; or (iv) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the initial public offering occurs or, in the case of a private company that becomes publicly held without an initial public offering, the first calendar year following the calendar year in which the company becomes publicly held.
ESPP
In connection with the IPO, we have adopted, and our stockholders have approved, the ESPP. Our employees, other than our executive officers, will be allowed to participate in our ESPP, subject to the eligibility requirements described below. The first offering period under the ESPP commenced on January 1, 2019 and will continue through June 30, 2019.
The aggregate number of shares of our common stock that are reserved for issuance under our ESPP is equal to the sum of (i) 973,014 shares and (ii) an annual increase on the first day of each calendar year beginning in 2019 and ending in 2028 equal to the lesser of (A) 486,507 shares, (B) 0.5% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of shares as determined by our board of directors. Our board of directors or its committee has full and exclusive authority to interpret the terms of the ESPP and determine eligibility. Our compensation committee is the initial administrator of the ESPP.
Our employees, other than our executive officers, and the employees of our subsidiaries are eligible to participate in the ESPP if they are customarily employed by us or any participating subsidiary for at least 20 hours per week and more than five months in any calendar year. However, an employee may not be granted rights to purchase stock under our ESPP if such employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of our common stock.
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Our ESPP is intended to qualify under Section 423 of the Code and stock will be offered under the ESPP during offering periods. The length of the offering periods under the ESPP will be determined by our compensation committee and may be up to twenty-seven months long. Employee payroll deductions will be used to purchase shares on each purchase date during an offering period. The purchase dates will be determined by the compensation committee for each offering period, but will generally be the last day in each offering period. Offering periods under the ESPP will commence when determined by our compensation committee. The compensation committee may, in its discretion, modify the terms of future offering periods.
Our ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation, which includes a participants gross base compensation for services to the Company, including overtime payments, but excluding commissions, incentive compensation, bonuses, expense reimbursements, fringe benefits and other special payments. A participant will be permitted to purchase a maximum of shares of common stock during each offering period. In addition, no employee will be permitted to accrue the right to purchase stock under the ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our common stock as of the first day of the offering period).
On the first trading day of each offering period, each participant will be automatically granted an option to purchase shares of our common stock. The option will expire at the end of the offering period or upon termination of employment, whichever is earlier, but is exercised at the end of each purchase period to the extent of the payroll deductions accumulated during such purchase period. The purchase price of the shares will not be less than 85% of the fair market value of the shares on the enrollment date. Participants may end their participation at any time during an offering period, and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Participation will end automatically upon termination of employment with us.
A participant may not transfer rights granted under the ESPP other than by will, the laws of descent and distribution or as otherwise provided under the ESPP.
In the event of certain significant transactions or a Change in Control (as defined in the ESPP), the compensation committee may provide for (i) either the replacement or termination of outstanding rights in exchange for cash, (ii) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, if any, (iii) the adjustment in the number and type of shares of stock subject to outstanding rights, (iv) the use of participants accumulated payroll deductions to purchase stock on a new purchase date prior to the next purchase date and termination of any rights under ongoing offering periods or (v) the termination of all outstanding rights.
The compensation committee may amend, suspend or terminate the ESPP. However, stockholder approval of any amendment to the ESPP will be obtained for any amendment which changes the aggregate number or type of shares that may be sold pursuant to rights under the ESPP, changes the corporations or classes of corporations whose employees are eligible to participate in the ESPP or changes the ESPP in any manner that would cause the ESPP to no longer be an employee stock purchase plan within the meaning of Section 423(b) of the Code.
Federal Income Taxes . The material federal income tax consequences of the ESPP under current federal income tax law are summarized in the following discussion, which deals with the general tax principles applicable to the ESPP. The following discussion is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. Foreign, state and local tax laws, and employment, estate and gift tax considerations are not discussed due to the fact that they may vary depending on individual circumstances and from locality to locality.
The ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. Under the applicable Code provisions, no income will be taxable to a
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participant until the sale or other disposition of the shares purchased under the ESPP. This means that an eligible employee will not recognize taxable income on the date the employee is granted an option under the ESPP (i.e., the first day of the offering period). In addition, the employee will not recognize taxable income upon the purchase of shares. Upon such sale or disposition, the participant will generally be subject to tax in an amount that depends upon the length of time such shares are held by the participant prior to disposing of them. If the shares are sold or disposed of more than two years from the first day of the offering period during which the shares were purchased and more than one year from the date of purchase, or if the participant dies while holding the shares, the participant (or his or her estate) will recognize ordinary income measured as the lesser of (1) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price or (2) an amount equal to 85% of the fair market value of the shares as of the first day of the offering period. Any additional gain will be treated as long-term capital gain. If the shares are held for the holding periods described above but are sold for a price that is less than the purchase price, there will be no ordinary income and the participating employee has a long-term capital loss for the difference between the sale price and the purchase price.
If the shares are sold or otherwise disposed of before the expiration of the holding periods described above, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price and we will be entitled to a tax deduction for compensation expense in the amount of ordinary income recognized by the employee. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares were held following the date they were purchased by the participant prior to disposing of them. If the shares are sold or otherwise disposed of before the expiration of the holding periods described above but are sold for a price that is less than the purchase price, the participant will recognize ordinary income equal to the excess of the fair market value of the shares on the date of purchase over the purchase price (and we will be entitled to a corresponding deduction), but the participant generally will be able to report a capital loss equal to the difference between the sales price of the shares and the fair market value of the shares on the date of purchase.
Equity Compensation Plan Information
The following table provides information for the fiscal year 2018 regarding compensation plans under which our equity securities were authorized for issuance:
Plan Category |
Number of Securities
to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted Average
Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans |
|||||||||
Equity compensation plans approved by stockholders) |
5,862,877 | (1) | $ | 10.78 | (2) | 8,572,846 | (3) | |||||
Equity compensation plans not approved by stockholders |
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Total |
5,862,877 | | 8,572,846 |
(1) |
Consists of 5,846,794 options granted under the 2011 Plan, 2012 Director Plan and 2018 Plan and 16,083 restricted stock units granted under the 2018 Plan to non-employee members of our board of directors. |
(2) |
The restricted stock units do not have an exercise price. |
(3) |
Remaining shares available for issuance under the 2018 Plan. |
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock as of February 6, 2019, and to reflect the sale of the shares of common stock offered from time to time pursuant to this prospectus for:
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each person or entity who is known by us to beneficially own more than 5% of our common stock; |
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each of our directors and named executive officers; |
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all of our directors and executive officers as a group; and |
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each selling stockholder. |
Information with respect to beneficial ownership has been furnished to us by each director, executive officer or stockholder listed in the table below, as the case may be. The amounts and percentages of our common stock beneficially owned are reported on the basis of rules of the SEC governing the determination of beneficial ownership of securities. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after February 6, 2019, including any shares of our common stock subject to an option that has vested or will vest within 60 days after February 6, 2019. More than one person may be deemed to be a beneficial owner of the same securities.
Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, the address for each person or entity listed below is c/o BJs Wholesale Club Holdings, Inc., 25 Research Drive, Westborough, Massachusetts 01581.
The selling stockholders named below may offer or sell from time to time pursuant to this prospectus up to an aggregate of 58,345,145 shares of our common stock. The table below describes, as of February 6, 2019, each selling stockholders beneficial ownership of shares of our common stock (a) according to the information available to us as of the date of this prospectus and (b) assuming each selling stockholder has sold all of its shares of our common stock covered by this prospectus.
Because the selling stockholders may sell, transfer or otherwise dispose of all, some or none of the shares of our common stock covered by this prospectus, we cannot determine the number of such shares that will be sold, transferred or otherwise disposed of by the selling stockholders, or the amount or percentage of shares of our common stock that will be held by the selling stockholders upon termination of any particular offering or sale. See Plan of Distribution. When we refer to the selling stockholders in this prospectus, we mean the entities listed in the table below, as well as their pledgees, donees, assignees, transferees and successors in interest.
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Information concerning the selling stockholders may change from time to time. Any changes to the information provided below will be set forth in a prospectus supplement if and when necessary.
Shares Beneficially
Owned Prior to this Offering |
Shares that May be Sold in this
Offering |
Shares Beneficially
Owned After this Offering |
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Number | Percent | Number | Percent | Number | Percent | |||||||||||||||||||
5% Stockholders |
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CVC Beacon LP (1) |
28,502,024 | 20.8% | 28,502,024 | 20.8% | | * | ||||||||||||||||||
Green Equity Investors V, L.P. and Green Equity Investors Side V, L.P (2) . |
28,502,024 | 20.8% | 28,502,024 | 20.8% | | * | ||||||||||||||||||
Directors and Named Executive Officers |
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Christopher J. Baldwin (3) |
2,040,835 | 1.5% | | * | 2,040,835 | 1.5 | % | |||||||||||||||||
Robert W. Eddy (4) |
1,031,280 | * | | * | 1,031,280 | * | ||||||||||||||||||
Lee Delaney (5) |
765,866 | * | | * | 765,866 | * | ||||||||||||||||||
Scott Kessler (6) |
283,931 | * | | * | 283,931 | * | ||||||||||||||||||
Brian Poulliot (7) |
519,332 | * | | * | 519,332 | * | ||||||||||||||||||
Cameron Breitner |
| * | | * | | * | ||||||||||||||||||
Nishad Chande |
| * | | * | | * | ||||||||||||||||||
J. Kristofer Galashan |
28,502,024 | 20.8% | 28,502,024 | 20.8% | | * | ||||||||||||||||||
Lars Haegg |
| * | | * | | * | ||||||||||||||||||
Ken Parent (8) |
35,004 | * | | * | 35,004 | * | ||||||||||||||||||
Christopher H. Peterson |
| * | | * | | * | ||||||||||||||||||
Jonathan A. Seiffer |
28,502,024 | 20.8% | 28,502,024 | 20.8% | | * | ||||||||||||||||||
Robert Steele (9) |
18,900 | * | | * | 18,900 | * | ||||||||||||||||||
Judith L. Werthauser |
| * | | * | | * | ||||||||||||||||||
All executive officers and directors as a group (22 persons) (10) |
34,449,185 | 25.1% | 28,523,822 | 20.8% | 5,925,363 | 4.3 | % | |||||||||||||||||
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Other Selling Stockholders |
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Other selling stockholders (9 persons) (11) |
1,368,299 | * | 1,319,299 | * | 49,000 | * |
* |
Represents beneficial ownership of less than 1% of our outstanding common stock. |
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Assumes the sale by the selling stockholders of all shares of our common stock registered pursuant to this prospectus. |
(1) |
The shares are held of record by CVC Beacon LP. CVC Beacon GP LLC is the general partner of CVC Beacon LP. CVC European Equity V Limited is the managing member of CVC Beacon GP LLC. Investment and voting power with regard to shares held of record by CVC Beacon LP rests with the Board of Directors of CVC European Equity V Limited, which consists of James Culshaw, Carl Hansen and Fred Watt, with address c/o CVC European Equity V Limited, 1 Waverley Place, Union Street, St Helier, Jersey JE1 1SG. As such, each of these entities and individuals may be deemed to share beneficial ownership of the shares held of record by CVC Beacon LP. Each of Messrs, Culshaw, Hansen and Watt disclaim beneficial ownership of the securities held of record by CVC Beacon LP. |
(2) |
Voting and investment power with respect to the shares of our common stock held by Green Equity Investors V, L.P. and Green Equity Investors Side V, L.P. (collectively, Green V) is shared. Voting and investment power may also be deemed to be shared with certain affiliated entities and investors (collectively comprising less than 1.5% of our outstanding common stock) whose holdings are included in the above amount. Messrs. Seiffer and Galashan may also be deemed to share voting and investment power with respect to such shares due to their positions with affiliates of Green V, and each disclaims beneficial ownership of such shares. Each of the foregoing individuals address is c/o Leonard Green & Partners, L.P., 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025. |
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(3) |
Consists of (a) 170,737 shares of common stock held by the Christopher J. Baldwin Irrevocable Trust dated September 26, 2016, of which Mr. Baldwins spouse, Linda B. Baldwin, is trustee, (b) 849,696 shares of common stock held by The Christopher J. Baldwin Grantor Retained Annuity Trust and (c) an aggregate of 1,020,402 shares of (i) unvested restricted stock (which may be forfeited based on satisfaction of the applicable vesting conditions) and (ii) common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(4) |
Consists of (a) 2,000 shares of common stock held by his minor children, (b) 86,324 shares of common stock held by the Robert W. Eddy November 2018 GRAT, (c) 52,489 shares of common stock held by Robert W. Eddy November 2018 GRAT II and (d) an aggregate of 890,467 shares of (i) unvested restricted stock (which may be forfeited based on satisfaction of the applicable vesting conditions) and (ii) common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(5) |
Consists of (a) 56,239 shares of common stock and (b) 709,627 shares of (i) unvested restricted stock (which may be forfeited based on satisfaction of the applicable vesting conditions) and (ii) common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(6) |
Consists of (a) 39,367 shares of common stock and (b) 244,564 shares of (i) unvested restricted stock (which may be forfeited based on satisfaction of the applicable vesting conditions) and (ii) common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(7) |
Consists of (a) 39,367 shares of common stock and (b) 479,965 shares of (i) unvested restricted stock (which may be forfeited based on satisfaction of the applicable vesting conditions) and (ii) common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(8) |
Includes shares of common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(9) |
Includes shares of common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(10) |
Consists of (a) 29,937,497 shares of common stock and (b) 4,511,688 shares of (i) unvested restricted stock (which may be forfeited based on satisfaction of the applicable vesting conditions) and (ii) common stock issuable upon the exercise of outstanding options or options that will become exercisable within 60 days of the date of this table. |
(11) |
Consists of selling stockholders not otherwise listed in this table who are former members of our management and who collectively beneficially own less than approximately 1% of our common stock. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions to which we were a party since January 29, 2017 in which the amount involved exceeded or will exceed $120,000, and in which any of our executive officers, directors or holders of more than 5% of any class of our voting securities, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.
Amended and Restated Stockholders Agreement
On September 30, 2011, and in connection with the acquisition of the Company by the Sponsors, the Company and the Sponsors entered into the Stockholders Agreement. The Stockholders Agreement contained, among other things, certain restrictions on the ability of such Sponsors to freely transfer shares of our stock. It also provided that each of the Sponsors has the right to nominate at least one individual for election to our board, and each party to the stockholders agreement agrees to vote all of their shares to elect such individual to our board. The Stockholders Agreement also provided for demand and piggyback registration rights as described below. The provisions of the Stockholders Agreement (subject to the survival of certain obligations, such as those relating to registration rights described below) were terminated upon the consummation of the IPO.
Upon the consummation of the IPO, we amended and restated the Stockholders Agreement to eliminate certain provisions thereof (but maintaining those related to the registration rights, which are described below), and to provide that the Sponsors will coordinate sales with each other in situations where piggyback rights are not otherwise applicable such that, subject to certain exceptions and certain minimum ownership thresholds, the Sponsors will be provided notice of, and the opportunity to participate in, each others dispositions on a pro rata basis. Each of the Sponsors are entitled, subject to certain exceptions, to demand registrations and to cause us to engage in an underwritten offering or other public sale of the shares that are the subject of the registration statement of which this prospectus forms a part. We are not required to effect any registration if the anticipated gross offering price of the shares of registered securities would be less than (i) $25 million in any offering registered on Form S-1, or (ii) $5 million in any offering registered on Form S-3. Management stockholders who are party to the Management Stockholders Agreement are also entitled to piggyback rights in connection with registered public offerings.
Voting Agreement
We have entered into a Voting Agreement with the Sponsors. The Voting Agreement, as further described below, contains specific rights, obligations and agreements of these parties as owners of our common stock. Under the Voting Agreement, the Sponsors agreed to take all necessary action, including casting all votes to which such members are entitled to cast at any annual or special meeting of stockholders, so as to ensure that the composition of our board of directors and its committees complies with the provisions of the Voting Agreement related to the composition of our board of directors and its committees, which are discussed under ManagementCorporate GovernanceComposition of our Board of Directors and ManagementCorporate GovernanceBoard Committees.
Management Stockholders Agreement
On September 30, 2011, and in connection with the acquisition of the Company by the Sponsors, Beacon Holding Inc. (the Company), Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC and certain management stockholders entered into a stockholders agreement (the Management Stockholders Agreement). The Management Stockholders Agreement provided for customary call rights, put rights, stock pre-emptive rights, stock co-sale rights and drag-along rights, as well as piggyback registration rights as described below. At the completion of the IPO, the provisions of the Management Stockholders Agreement (other than those granting piggyback registration rights) terminated.
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Management Services Agreement
On September 30, 2011, and in connection with the acquisition of the Company by the Sponsors, the Company entered into a management services agreement with the advisory affiliates of the Sponsors, pursuant to which the Sponsors agreed to provide certain management and financial services. We paid $8.1 million in fees and out of pocket expenses in both 2015 and 2016 and $8.0 million in fees and out of pocket expenses in 2017 to the advisory affiliates of the Sponsors under the management services agreement. The management services agreement with the Sponsors terminated without any termination payment automatically upon the closing of the IPO, subject to the survival of certain obligations, including as to indemnification. The final payment due to the Sponsors under this management services agreement was waived.
Christopher J. Baldwin Share Purchase and Promissory Note
On September 8, 2015, Christopher J. Baldwin purchased 170,737 shares of our common stock pursuant to a subscription agreement at a price of $5.86 per share, for an aggregate purchase price of $1.0 million. To finance his purchase of our common stock, we granted Mr. Baldwin a loan in the amount of $0.5 million, which was evidenced by a promissory note. The promissory note initially bore interest at 0.55% per annum, was payable on October 31, 2016 and was guaranteed by Mr. Baldwin. On October 31, 2016, the interest rate and maturity of the promissory note were amended to 0.66% and October 31, 2019 respectively. The promissory note was repaid on February 3, 2017.
Other Relationships
One of our suppliers, Advantage Solutions Inc., is controlled by affiliates of the Sponsors. Advantage Solutions Inc. is principally a provider of in-club product demonstration and sampling services, and we also engage them from time to time to provide ancillary support services, including for example, seasonal gift wrapping, on-floor sales assistance and display maintenance. In fiscal years 2017, 2016 and 2015 we incurred costs of $44.8 million, $41.0 million and $10.6 million, respectively. We incurred $29.4 million and $33.0 million of costs to Advantage Solutions Inc. for services rendered during the thirty-nine weeks ended in October 28, 2017 and November 3, 2018, respectively. The demonstration and sampling service fees are fully funded by our merchandise vendors who participate in the program.
We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described in this section were comparable to terms available or amounts that would be paid or received, as applicable, in arms-length transactions with parties unrelated to us.
Indemnification Agreements
Our amended and restated bylaws provide that we indemnify our directors and officers to the fullest extent permitted by the DGCL, subject to certain exceptions contained in our amended and restated bylaws. In addition, our amended and restated certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty.
We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the indemnitees with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the DGCL, subject to certain exceptions contained in those agreements.
There is no pending litigation or proceeding naming any of our directors or officers for which indemnification is being sought, and we are not aware of any pending litigation that may result in claims for indemnification by any director or executive officer.
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Our Policy Regarding Related Party Transactions
Our board of directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests or improper valuation (or the perception thereof). In connection with the IPO, our board of directors adopted a written policy on transactions with related persons that is in conformity with the requirements for issuers having publicly held common stock that is listed on the NYSE. Under such policy:
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any related person transaction, and any material amendment or modification to a related person transaction, must be reviewed and approved or ratified by a committee of the board of directors composed solely of independent directors who are disinterested or by the disinterested members of the board of directors; and |
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any employment relationship or transaction involving an executive officer and any related compensation must be approved by the compensation committee of the board of directors or recommended by the compensation committee to the board of directors for its approval. |
In connection with the review and approval or ratification of a related person transaction:
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management must disclose to the committee or disinterested directors, as applicable, the name of the related person and the basis on which the person is a related person, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction and all the material facts as to the related persons direct or indirect interest in, or relationship to, the related person transaction; |
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management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction complies with the terms of our agreements governing our material outstanding indebtedness that limit or restrict our ability to enter into a related person transaction; |
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management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction will be required to be disclosed in our applicable filings under the Securities Act or the Exchange Act, and related rules, and, to the extent required to be disclosed, management must ensure that the related person transaction is disclosed in accordance with such Acts and related rules; and |
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management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction constitutes a personal loan for purposes of Section 402 of the Sarbanes-Oxley Act. |
In addition, the related person transaction policy provides that the committee or disinterested directors, as applicable, in connection with any approval or ratification of a related person transaction involving a non-employee director or director nominee, should consider whether such transaction would compromise the director or director nominees status as an independent, or outside director, as applicable, under the rules and regulations of the SEC, the NYSE and the Code.
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The following descriptions of our capital stock and provisions of our amended and restated certificate of incorporation and our amended and restated bylaws are summaries and are qualified by reference to the amended and restated certificate of incorporation and the amended and restated bylaws, the forms of which are filed as exhibits to the registration statement of which this prospectus forms a part.
General
Our authorized capital stock consists of 300,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share. Unless the board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form. We urge you to read our amended and restated certificate of incorporation and our amended and restated bylaws.
Common Stock
Our amended and restated certificate of incorporation authorizes a total of 300,000,000 shares of common stock. As of February 2, 2019, 137,316,974 shares of common stock were issued and outstanding.
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.
In the event of our liquidation, dissolution, or winding up, the holders of common stock are entitled to receive proportionately our net assets available for distribution to stockholders after the payment in full of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. There are no sinking fund provisions applicable to our common stock. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Preferred Stock
Our amended and restated certificate of incorporation authorizes a total of 5,000,000 shares of preferred stock. We have no shares of preferred stock issued or outstanding.
Under the terms of our amended and restated certificate of incorporation, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. We have no present plans to issue any shares of preferred stock.
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Dividends
The DGCL permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of its net profits for the fiscal year in which the dividend is declared for the preceding fiscal year. Surplus is defined as the excess of the net assets of the corporation over the amount determined to be the capital of the corporation by the board of directors. The capital of the corporation is typically calculated to be (and cannot be less than) the aggregate par value of all issued shares of capital stock. Net assets equal the fair value of the total assets minus total liabilities. The DGCL also provides that dividends may not be paid out of net profits if, after the payment of the dividend, capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.
Declaration and payment of any dividend will be subject to the discretion of our board of directors. The time and amount of dividends will depend upon our financial condition, operations, cash requirements and availability, debt repayment obligations, capital expenditure needs, restrictions in our debt instruments, industry trends, the provisions of Delaware law affecting the payment of distributions to stockholders and any other factors our board of directors may consider relevant.
We have no current plans to pay dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. Our ability to pay dividends is limited by covenants in our existing indebtedness and may be limited by the agreements governing other indebtedness that we or our subsidiaries incur in the future. See Description of Certain Indebtedness. In addition, because we are a holding company and have no direct operations, we will only be able to pay dividends from funds we receive from our subsidiaries.
Authorized but Unissued Shares
The authorized but unissued shares of our common stock and our preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of the NYSE. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Voting Agreement
In connection with the IPO, we entered into a Voting Agreement with the Sponsors pursuant to which the Sponsors have specified board representation rights, governance rights and other rights. See Certain Relationships and Related Party TransactionsVoting Agreement.
Registration Rights
The holders of 59,850,721 shares of our common stock, or their transferees, are entitled to various rights with respect to the registration of these shares under the Securities Act. The sale of these shares pursuant to registration under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See Certain Relationships and Related Party TransactionsAmended and Restated Stockholders Agreement elsewhere in this prospectus.
Exclusive Venue
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a
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fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine must be brought only in the Court of Chancery in the State of Delaware. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. Our amended and restated certificate of incorporation renounces, to the maximum extent permitted from time to time by Delaware law, any interest or expectancy that we have in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to our directors or stockholders or their respective affiliates, other than those directors who are our or our subsidiaries employees. Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, none of the Sponsors or any of their affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates has any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates. In addition, to the fullest extent permitted by law, in the event that the Sponsors or any non-employee director acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself or himself or its or his affiliates or for us or our affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to us or any of our affiliates and they may take any such opportunity for themselves or offer it to another person or entity. Our amended and restated certificate of incorporation does not renounce our interest in any business opportunity that is expressly offered to a non-employee director solely in his or her capacity as a director or officer of the Company. To the fullest extent permitted by law, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Company if it is a business opportunity that (i) the Company is neither financially or legally able, nor contractually permitted, to undertake, (ii) from its nature, is not in the line of the Companys business or is of no practical advantage to the Company or (iii) is one in which the Company has no interest or reasonable expectancy.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors fiduciary duties, subject to certain exceptions. Our amended and restated certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. The effect of these provisions is to eliminate the rights of us and our stockholders, through stockholders derivative suits on our behalf, to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director.
Our amended and restated bylaws provide that we must indemnify and advance expenses to our directors and officers to the fullest extent authorized by the DGCL. We also are expressly authorized to carry directors and officers liability insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification and advancement provisions and insurance are useful to attract and retain qualified directors and executive officers.
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The limitation of liability, indemnification and advancement provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
We currently are party to indemnification agreements with certain of our directors and officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and Delaware Law
Certain provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the power to discourage acquisitions that some stockholders may favor.
Classified Board of Directors
Our amended and restated certificate of incorporation provides that our board of directors is divided into three classes, with the classes as nearly equal in number as possible and, following the expiration of specified initial terms for each class, each class serving three-year staggered terms. As a result, approximately one-third of our directors are elected each year. Pursuant to the terms of the Voting Agreement, directors designated by the Sponsors may only be removed with or without cause by the request of the party entitled to designate such director. In all other cases and at any other time, our amended and restated certificate of incorporation provides that directors may only be removed from our board of directors for cause by the affirmative vote of at least a majority of the confirmed voting power of our common stock. See ManagementCorporate GovernanceComposition of our Board of Directors. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
Our amended and restated certificate of incorporation provides that special meetings of the stockholders may be called only by the chairman of the board, a resolution adopted by the affirmative vote of the majority of the directors then in office and not by our stockholders or any other person or persons. Our amended and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. In addition, any stockholder who wishes to bring business before an annual meeting or nominate directors must comply with the advance notice requirements set forth in our amended and restated bylaws. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers or changes in control of us or our management.
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Stockholder Action by Written Consent
Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation prohibits stockholder action by written consent (and, thus, requires that all stockholder actions be taken at a meeting of our stockholders).
Approval for Amendment of Certificate of Incorporation and Bylaws
Our amended and restated certificate of incorporation further provides that the affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of voting stock, voting as a single class, is required to amend certain provisions of our amended and certificate of incorporation, including provisions relating to the size of the board, removal of directors, special meetings, actions by written consent and cumulative voting. The affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of voting stock, voting as a single class, is required to amend or repeal our bylaws, although our bylaws may be amended by a simple majority vote of our board of directors.
Business Combinations
We have opted out of Section 203 of the DGCL.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.
Stock Exchange Listing
Our common stock is listed on the NYSE under the symbol BJ.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
On February 3, 2017, we entered into the ABL Facility and Term Loan Facilities to amend the Prior ABL Facility and refinance the Prior Term Loan Facilities and to fund (i) a $735.5 million dividend payment to our stockholders, including funds affiliated with the Sponsors, (ii) a $67.5 million payment to certain holders of our outstanding stock options and (iii) a $5.4 million payment to our employees under retention bonus arrangements. Borrowings under the ABL Facility are also used to finance or refinance our working capital and capital expenditures and for general corporate purposes. We used the proceeds of the IPO to repay approximately $623.2 million of principal amount of indebtedness under the Second Lien Term Loan, as well as any accrued and unpaid interest and premium on the outstanding principal amount of the Second Lien Term Loan, following which our obligations thereunder were terminated. See Initial Public Offering.
On August 13, 2018, the Company and BJs Wholesale Club, Inc. entered into the First Lien Amendment, which reduced the applicable rate for the First Lien Term Loan from 3.75% for LIBOR loans and 2.75% for base rate loans (in each case, with a 0.25% stepdown at first lien net leverage of 4.25 to 1.00) to 3.00% for LIBOR loans and 2.00% for base rate loans (in each case, with a 0.25% stepdown at first lien net leverage of 3.00 to 1.00), provided that until delivery of financial statements for the first full fiscal quarter ending after August 13, 2018, the applicable rate is 3.00% for LIBOR loans and 2.00% for base rate loans.
On August 17, 2018, the Company and BJs Wholesale Club, Inc. entered into the ABL Amendment, which (a) extended the scheduled maturity date of the ABL Facility from February 3, 2022 to August 17, 2023 and (b) amended the pricing grid (as described in further detail in Description of Certain IndebtednessABL FacilityInterest) to reduce the applicable margin for all classes of loans and fees paid in connection with letters of credit at all levels of average daily availability (in each case, with stepdowns at total net leverage of 3.00 to 1.00 of (i) in the case of LIBOR and base rate loans and standby letters of credit fees, 0.125% and (ii) in the case of documentary letters of credit fees, 0.0625%), provided that, until February 1, 2019, the applicable margin for revolving loans will be set at LIBOR plus 125 basis points or base rate plus 25 basis points and the applicable margin for term loans will be set at LIBOR plus 200 basis points or base rate plus 100 basis points (including, if applicable, any stepdowns based on achieving total net leverage of 3.00 to 1.00).
ABL Facility
General
On February 3, 2017, BJs Wholesale Club, Inc., as borrower, and we, as a guarantor, amended our ABL Facility with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent and collateral agent (in such capacities, the ABL Agent). On August 17, 2018, the Company and BJs Wholesale Club, Inc. entered into the ABL Amendment with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent (in such capacity, the ABL Amendment Agent). The ABL Facility is scheduled to mature on August 17, 2023. There is no scheduled amortization under the ABL Facility.
The ABL Facility provides for (i) revolving borrowings of up to $950.0 million subject to borrowing base availability and (ii) a $50.0 million term loan. The borrowing base is equal to the sum (subject to certain reserves and adjustments) of (i) 90% of eligible credit card receivables, (ii) 90% of the amount of eligible accounts, (iii) the net recovery percentage of eligible inventory multiplied by 90% of the cost of eligible inventory, net of inventory reserves attributable to eligible inventory and (iv) qualified cash in an amount of up to 10% the borrowing base as calculated after giving effect to this clause (iv)), minus (v) the then amount of all availability reserves. The term borrowing base is equal to the sum (subject to certain reserves and adjustments) of (i) 5% of eligible credit card receivables, (ii) 5% of eligible accounts and (iii) the net recovery percentage of eligible inventory multiplied by 5% of the cost of eligible inventory, net of inventory reserves attributable to eligible inventory, minus (iv) the then amount of all availability reserves taken in respect of the term borrowing base. Subject to the borrowing base availability, the ABL Facility also includes a letter of credit subfacility of up to
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$300.0 million and a swing line subfacility for same-day borrowings of up to $75.0 million. Borrowings under the ABL Facility are subject to the satisfaction of customary conditions, including absence of default and accuracy of representations and warranties.
The ABL Amendment (a) extended the scheduled maturity date of the ABL Facility from February 3, 2022 to August 17, 2023 and (b) amended the pricing of the ABL Facility to the terms described below under the heading Interest.
Interest
Borrowings under the ABL Facility bear interest at a rate per annum equal to, at our option, either (a) adjusted LIBOR plus the applicable rate or (b) base rate (determined by reference to the greatest of the prime rate published by Wells Fargo, National Association, the federal funds effective rate plus 0.5% and one-month LIBOR plus 1%) plus the applicable rate. The applicable rates under the ABL Facility are subject to step-ups and step-downs based on the ABL Borrowers average daily availability for the immediately preceding fiscal quarter (in each case, with further step-downs at total net leverage of 3.00 to 1.00 of (i) in the case of LIBOR and base rate loans and standby letters of credit fees, 0.125% and (ii) in the case of documentary letters of credit fees, 0.0625%) in accordance with the following schedule provided that, until February 1, 2019, the applicable margins set forth below for Pricing Level I shall apply (including, if applicable, any stepdowns based on achieving total net leverage of 3.00 to 1.00):
Pricing
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Average Daily Availability |
Eurodollar
Rate Revolving Loans and Letters of Credit |
Base Rate
Revolving Loans |
Eurocurrency
Rate Term Loans |
Base Rate
Term Loans |
Documentary
Letters of Credit |
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I |
Greater than $500.0 million |
1.25 | % | 0.25 | % | 2.00 | % | 1.00 | % | 0.625 | % | ||||||||||||||||
II |
Less than or equal to $500.0 million but greater than $350.0 million |
1.50 | % | 0.50 | % | 2.25 | % | 1.25 | % | 0.750 | % | ||||||||||||||||
III |
Less than or equal to $350.0 million |
1.75 | % | 0.75 | % | 2.50 | % | 1.50 | % | 0.875 | % |
Optional and Mandatory Prepayments; Cash Dominion
At our option, the ABL Facility may be prepaid at any time without a premium or penalty with notice to the ABL Agent. We may also terminate or permanently reduce the unused commitments under the ABL Facility, with notice to the ABL Agent. Such termination or reduction must be in a minimum aggregate amount of $1.0 million or in whole multiples of $500,000 in excess thereof. In addition, we are not permitted to terminate or reduce the commitments if such termination or reduction (and any concurrent prepayments) would cause the total outstanding amount to exceed the amount of the ABL Facility. To the extent the borrowings under the ABL Facility at any time exceed the borrowing base at such time, we are required to prepay the borrowings under the ABL Facility in the amount of such excess.
We will be required to sweep substantially all cash receipts from the sale of inventory, collection of receivables and dispositions of the ABL Priority Collateral (defined below) into certain concentration accounts under the dominion and control of the administrative agent under the ABL Facility and all such cash will be used to repay outstanding borrowings under the ABL Facility (i) during the existence of certain specified events of default or (ii) when we fail to maintain availability of at least the greater of $60.0 million and 10.0% of the line cap for five consecutive business days.
Guarantee and Collateral
Obligations in respect of the ABL Facility are guaranteed by us and each of our material existing, newly acquired or created wholly-owned domestic restricted subsidiaries. Obligations under the ABL Facility, as well
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as obligations to the ABL Facility lenders and their affiliates under certain secured cash management agreements and secured hedge agreements, are secured by a first priority lien on the borrowers and the guarantors accounts receivable, inventory, deposit accounts, securities accounts, commodities accounts, cash and cash equivalents; chattel paper, documents, instruments, general intangibles (excluding intellectual property), books, records, proceeds and supporting obligations relating to the foregoing (collectively, the ABL Priority Collateral); and a third priority lien on the borrowers and the guarantors and their wholly-owned subsidiaries capital stock (which will be limited, in the case of any foreign subsidiaries, to 65% of the voting stock and 100% of the non-voting stock of any first-tier foreign subsidiaries); and the borrowers and the guarantors intercompany debt and certain other fixed assets other than the ABL Priority Collateral (collectively, the Term Loan Priority Collateral).
Covenants and Other Matters
The ABL Facility requires that we comply with a number of covenants, as well as certain financial tests. If we fail to maintain availability of at least the greater of $60.0 million and 10% of the line cap, the consolidated fixed charge coverage ratio of the most recently completed period of four consecutive quarters must be 1.00 to 1.00 or higher until our availability is at least the greater of $60.0 million and 10% of the line cap for 30 consecutive days. The covenants also limit, in certain circumstances, our ability to take a variety of actions, including:
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incur indebtedness; |
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create or maintain liens on property or assets; |
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make investments, loans and advances; |
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engage in acquisitions, mergers, consolidations and asset sales; |
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redeem debt; |
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pay dividends and distributions; and |
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enter into transactions with affiliates. |
The borrowers future compliance with its financial covenants and tests under the ABL Facility will depend on its ability to maintain sufficient liquidity, generate earnings and manage its assets effectively. The ABL Facility also has various non-financial covenants, both requiring the borrower and the guarantors to refrain from taking certain future actions (as described above) and requiring the borrower and the guarantors to take certain actions, such as keeping in good standing its corporate existence, maintaining insurance and providing the bank lending group with financial information on a timely basis. The ABL Facility also contains certain customary representations and warranties and events of default, including, among other things, payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any material guaranty or security document supporting the ABL Facility to be in full force and effect and change of control. If such an event of default occurs, the administrative agent under the ABL Facility would be entitled to take various actions, including the acceleration of amounts due under the ABL Facility and all actions permitted to be taken by a secured creditor.
Certain of the participants in the ABL Amendment and/or their respective affiliates, have provided, and may in the future from time to time provide, certain commercial and investment banking, financial advisory and/or other services in the ordinary course of business for the Company and/or its subsidiaries, for which they have in the past, and may in the future receive, customary fees and commissions.
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Term Loan Facilities
General
On February 3, 2017, BJs Wholesale Club, Inc., as the borrower, and we, as a guarantor, entered into (i) the First Lien Term Loan, with the lenders party thereto, and Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent (in such capacities, the First Lien Agent) and (ii) the Second Lien Term Loan, with the lenders party thereto and Jefferies Finance LLC, as administrative agent and collateral agent. On July 2, 2018, in connection with the closing of the IPO, we repaid all of the outstanding borrowings under the Second Lien Term Loan, following which our obligations thereunder were terminated. On August 13, 2018, the Company and BJs Wholesale Club, Inc. repaid $350 million of the then existing First Lien Term Loan and entered into the First Lien Amendment with the lenders, the other parties that are party thereto and the First Lien Agent.
As amended, the First Lien Term Loan provides for term loans of $1,537.7 million (the First Lien Term Loan). The First Lien Term Loan amortizes in nominal quarterly installments equal to 0.25% of the original aggregate principal amount of the First Lien Term Loan and matures on February 3, 2024. The First Lien Term Loan also permits us to add one or more incremental term loans up to $475.0 million plus additional amounts subject to our compliance, with respect to the First Lien Term Loan, with a first lien net leverage ratio test.
The First Lien Amendment reduced the applicable rate for the First Lien Term Loan from 3.75% for LIBOR loans and 2.75% for base rate loans (in each case, with a 0.25% stepdown at first lien net leverage of 4.25 to 1.00) to 3.00% for LIBOR loans and 2.00% for base rate loans (in each case, with a 0.25% stepdown at first lien net leverage of 3.00 to 1.00), provided that until delivery of financial statements for the first full fiscal quarter ending after the effective date of August 13, 2018, the applicable rate is 3.00% for LIBOR loans and 2.00% for base rate loans.
Interest
The First Lien Term Loan bears interest at a rate per annum equal to, at our option, either (a) adjusted LIBOR plus the applicable rate or (b) base rate (determined by reference to the greatest of the prime rate published by the Wall Street Journal, the federal funds effective rate plus 0.5% and one-month LIBOR plus 1%) plus the applicable rate. Until delivery of financial statements for the first full fiscal quarter ending after the effective date of August 13, 2018, the applicable rate under the First Lien Term Loan is 3.00% for LIBOR loans and 2.00% for base rate loans. Thereafter, the applicable rate under the First Lien Term Loan shall be based on first lien net leverage ratio levels in accordance with the following schedule:
Pricing
|
First Lien Net Leverage Ratio |
Eurodollar Rate | Base Rate | |||||||||
I |
Greater than 3.00:1.00 |
3.00 | % | 2.00 | % | |||||||
II |
Less than or equal to 3.00:1.00 |
2.75 | % | 1.75 | % |
Optional and Mandatory Prepayments
At our option, the First Lien Term Loan may be prepaid at any time, in whole or in part, with notice to the First Lien Agent; provided, however, any prepayment in connection with a repricing event made prior to February 13, 2019 shall be subject to a prepayment premium equal to the principal amount of the First Lien Term Loan subject to such prepayment multiplied by 1%. Any prepayment of all or any portion of the outstanding First Lien on or after February 13, 2019 shall not be subject to a premium.
In addition, subject to the satisfaction of certain conditions, we are permitted to offer our lenders to repurchase loans held by them under the First Lien Term Loan at a discount.
Under certain circumstances and subject to certain exceptions, the First Lien Term Loan will be subject to mandatory prepayments in the amount equal to: (x) 100% of the net cash proceeds of certain assets sales and
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issuances or incurrence of non-permitted indebtedness and (y) 50% of annual excess cash flow for any fiscal year, such percentage to decrease to 25% and 0% depending on the attainment of certain first lien net leverage ratio targets.
Guarantee and Collateral
The borrowers obligations in respect of the First Lien Term Loan are guaranteed by us and each of our material existing and newly acquired or created wholly-owned domestic restricted subsidiaries. Our obligations under the First Lien Term Loan are secured by a first priority lien on the Term Loan Priority Collateral and a second priority lien on the ABL Priority Collateral.
Covenants and Other Matters
The First Lien Term Loan has various non-financial covenants, customary representations and warranties, events of defaults and remedies, substantially similar to those described in respect of the ABL Facility above. There are no financial maintenance covenants in the First Lien Term Loan.
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SHARES ELIGIBLE FOR FUTURE SALE
We cannot predict what effect, if any, market sales of our common stock or the availability of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon the exercise of outstanding options, in the public market, or the perception that such sales could occur, could materially and adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate.
As of February 2, 2019, we had outstanding an aggregate of 137,316,974 shares of our common stock. All of the shares of common stock sold pursuant to this prospectus will be freely transferable without restriction or further registration under the Securities Act by persons other than affiliates, as that term is defined in Rule 144 under the Securities Act. Shares of our common stock that are not restricted securities and are purchased by our affiliates will be control securities under Rule 144. Restricted securities may be sold in the public market only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act. These rules are summarized below. Control securities may be sold in the public market subject to the restrictions set forth in Rule 144, other than the holding period requirement.
Subject to the provisions of Rule 144, all of the shares of our common stock that are restricted securities, or are held by our affiliates as of the date of this prospectus, will be available for sale in the public market. The sale of these restricted securities is subject, in the case of shares held by affiliates, to the volume restrictions contained in Rule 144.
Rule 144
The availability of Rule 144 will vary depending on whether restricted shares are held by an affiliate or a non-affiliate. Under Rule 144 as in effect on the date of this prospectus an affiliate who has beneficially owned restricted ordinary shares for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:
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1% of the number of shares of our common stock then outstanding, which equalled approximately 1,373,169 shares as of February 2, 2019; or |
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the average weekly trading volume in our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
Sales by our affiliates under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. An affiliate is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with an issuer.
Under Rule 144, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least six months (including the holding period of any prior owner other than an affiliate), would be entitled to sell those shares subject only to availability of current public information about us, and after beneficially owning such shares for at least twelve months, would be entitled to sell an unlimited number of shares without restriction. To the extent that our affiliates sell their common stock, other than pursuant to Rule 144 or a registration statement, the purchasers holding period for the purpose of effecting a sale under Rule 144 commences on the date of transfer from the affiliate.
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Rule 701
In general, under Rule 701, any of an issuers employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.
The Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after an issuer becomes subject to the reporting requirements of the Exchange Act.
Stock Plans
On June 28, 2018, we filed a registration statement on Form S-8 under the Securities Act covering shares of common stock reserved for issuance under our 2018 Plan and ESPP and pursuant to all outstanding option grants made prior to the IPO under the 2011 Plan and 2012 Director Plan. Shares issued upon the exercise of stock options after the effective date of the applicable Form S-8 registration statement are eligible for resale in the public market without restriction, subject to Rule 144 limitations applicable to affiliates.
Registration Rights
Some of our stockholders have the right to require us to register their shares for future sale and to cause us to engage in an underwritten offering or other public sale of the shares that are the subject of the registration statement of which this prospectus forms a part. See Certain Relationships and Related Party TransactionsAmended and Restated Stockholders Agreement.
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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF OUR COMMON STOCK
The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock sold in accordance with this prospectus, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.
This discussion is limited to Non-U.S. Holders that hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holders particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
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U.S. expatriates and former citizens or long-term residents of the United States; |
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persons subject to the alternative minimum tax; |
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persons holding our common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a conversion transaction or other integrated investment; |
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persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement; |
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banks, insurance companies and other financial institutions; |
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brokers, dealers, or traders in securities; |
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controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax; |
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partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); |
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tax-exempt organizations or governmental organizations; |
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persons deemed to sell our common stock under the constructive sale provisions of the Code; |
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persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; |
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persons that own, or are deemed to own, more than 5% of our common stock (except to the extent specifically set forth below); |
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tax-qualified retirement plans; and |
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qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds. |
If an entity (or arrangement) treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner or beneficial owner of the entity will depend on the status of the
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partner or beneficial owner, the activities of the entity and certain determinations made at the partner or beneficial owner level. Accordingly, entities treated as partnerships for U.S. federal income tax purposes holding our common stock and the partners or beneficial owners in such entities should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of a Non-U.S. Holder
For purposes of this discussion, a Non-U.S. Holder is any beneficial owner of our common stock that is neither a U.S. person nor an entity (or arrangement) treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
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an individual who is a citizen or resident of the United States; |
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an entity created or organized under the laws of the United States, any state thereof, or the District of Columbia that is classified as a corporation for U.S. federal income tax purposes; |
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an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
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a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. |
Distributions
As described in the section of this prospectus entitled Dividend Policy, we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will first constitute a return of capital and be applied against and reduce a Non-U.S. Holders adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under Sale or Other Taxable Disposition.
Except as described below with respect to effectively connected dividends and subject to the discussions below of backup withholding and Sections 1471 to 1474 of the Code (such Sections and related Treasury Regulations commonly referred to as the Foreign Account Tax Compliance Act, or FATCA), dividends paid to a Non-U.S. Holder of our common stock will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). If a Non-U.S. Holder holds the stock through a financial institution or other intermediary, the Non-U.S. Holder will be required to provide appropriate documentation to the intermediary, which then will be required to provide appropriate documentation to the applicable withholding agent, either directly or through other intermediaries. A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
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If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal income tax generally in the same manner as if the Non-U.S. Holder were a U.S. person and be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits for the taxable year that are attributable to such dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules or rates.
Sale or Other Taxable Disposition
Subject to the discussions below regarding FATCA and backup withholding, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
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the gain is effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable); |
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the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or |
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our common stock constitutes a U.S. real property interest, or USRPI, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes. |
Gain described in the first bullet point above generally will be subject to U.S. federal income tax generally in the same manner as if the Non-U.S. Holder were a U.S. person and be taxed on the net gain derived from the sale or other taxable disposition under regular graduated U.S. federal income tax rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on a portion of its effectively connected earnings and profits for the taxable year that are attributable to such gain, as adjusted for certain items.
Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance that we currently are not a USRPHC or that will not become a USRPHC in the future. Even if we are or were to become a USRPHC, our common stock will not be treated as a USRPI if our common stock is regularly traded, as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually or constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition of, or the Non-U.S. Holders holding period for, our common stock.
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Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person and the holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E, W-8ECI, or W-8EXP, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such holder is a U.S. person, or the holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established or organized.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holders U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under FATCA on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or, subject to the proposed Treasury Regulations discussed below, gross proceeds from the sale or other disposition of, our common stock paid to a foreign financial institution (as defined by the Code to include, in addition to banks and traditional financial institutions, entities such as investment funds and certain holding companies) or a non-financial foreign entity (as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence, reporting and withholding obligations, (2) the non-financial foreign entity either certifies it does not have any substantial United States owners (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence, reporting and withholding requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain specified United States persons or United States-owned foreign entities (each as defined in the Code), annually report certain information about such accounts and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Accordingly, the entity through which our common stock is held will affect the determination of whether such withholding is required. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, recently proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
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The FATCA withholding tax will apply to all withholdable payments without regard to whether the beneficial owner of the payment would otherwise be entitled to an exemption from imposition of withholding tax pursuant to an applicable tax treaty with the United States or U.S. domestic law. Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
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This prospectus relates to the offer and sale from time to time by the selling stockholders identified in this prospectus of up to an aggregate of 58,345,145 shares of our common stock. We are not selling any shares of our common stock under this prospectus.
The selling stockholders may sell all or a portion of the shares of our common stock described in this prospectus from time to time in the future directly or through one or more underwriters, broker-dealers or agents. The shares of our common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, through:
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any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; |
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the over-the-counter market; |
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transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
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the writing of options, whether such options are listed on an options exchange or otherwise; |
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
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an exchange distribution in accordance with the rules of the applicable exchange; |
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privately negotiated transactions; |
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short sales; |
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transactions in which broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; |
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a combination of any such methods of sale; and |
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any other method permitted pursuant to applicable law. |
Some of the shares of our common stock covered by this prospectus may be sold by selling stockholders in private transactions or under Rule 144 under the Securities Act rather than pursuant to this prospectus.
If the selling stockholders use an underwriter or underwriters for any offering, we will name them, and set forth the terms of the offering, in a prospectus supplement pertaining to such offering and, except to the extent otherwise set forth in such prospectus supplement, the selling stockholders will agree in an underwriting agreement to sell to the underwriter(s), and the underwriter(s) will agree to purchase from the selling stockholder, the number of shares of our common stock set forth in such prospectus supplement. Any such underwriter(s) may offer the shares of our common stock from time to time for sale in one or more transactions on the New York Stock Exchange, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. The underwriter(s) may also propose initially to offer the shares of our common stock to the public at a fixed public offering price set forth on the cover page of the applicable prospectus supplement. The underwriter(s) may be granted an option, exercisable for 30 days after the date of the applicable prospectus supplement, to purchase additional shares from the selling stockholders. In connection with an underwritten offering, we, our directors and officers, and/or other holders of our common stock may agree with the underwriter(s), subject to certain exceptions, not to dispose of or hedge any common stock or securities convertible into or exchangeable for
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shares of common stock for a period of time after such offering. Except as otherwise set forth in a prospectus supplement, any underwritten offering pursuant to this prospectus will be underwritten by one, several or all of the following financial institutions: Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Jefferies LLC, Wells Fargo Securities, LLC, Nomura Securities International, Inc., Robert W. Baird & Co. Incorporated, William Blair & Company, L.L.C. and Siebert Cisneros Shank & Co., L.L.C. We will file a post-effective amendment to the registration statement of which this prospectus is a part to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
In connection with an underwritten offering, the underwriter(s) may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriter(s) of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A covered short position is a short position that is not greater than the amount of additional shares for which the underwriters option described above may be exercised. The underwriter(s) may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriter(s) will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. Naked short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriter(s) must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriter(s) are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the consummation of the offering.
The underwriter(s) may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriter(s) a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
If the selling stockholders effect such transactions by selling shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of shares or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares in the course of hedging in positions they assume. The selling stockholders may also sell shares short and deliver shares covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some or all of the shares of our common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of our common stock from time to time pursuant to this prospectus or any prospectus supplement under Rule 424(b)(3) or other applicable provision under the Securities Act, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of our common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
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The selling stockholders and any broker-dealer participating in the distribution of the shares of our common stock may be deemed to be underwriters within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. Any such broker-dealer will be named as an underwriter in a prospectus supplement or post-effective amendment to the registration statement, of which this prospectus is a part, and any discounts and commissions to be paid to any such broker-dealer will be disclosed therein. At the time a particular offering of the shares of our common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of our common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of our common stock may be sold in such states only through registered or licensed brokers or dealers. There can be no assurance that any selling stockholders will sell any or all of the shares of our common stock covered by this prospectus. The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act of 1934, as amended (the Exchange Act), which may limit the timing of purchases and sales of any of the shares of our common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of our common stock to engage in market-making activities with respect to the shares of our common stock. However, such persons may engage in transactions that stabilize the price of the ordinary shares, such as bids or purchases to peg, fix or maintain that price. Such stabilization transactions may occur at any time prior to the completion of the offering. All of the foregoing may affect the marketability of the shares of our common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of our common stock.
We will not receive any cash proceeds from our issuance of shares of our common stock to the selling stockholders or the sale by the selling stockholders of our shares of our common stock pursuant to this prospectus. Each selling stockholder will bear the cost of any underwriting discounts and selling commissions related to their respective offering and sale of shares of our common stock pursuant to this prospectus. We may be required to indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, or the selling stockholders will be entitled to contribution. We, our affiliates and our respective directors, officers, employees, agents and control persons may be indemnified by the selling stockholders against liabilities that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus or we or they may be entitled to contribution.
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The validity of the shares of common stock offered hereby will be passed upon for us by Latham & Watkins LLP, New York, New York.
The financial statements as of February 3, 2018 and January 28, 2017 and for each of the three years in the period ended February 3, 2018 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under the Securities Act with respect to the common stock to be sold pursuant to this prospectus. As allowed by SEC rules, this prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules that are part of the registration statement. For further information about us and our common stock, you should refer to the registration statement, including all amendments, supplements, schedules and exhibits thereto.
Statements included elsewhere in this in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. We are also required to file annual, quarterly and current reports, proxy statements and other information with the SEC.
You can review the registration statement, as well as our future SEC filings, by accessing the SECs website at www.sec.gov. You may also request copies of those documents, at no cost to you, by contacting us at the following address:
BJs Wholesale Club Holdings, Inc.
Attn: Investor Relations
25 Research Drive
Westborough, Massachusetts 01581
(774) 512-7400
We are subject to the information and reporting requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You can request copies of these documents, for a copying fee, by writing to the SEC. We intend to furnish our stockholders with annual reports containing financial statements audited by our independent auditors.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-2 | ||||
Audited Consolidated Financial Statements |
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Consolidated Balance Sheets as of January 28, 2017 and February 3, 2018 |
F-3 | |||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Unaudited Consolidated Financial Statements |
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Consolidated Balance Sheets as of October 28, 2017, February 3, 2018 and November 3, 2018 |
F-37 | |||
F-38 | ||||
F-39 | ||||
F-40 | ||||
F-41 | ||||
F-42 |
F-1
REPORT OF INDEPEN DENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of BJs Wholesale Club Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BJs Wholesale Club Holdings, Inc. and its subsidiaries as of February 3, 2018 and January 28, 2017, and the related consolidated statements of operations and comprehensive income, of contingently redeemable common stock and stockholders deficit and of cash flows for each of the three years in the period ended February 3, 2018, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 3, 2018 and January 28, 2017, and the results of their operations and their cash flows for each of the three years in the period ended February 3, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
April 18, 2018, except for the effects of the revision discussed in Note 3 to the consolidated financial statements, as to which the date is May 17, 2018, and except for the effects of the stock split discussed in Note 23 to the consolidated financial statements, as to which the date is June 15, 2018
We have served as the Companys auditor since 1996.
F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
BJS WHOLESALE CLUB HOLDINGS, INC.
(Amounts in thousands, except per share amounts)
January 28,
2017 |
February 3,
2018 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 31,964 | $ | 34,954 | ||||
Accounts receivable, net |
166,249 | 190,756 | ||||||
Merchandise inventories |
1,031,844 | 1,019,138 | ||||||
Prepaid expenses |
34,105 | 81,972 | ||||||
Prepaid federal and state income taxes |
233 | 9,784 | ||||||
|
|
|
|
|||||
Total current assets |
1,264,395 | 1,336,604 | ||||||
Property and equipment: |
||||||||
Land and buildings |
409,397 | 404,400 | ||||||
Leasehold costs and improvements |
171,363 | 184,165 | ||||||
Furniture, fixtures and equipment |
813,925 | 924,616 | ||||||
Construction in progress |
6,848 | 20,775 | ||||||
|
|
|
|
|||||
1,401,533 | 1,533,956 | |||||||
Less: accumulated depreciation and amortization |
(637,890 | ) | (775,206 | ) | ||||
|
|
|
|
|||||
Total property and equipment, net |
763,643 | 758,750 | ||||||
Goodwill |
924,134 | 924,134 | ||||||
Intangibles, net |
253,159 | 224,876 | ||||||
Other assets |
26,888 | 29,492 | ||||||
|
|
|
|
|||||
Total assets |
$ | 3,232,219 | $ | 3,273,856 | ||||
|
|
|
|
|||||
LIABILITIES |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt |
$ | 20,000 | $ | 219,750 | ||||
Accounts payable |
720,632 | 751,948 | ||||||
Accrued expenses and other current liabilities |
457,697 | 495,767 | ||||||
Closed store obligations due within one year |
2,012 | 2,122 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,200,341 | 1,469,587 | ||||||
Long-term debt |
2,000,118 | 2,492,660 | ||||||
Noncurrent closed store obligations |
6,258 | 6,561 | ||||||
Deferred income taxes |
92,900 | 57,074 | ||||||
Other noncurrent liabilities |
271,668 | 267,393 | ||||||
Commitments and contingencies (see Note 8) |
||||||||
Contingently redeemable common stock, par value $0.01; 1,043 and 1,456 shares issued and outstanding at January 28, 2017 and February 3, 2018 |
8,145 | 10,438 | ||||||
STOCKHOLDERS DEFICIT |
||||||||
Common stock, par value $0.01; 305,000 shares authorized; 87,073 shares issued and outstanding at January 28, 2017 and February 3, 2018 |
871 | 871 | ||||||
Additional paid-in capital |
6,397 | 2,883 | ||||||
Accumulated deficit |
(356,760 | ) | (1,036,012 | ) | ||||
Accumulated other comprehensive income |
2,281 | 2,401 | ||||||
|
|
|
|
|||||
Total stockholders deficit |
(347,211 | ) | (1,029,857 | ) | ||||
|
|
|
|
|||||
Total liabilities and stockholders deficit |
$ | 3,232,219 | $ | 3,273,856 | ||||
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-3
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Net sales |
$ | 12,220,215 | $ | 12,095,302 | $ | 12,495,995 | ||||||
Membership fee income |
247,338 | 255,235 | 258,594 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
12,467,553 | 12,350,537 | 12,754,589 | |||||||||
Cost of sales |
10,476,519 | 10,223,017 | 10,513,492 | |||||||||
Selling, general and administrative expenses |
1,797,780 | 1,908,752 | 2,017,821 | |||||||||
Preopening expense |
6,458 | 2,749 | 3,004 | |||||||||
|
|
|
|
|
|
|||||||
Operating income |
186,796 | 216,019 | 220,272 | |||||||||
Interest expense, net |
150,093 | 143,351 | 196,724 | |||||||||
|
|
|
|
|
|
|||||||
Income from continuing operations before income taxes |
36,703 | 72,668 | 23,548 | |||||||||
Provision (benefit) for income taxes |
12,049 | 27,968 | (28,427 | ) | ||||||||
|
|
|
|
|
|
|||||||
Income from continuing operations |
24,654 | 44,700 | 51,975 | |||||||||
Loss from discontinued operations, net of income taxes |
(550 | ) | (476 | ) | (1,674 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 24,104 | $ | 44,224 | $ | 50,301 | ||||||
|
|
|
|
|
|
|||||||
Income per share attributable to common stockholders basic: |
||||||||||||
Income from continuing operations |
$ | 0.28 | $ | 0.51 | $ | 0.59 | ||||||
Loss from discontinued operations |
(0.01 | ) | (0.01 | ) | (0.02 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 0.27 | $ | 0.50 | $ | 0.57 | ||||||
|
|
|
|
|
|
|||||||
Income per share attributable to common stockholders diluted: |
||||||||||||
Income from continuing operations |
$ | 0.27 | $ | 0.49 | $ | 0.56 | ||||||
Loss from discontinued operations |
(0.01 | ) | (0.01 | ) | (0.02 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 0.26 | $ | 0.48 | $ | 0.54 | ||||||
|
|
|
|
|
|
|||||||
Weighted-average number of common shares outstanding: |
||||||||||||
Basic |
87,869 | 88,164 | 88,386 | |||||||||
Diluted |
90,241 | 90,736 | 92,264 | |||||||||
Other comprehensive income, net of tax: |
||||||||||||
Postretirement medical plan adjustment, net of income tax of $717, $744 and $204, respectively |
$ | 1,045 | $ | (1,086 | ) | $ | (312 | ) | ||||
Unrealized gain on cash flow hedge, net of income tax of $424, $25 and $0, respectively |
619 | 38 | | |||||||||
|
|
|
|
|
|
|||||||
Total other comprehensive income, net of tax |
$ | 25,768 | $ | 43,176 | $ | 49,989 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-4
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CONTINGENT LY REDEEMABLE COMMON STOCK AND
STOCKHOLDERS DEFICIT
(Amount in thousands, except share amounts)
Contingently Redeemable
Common Stock |
Common Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Income |
Total
Stockholders Deficit |
|||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balance, January 31, 2015 |
413 | $ | 6,944 | 87,073 | $ | 871 | $ | (4,923 | ) | $ | (425,088 | ) | $ | 1,665 | $ | (427,475 | ) | |||||||||||||||
Net income |
| | | | | 24,104 | | 24,104 | ||||||||||||||||||||||||
Postretirement medical plan adjustment, net of tax |
| | | | | | 1,045 | 1,045 | ||||||||||||||||||||||||
Unrealized gain on cash flow hedge, net of tax |
| | | | | | 619 | 619 | ||||||||||||||||||||||||
Dividends paid |
| | | | (25 | ) | | | (25 | ) | ||||||||||||||||||||||
Stock compensation expense |
| | | | 2,265 | | | 2,265 | ||||||||||||||||||||||||
Stock issuance |
168 | 500 | | | | | | | ||||||||||||||||||||||||
Option exercises |
504 | 1,313 | | | (638 | ) | | | (638 | ) | ||||||||||||||||||||||
Call of shares |
(140 | ) | (806 | ) | | | (144 | ) | | | (144 | ) | ||||||||||||||||||||
Other equity transactions |
| | | | (824 | ) | | | (824 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance, January 30, 2016 |
945 | $ | 7,951 | 87,073 | $ | 871 | $ | (4,289 | ) | $ | (400,984 | ) | $ | 3,329 | $ | (401,073 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income |
| | | | | 44,224 | | 44,224 | ||||||||||||||||||||||||
Postretirement medical plan adjustment, net of tax |
| | | | | | (1,086 | ) | (1,086 | ) | ||||||||||||||||||||||
Unrealized gain on cash flow hedge, net of tax |
| | | | | | 38 | 38 | ||||||||||||||||||||||||
Dividends paid |
| | | | (25 | ) | | | (25 | ) | ||||||||||||||||||||||
Stock compensation expense |
| | | | 11,828 | | | 11,828 | ||||||||||||||||||||||||
Option exercises |
217 | 1,038 | (661 | ) | (661 | ) | ||||||||||||||||||||||||||
Call of shares |
(119 | ) | (844 | ) | (583 | ) | (583 | ) | ||||||||||||||||||||||||
Other equity transactions |
| | | | 127 | | | 127 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance, January 28, 2017 |
1,043 | $ | 8,145 | 87,073 | $ | 871 | $ | 6,397 | $ | (356,760 | ) | $ | 2,281 | $ | (347,211 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income |
| $ | | | $ | | $ | | 50,301 | $ | | 50,301 | ||||||||||||||||||||
Postretirement medical plan adjustment, net of tax |
| | | | | | (312 | ) | (312 | ) | ||||||||||||||||||||||
Dividends paid |
| | | | (6,397 | ) | (729,121 | ) | | (735,518 | ) | |||||||||||||||||||||
Stock compensation expense |
| | | | 9,102 | | | 9,102 | ||||||||||||||||||||||||
Option exercises |
616 | 3,708 | | | (2,850 | ) | | | (2,850 | ) | ||||||||||||||||||||||
Call of shares |
(203 | ) | (1,415 | ) | | | (554 | ) | | | (554 | ) | ||||||||||||||||||||
Other equity transactions |
| | | | (2,815 | ) | (432 | ) | 432 | (2,815 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance, February 3, 2018 |
1,456 | $ | 10,438 | 87,073 | $ | 871 | $ | 2,883 | $ | (1,036,012 | ) | $ | 2,401 | $ | (1,029,857 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-5
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
The accompanying notes are an integral part of the consolidated financial statements.
F-6
BJS WHOLESALE CLUB HOLDINGS, INC.
NOTES TO CONSOLIDAT ED FINANCIAL STATEMENTS
1. Description of Business
BJs Wholesale Club Holdings, Inc. and its wholly owned subsidiaries (the Company or BJs) is a leading warehouse club operator in the eastern United States of America. As of February 3, 2018, BJs operated 215 warehouse clubs in 16 states.
BJs business, in common with the business of retailers generally, is subject to seasonal influences. Sales and operating income have typically been strongest in the fourth quarter holiday season and lowest in the first quarter of each fiscal year.
BJs Wholesale Club, Inc. was previously an independent publicly traded corporation until its acquisition on September 30, 2011, by a subsidiary of Beacon Holding Inc., a company incorporated on June 24, 2011 by investment funds affiliated with or advised by Leonard Green & Partners and CVC Capital Partners, (collectively, the Sponsors) for the purpose of the acquisition. Beacon Holding Inc. changed its name to BJs Wholesale Club Holdings, Inc. on February 23, 2018.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
The Companys fiscal year ends on the Saturday closest to January 31. Fiscal year 2015 (2015) consists of the 52 weeks ended January 30, 2016, Fiscal year 2016 (2016) consists of the 52 weeks ended January 28, 2017, and fiscal year 2017 (2017) consists of the 53 weeks ended February 3, 2018.
Estimates Included in Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and stockholders equity, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates relied upon in preparing these consolidated financial statements include, but are not limited to, revenue recognition; vendor rebates and allowances; estimating inventory reserves; estimating impairment assessments of goodwill, intangible assets, and other long-lived assets; estimating self-insurance reserves; estimating income taxes and equity-based compensation. Actual results could differ from those estimates.
Segment Reporting
The Companys club retail operations, which represent substantially all of the Companys consolidated total revenues, are the Companys only reportable segment. All of the Companys identifiable assets are located in the United States. The Company does not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented.
F-7
The following table summarizes the percentage of net sales by category:
Fiscal Year | ||||||||||||
2015
% of Total |
2016
% of Total |
2017
% of Total |
||||||||||
Edible Grocery |
24 | % | 25 | % | 24 | % | ||||||
Perishables |
30 | % | 29 | % | 29 | % | ||||||
Non-Edible Grocery |
21 | % | 22 | % | 21 | % | ||||||
General Merchandise |
14 | % | 14 | % | 14 | % | ||||||
Gasoline & Other Ancillary Services |
11 | % | 10 | % | 12 | % |
Concentration Risk
An adverse change in the Companys relationships with its key suppliers could have a material effect on the business and results of operations of the Company. Currently, one distributor consolidates a substantial majority of perishables for shipment to the clubs. While the Company believes that such a consolidation is in its best interest overall, a prolonged disruption in logistics processes could materially impact sales and profitability for the near term.
All of the warehouse clubs are located in the eastern United States. Sales from the New York metropolitan area made up approximately 25% of net sales in 2015, 2016 and 2017.
Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash held in financial institutions. The Company considers the credit risk associated with these financial instruments to be minimal. Cash is held by financial institutions with high credit ratings and the Company has not historically sustained any credit losses associated with its cash balances.
Cash and Cash Equivalents
Highly liquid investments with a maturity of three months or less at the time of purchase are considered to be cash equivalents. Book overdrafts not subject to offset with other accounts with the same financial institution are classified as accounts payable.
Accounts Receivable
Accounts receivable consists primarily of credit card receivables and receivables from vendors related to rebates and coupons and is stated net of allowances for doubtful accounts of $1.3 million at January 28, 2017 and $1.2 million at February 3, 2018. The determination of the allowance for doubtful accounts is based on BJs historical experience applied to an aging of accounts and a review of individual accounts with a known potential for write-off.
Merchandise Inventories
Inventories are stated at the lower of cost, determined under the average cost method, or net realizable value. The Company recognizes the write-down of slow-moving or obsolete inventory in cost of sales when such write-downs are probable and estimable. The Company writes down inventory for estimated shrinkage for the period between physical inventories based on historical results of previous physical inventories, shrinkage trends or other judgments management believes to be reasonable under the circumstances.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Buildings and improvements are depreciated over estimated useful lives of 33 years.
F-8
Interest related to the development of buildings is capitalized during the construction period. Leasehold costs and improvements are amortized over the remaining lease term (which includes renewal periods that are reasonably assured) or the assets estimated useful life, whichever is shorter. Furniture, fixtures and equipment are depreciated over estimated useful lives, ranging from three to ten years. Depreciation expense was $145.7 million in 2015, $149.5 million in 2016 and $138.0 million in 2017.
Certain costs incurred in connection with developing or obtaining computer software for internal use are capitalized. Capitalized software costs are included in furniture, fixtures, and equipment and are amortized on a straight-line basis over the estimated useful life of the software, which is three to seven years. Software costs not meeting the criteria for capitalization are expensed as incurred.
Expenditures for betterments and major improvements that significantly enhance the value and increase the estimated useful life of the assets are capitalized and depreciated over the new estimated useful life. Repairs and maintenance costs on all assets are expensed as incurred.
Deferred Issuance Costs
The Company defers costs directly associated with acquiring third-party financing. Debt issuance costs related to the term loans are recorded as a direct deduction from the carrying amount of the debt and debt issuance costs associated with the ABL are recorded within other assets. Debt issuance costs are amortized over the term of the related financing arrangements on a straight-line basis, which is materially consistent with the effective interest method. Amortization of deferred debt issuance costs is recorded in interest expense and was $7.4 million in 2015, $7.7 million in 2016 and $4.1 million in 2017.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived trade name intangible assets are not subject to amortization. The Company assesses the recoverability of its goodwill and trade name annually in the fourth quarter or whenever events or changes in circumstances indicate it may be impaired. The Company has determined it has one reporting unit for goodwill impairment testing purposes.
The Company may assess its goodwill for impairment initially using a qualitative approach (step zero) to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If management concludes, based on its assessment of relevant events, facts and circumstances that it is more likely than not that a reporting units carrying value is greater than its fair value, then a quantitative analysis will be performed to determine if there is any impairment. The Company may also elect to initially perform a quantitative analysis instead of starting with step zero. The quantitative assessment for goodwill is a two-step assessment. Step one requires comparing the carrying value of a reporting unit, including goodwill, to its fair value. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and no further testing is required. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is to measure the amount of impairment loss, if any. Step two compares the implied fair value of goodwill to the carrying amount of goodwill. The implied fair value of goodwill is determined by a hypothetical purchase price allocation using the reporting units fair value as the purchase price. If the carrying amount of goodwill exceeds the implied fair value, an impairment charge is recorded to write down goodwill to its implied fair value and is recorded as a component of selling, general and administrative expense (SG&A). The Company assessed the recoverability of goodwill in 2015, 2016 and 2017 and determined that there was no impairment.
The Company assesses the recoverability of its trade name whenever there are indicators of impairment, or at least annually in the fourth quarter. If the recorded carrying value of the trade name exceeds its estimated fair value, the Company records a charge to write the intangible asset down to its estimated fair value as a component of SG&A. The Company assessed the recoverability of the BJs trade name and determined that its estimated fair value exceeded its carrying value and that no impairment was necessary in 2015, 2016 or 2017.
F-9
Impairment of Long-lived Assets
The Company reviews the realizability of long-lived assets periodically and whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Current and expected operating results and cash flows and other factors are considered in connection with managements reviews. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows of individual clubs and consolidated net cash flows for long-lived assets not identifiable to individual clubs. Impairment losses are measured as the difference between the carrying amount and the estimated fair value of the assets being evaluated. No impairment charges were recorded in 2015, 2016 or 2017.
Asset Retirement Obligations
An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development or normal operation of that long-lived asset. The Company recognizes asset retirement obligations in the period in which they are placed in service, if a reasonable estimate of fair value can be made. The asset retirement obligation is subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized in leasehold improvements and depreciated over their useful life. The Companys asset retirement obligations relate to the future removal of gasoline tanks and related assets from gasoline stations. See Note 15 for further information on the amounts accrued.
Self-Insurance Reserves
The Company is primarily self-insured for workers compensation, general liability claims and medical claims. Reported reserves for these claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The Company carries stop-loss insurance on its workers compensation and general liability claims to mitigate its exposure to large claims.
Revenue Recognition
Revenue is recognized from the sale of merchandise, net of estimated returns, at the time of purchase by the customer in the club. In the limited instances when the customer is not able to take delivery at the point of sale, revenue from the sale of merchandise is not recognized until title and risk of loss pass to the customer. For sales of merchandise on the Companys website, revenue is also recognized when title and risk of loss pass to the customer, which is normally at the time the merchandise is received by the customer. Sales incentives redeemable only at BJs, such as coupons and instant rebates, are recorded as a reduction of net sales.
The Company evaluates whether it is appropriate to record the gross amount of merchandise or service sales and related costs or the net amount earned as commission. Generally, when the Company is considered the primary obligor in the transaction, revenue is recorded at the gross sales price. If the Company is not considered the primary obligor, as in the case of third party ancillary services such as vision care, travel and insurance that are offered in club or through bjs.com, the net amount retained is recorded.
Membership fee income (MFI) is recognized on a straight-line basis over the life of the membership, which is typically 12 months.
The Companys BJs Perks Rewards members earn 2% cash back, up to a maximum of $500 per year, on all qualified purchases made at BJs. The Companys My BJs Perks Mastercard holders earn 3% or 5% cash back on all qualified purchases made at BJs and 1% or 2% cash back on purchases made with the card outside of BJs. Cash back is in the form of electronic awards issued in $20 increments that may be used in-club at the register and expire six months from the date issued. The Company accounts for the awards as a reduction of net sales, with the related liability classified within other current liabilities. This liability was $21.1 million in 2016 and $22.7 million in 2017.
F-10
BJs gift cards are available for purchase at all clubs. Revenue from gift card sales is recognized upon redemption of the gift card. Revenue from gift card and rewards breakage is recorded in net sales when the likelihood of redemption is remote and the Company does not have a legal obligation to escheat the value of unredeemed gift cards and rewards to any jurisdiction. Breakage recorded in 2015, 2016 and 2017 was not material.
The sales returns reserve, which reduces sales and cost of sales for the estimated impact of returns and also includes an estimate for membership cancellations, was $2.3 million in 2015, $3.7 million in 2016 and $3.4 million in 2017.
Warranty Programs
The Company passes on any manufacturers warranties to the members. In addition, BJs includes an extended warranty on tires sold at the clubs, under which BJs customers receive tire repair services or tire replacement in certain circumstances. This warranty is included in the sale price of the tire and it cannot be declined by the customers. The Company is fully liable for claims under the tire warranty program. As the primary obligor in these arrangements, associated revenue is recognized on the date of sale and an estimated warranty obligation is accrued based on claims experience. The liability for future claims under this program is not material to the financial statements.
Extended warranties are also offered on certain types of products such as electronics and jewelry. These warranties are provided by a third party at fixed prices to BJs. No liability is retained to satisfy warranty claims under these arrangements. The Company is not the primary obligor under these warranties, and as such net revenue is recorded on these arrangements at the time of sale. Revenue from warranty sales is included in net sales on the income statement.
Cost of Sales
The Companys cost of sales includes the direct costs of sold merchandise, which includes customs, taxes, duties and inbound shipping costs, inventory shrinkage and adjustments and reserves for excess, aged and obsolete inventory. Cost of goods sold also includes certain distribution center costs and allocations of certain indirect costs, such as occupancy, depreciation, amortization, labor and benefits.
Presentation of Sales Tax Collected from Customers and Remitted to Governmental Authorities
In the ordinary course of business, sales tax is collected on items purchased by the members that are taxable in the jurisdictions when the purchases take place. These taxes are then remitted to the appropriate taxing authority. These taxes collected are excluded from revenues in the financial statements.
Vendor Rebates and Allowances
The Company receives various types of cash consideration from vendors, principally in the form of rebates, based on purchasing or selling certain volumes of product, time-based rebates or allowances, which may include product placement allowances or exclusivity arrangements covering a predetermined period of time, price protection rebates and allowances for retail price reductions on certain merchandise and salvage allowances for product that is damaged, defective or becomes out-of-date.
Such vendor rebates and allowances are recognized based on a systematic and rational allocation of the cash consideration offered to the underlying transaction that results in progress by BJs toward earning the rebates and allowances, provided the amounts to be earned are probable and reasonably estimable. Otherwise, rebates and allowances are recognized only when predetermined milestones are met. The Company recognizes product placement allowances as a reduction of cost of sales in the period in which the product placement is completed.
F-11
Time-based rebates or allowances are recognized as a reduction of cost of sales over the performance period on a straight-line basis. All other vendor rebates and allowances are recognized as a reduction of cost of sales when the merchandise is sold or otherwise disposed.
Cash consideration is also received for advertising products in publications sent to BJs members. Such cash consideration is recognized as a reduction of SG&A to the extent it represents a reimbursement of specific, incremental and identifiable SG&A costs incurred by BJs to sell the vendors products. If the cash consideration exceeds the costs being reimbursed, the excess is characterized as a reduction of cost of sales. Cash consideration for advertising vendors products is recognized in the period in which the advertising takes place.
Manufacturers Incentives Tendered by Consumers
Consideration from manufacturers incentives (such as rebates or coupons) is recorded gross in net sales when the incentive is generic and can be tendered by a consumer at any reseller and the Company receives direct reimbursement from the manufacturer, or clearinghouse authorized by the manufacturer, based on the face value of the incentive. If these conditions are not met, such consideration is recorded as a decrease in cost of sales.
Leases
The majority of leases are accounted for as operating leases in accordance with ASC 840, Leases . Assets subject to an operating lease and the related lease payments are not recorded on the balance sheet. Rent expense is recognized on a straight-line basis over the expected lease term. The lease term begins on the date the Company becomes legally obligated for the rent payments or takes possession of the property, whichever is earlier. The lease term includes cancelable option periods where failure to exercise such options would result in economic penalty.
Sometimes, the Company is involved in the construction of leased clubs. In these situations, the Company evaluates whether it is deemed the owner of the club for accounting purposes. If deemed the owner of the construction project, the Company capitalizes the construction costs of the club on the balance sheet and records financing obligations equal to the cash proceeds or fair value of the assets received from the landlord. Upon the completion of the project, a sale-leaseback analysis is performed pursuant to current leasing guidance to determine if the assets and related financing obligations can be removed from the balance sheet. Assuming the assets and liabilities are removed from the balance sheet, leases are classified as either operating or capital. In some of the leases, the Company is reimbursed only a portion of the construction cost or the lease has terms that fix the rental payments for a significant percentage of the leased assets economic life. These items generally are considered continuing involvement which precludes removing the assets and related financing obligation from the balance sheet when construction is complete. Rent expense is not reported for any properties which are considered owned for accounting purposes. Rental payments under these leases are allocated as a reduction of the financing obligation and interest expense.
Assets recorded under capital lease and financing obligations are included in land and buildings on the balance sheet and are depreciated over their estimated useful lives using the straight-line method. As of January 28, 2017, and February 3, 2018, the gross amount of assets recorded under capital lease and financing obligations was $49.4 million. Related accumulated depreciation for these assets as of January 30, 2016, January 28, 2017 and February 3, 2018 was $8.1 million, $10.2 million and $12.2 million, respectively.
Preopening Costs
Preopening costs consist of direct incremental costs of opening or relocating a facility and are expensed as incurred.
F-12
Advertising Costs
Advertising costs generally consist of efforts to acquire new members and typically include media advertising (some of which is vendor-funded). BJs expenses advertising as incurred as a component of SG&A. Advertising expenses were approximately 0.4%, 0.5% and 0.6% of net sales in 2015, 2016 and 2017, respectively.
Stock-Based Compensation
The fair value of service-based employee awards is recognized as compensation expense on a straight-line basis over the requisite service period of the award. The fair value of the performance-based awards is recognized as compensation expense ratably over the service period of each performance tranche. The fair value of the stock-based awards is determined using the Black-Scholes option pricing model. Determining the fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise and the associated volatility.
The estimated fair value of the Companys stock is determined by its board of directors, with input from management and considering third-party valuations of common stock. See Note 11 for an additional description of the accounting for stock-based awards.
Earnings Per Share
Basic net income per share attributable to common stockholders is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period, including contingently redeemable common stock recorded outside of stockholders equity. Basic income from continuing operations per share attributable to common stockholders is calculated by dividing income from continuing operations available to common stockholders by the weighted average number of common shares outstanding for the period, including contingently redeemable common stock recorded outside of stockholders equity. Basic loss from discontinuing operations per share attributable to common stockholders is calculated by dividing loss from discontinuing operations available to common stockholders by the weighted average number of common shares outstanding for the period, including contingently redeemable common stock recorded outside of stockholders equity.
Diluted net income per share attributable to common stockholders is calculated by dividing net income available to common stockholders by the diluted weighted average number of common shares outstanding for the period. Diluted income from continuing operations per share attributable to common stockholders is calculated by dividing income from continuing operations available to common stockholders by the diluted weighted average number of common shares outstanding for the period. Diluted loss from discontinuing operations per share attributable to common stockholders is calculated by dividing loss from discontinuing operations available to common stockholders by the diluted weighted average number of common shares outstanding for the period.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying values and their respective tax bases, using enacted tax rates expected to be applicable in the years in which the temporary differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected, scheduling of anticipated reversals of taxable temporary differences, and considering prudent and feasible tax planning strategies.
F-13
The Company records liabilities for uncertain income tax positions based on a two-step process. The first step is recognition, where an individual tax position is evaluated as to whether it has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have less than a 50% likelihood of being sustained, no tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized on ultimate settlement. The actual benefits ultimately realized may differ from the estimates. In future periods, changes in facts, circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in income tax expense and liability in the period in which such changes occur.
Any interest or penalties incurred related to unrecognized tax benefits are recorded as a component of the provision for income tax expense.
Derivative Financial Instruments
All derivatives are recognized as either assets or liabilities on the consolidated balance sheet and measurement of these instruments is at fair value. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive income and are recognized in the consolidated statement of operations when the hedged item affects earnings. Any portion of the change in fair value that is determined to be ineffective is immediately recognized in earnings as SG&A. Derivative gains or losses included in accumulated other comprehensive income are reclassified into earnings at the time the hedged transaction occurs as a component of SG&A.
Fair Value of Financial Instruments
Certain assets and liabilities are carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The Company uses a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
|
Level 1, quoted market prices in active markets for identical assets or liabilities. |
|
Level 2, observable inputs other than quoted market prices included in Level 1 such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data. |
|
Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
Comprehensive Income
Comprehensive income is a measure of net income and all other changes in equity that result from transactions other than with equity holders, and would normally be recorded in the consolidated statements of stockholders equity and the consolidated statements of comprehensive income. Other comprehensive income consists of unrealized gains and losses from derivative instruments designated as cash flow hedges, and postretirement medical plan adjustments.
F-14
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued an accounting standard update that aims to simplify accounting for stock-based compensation. The changes include accounting for income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross share compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The Company elected to account for forfeitures as they occur rather than apply an estimated forfeiture rate to stock-based compensation expense. The Company adopted this standard update in 2017 and applied the changes prospectively.
In July 2015, the FASB issued an accounting standard update that aims to simplify the measurement of inventory. The changes include measuring inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted this standard update on a prospective basis in 2017 and prior periods were not retrospectively adjusted.
In February 2018, the FASB issued an accounting standard update that allows the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The Company adopted this standard update in 2017 and applied the changes prospectively for the year ended February 3, 2018 and reclassified $432 thousand from accumulated other comprehensive income to retained earnings as of February 3, 2018.
Recent Accounting Pronouncements
In May 2014, the FASB issued a new standard that creates common revenue recognition guidance for GAAP and International Financial Reporting Standards. The new guidance supersedes most preexisting revenue recognition guidance. The standards core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this principle, and will require companies to use more judgment and make more estimates than under the current guidance. The new standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The standard is effective for public entities for annual periods beginning after December 15, 2017 and for interim periods within those fiscal years.
The Company is currently evaluating the impact that the adoption of the new standard will have on its consolidated financial statements. The Company expects that the areas impacted will include accounting for the Companys co-branded credit card agreement, breakage using a proportional performance method, assessing certain sales promotion programs and presentation of sales returns and allowances. The Company plans to adopt the new standard using the modified retrospective adoption method.
In February 2016, the FASB issued an accounting standard update that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its consolidated financial statements, however, the Company expects to have a material impact to its consolidated balance sheet upon adoption.
In August 2016, the FASB issued an accounting standard update that is intended to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows and to eliminate the
F-15
diversity in practice related to such classifications. The guidance in the accounting standard update is required to be adopted for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the standard update on its consolidated cash flow statements.
In January 2017, the FASB issued an accounting standard update for IntangiblesGoodwill and Other, simplifying the test for goodwill impairment. Under the existing standard, when the carrying value of a reporting unit exceeds the reporting units fair value, an entity would then proceed to a Step 2 goodwill impairment analysis, which requires calculating the impaired fair value by assigning the fair value of a reporting unit to all of its assets and liabilities, as if that reporting unit had been acquired in a business combination. Under the new standard a goodwill impairment will be the amount by which a reporting units carrying value exceeds its fair value, not to exceed the carrying value of the reporting units goodwill. The new standard is effective January 1, 2020, with early adoption permitted. The Company does not believe this will have an impact on the consolidated financial statements.
In March 2017, the FASB issued new guidance, which changes certain presentation and disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. This guidance requires entities to (1) report the service cost component of net periodic pension/postretirement benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period; (2) capitalize only the service cost component of net periodic pension/postretirement benefit cost (when applicable); and (3) present other components of net periodic pension/postretirement benefit cost separately from the service cost component and outside a subtotal of income from operations (if applicable). The standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted as of January 1, 2017. The Company is currently evaluating the impact of the standard update on its consolidated financial statements.
In May 2017, the FASB issued an accounting standard update, which provides guidance about changes to the terms or conditions of a share-based payment award requiring an entity to apply modification accounting. The standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this standard update should be applied prospectively to an award modified on or after the adoption date, and, therefore, the Company will consider the provisions of this update in conjunction with awards issued on or after February 2, 2019, as applicable.
3. Related Party Transactions
Management Agreement
The Company has a management services agreement with the Sponsors for ongoing consulting and advisory services. The management services agreement provides for the aggregate payment of management fees to the Sponsors (or advisory affiliates thereof) of $8.0 million per year, plus out of pocket expenses. The Company expensed $8.1 million of management fees and out of pocket expenses in 2015 and 2016 respectively, and $8.0 million of management fees and out of pocket expenses in 2017. Management fees and expenses are reported in SG&A in the consolidated statements of operations and comprehensive income.
Other Relationships
One of the Companys suppliers, Advantage Solutions Inc., is controlled by affiliates of the Sponsors. Advantage Solutions Inc. is principally a provider of in-club product demonstration and sampling services, and the Company also engages them from time to time to provide ancillary support services, including for example, seasonal gift wrapping, on-floor sales assistance and display maintenance. In fiscal years 2017, 2016 and 2015 the Company incurred costs of approximately $44.8 million, $41.0 million and $10.6 million, respectively. The demonstration and sampling service fees are fully funded by merchandise vendors who participate in the program.
F-16
The Company believes the terms obtained or consideration paid or received, as applicable, in connection with the transactions were comparable to terms available or amounts that would be paid or received, as applicable, in arms-length transactions with unrelated parties.
The Company determined that the related-party disclosure for Advantage Solutions Inc. was misstated in the previously issued consolidated financial statements for the fiscal years 2017, 2016 and 2015. In evaluating whether the Companys previously issued consolidated financial statements were materially misstated, after considering both qualitative and quantitative considerations, the Company concluded that the disclosure errors were not material to any of the Companys prior annual consolidated financial statements and therefore, amendments of previously filed reports were not required. However, the Company has revised the disclosure to correct errors incurred with Advantage Solutions Inc. to the amounts reflected above for fiscal years 2017, 2016 and 2015.
4. Dividend Recapitalization
On February 3, 2017, the Company distributed a $735.5 million dividend to its common stockholders. In conjunction with the dividend, the Company paid $67.5 million to stock option holders of the Company as required under the Fourth Amended and Restated 2011 Stock Option Plan of BJs Wholesale Club Holdings, Inc. (as further amended) (2011 Plan), and the 2012 Director Stock Option Plan of BJs Wholesale Club Holdings, Inc. (as further amended) (2012 Director Plan). The payments to option holders were recorded as compensation expense in SG&A in 2017. The Company also paid $5.4 million to employees under retention bonus arrangements, of which $4.6 million was accrued in 2016 and the remaining $0.8 million was recognized as compensation expense in 2017. In order to fund these payments, the Company executed the following transactions immediately prior to the payment of the dividend:
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Refinanced and upsized the First Term Loan to $1,925.0 million, subject to an original issue discount (OID) of $4.8 million. The First Term Loan now matures on February 3, 2024. |
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Refinanced and upsized the Second Term Loan to $625.0 million, subject to an OID of $6.2 million. The Second Lien Term Loan now matures on February 3, 2025. |
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Amended and restated the ABL Facility and borrowed $340.0 million. The maturity date on the ABL Facility was extended to February 3, 2022 and there were no changes to the material terms. |
The Company paid accrued outstanding interest of $11.0 million and capitalized debt issuance costs of $24.6 million in conjunction with the refinancing. The Company recorded a loss on the debt refinancing of $21.1 million in 2017 of which $9.8 million represents the write-off of previously capitalized deferred debt issuance costs.
5. Debt and Credit Arrangements
Debt consisted of the following at January 28, 2017 and February 3, 2018 (in thousands):
January 28,
2017 |
February 3,
2018 |
|||||||
ABL Facility |
$ | 55,000 | $ | 217,000 | ||||
First Lien Term Loan |
1,425,273 | 1,910,563 | ||||||
Second Lien Term Loan |
577,183 | 625,000 | ||||||
Unamortized debt discount and debt issuance costs |
(37,338 | ) | (40,153 | ) | ||||
Less: current portion |
(20,000 | ) | (219,750 | ) | ||||
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|
|
|
|||||
Long-term debt |
$ | 2,000,118 | $ | 2,492,660 | ||||
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|
F-17
ABL Facility
On February 3, 2017 the Company amended and restated the ABL Facility to extend the maturity date to February 3, 2022. The Company wrote-off $2.2 million of previously capitalized debt issuance costs, expensed $0.2 million of new third-party fees and capitalized $7.9 million of new debt issuance costs.
The ABL Facility is comprised of a $950.0 million revolving credit facility and a $50.0 million term loan. The ABL Facility is secured on a senior basis by certain liquid assets of the Company and secured on a junior basis by certain fixed assets of the Company. The $50.0 million term loan payment terms are restricted in that the term loan cannot be repaid unless all loans outstanding under the ABL Facility are repaid, and once repaid, cannot be re-borrowed. The availability under the $950.0 million revolving credit facility is restricted based on eligible monthly merchandise inventories and receivables as defined in the facility agreement. Interest rates under the revolving credit facility are calculated either on LIBOR plus a range of 150 to 200 basis points based on excess availability, or an alternative base rate calculation based on the higher of prime, the federal funds rate plus 50 basis points or one-month LIBOR plus 100 basis points, plus a range of 50 to 100 basis points based on excess availability. The Company may elect one week or one, two, three, or six-month LIBOR terms. Interest on the term loan is based either on LIBOR plus a range of 300 to 350 basis points or the alternative base rate described above, plus a range of 200 to 250 basis points based on excess availability. The ABL Facility also provides a subfacility for issuances of letters of credit subject to certain fees defined in the ABL Facility agreement. The ABL Facility is subject to various commitment fees during the term of the facility based on utilization of the revolver.
At January 28, 2017, there was $55.0 million outstanding in loans under the ABL Facility and $48.0 million in outstanding letters of credit. At February 3, 2018, there was $217.0 million outstanding in loans under the ABL Facility and $44.2 million in outstanding letters of credit. As of February 3, 2018, the interest rate on the revolving credit facility was 3.08% and borrowing availability was $574.8 million.
First Lien Term Loan
On February 3, 2017 the Company refinanced its senior secured first lien term loan facility (the First Lien Term Loan) to extend the maturity date to February 3, 2024, increase the First Lien Term Loan borrowings to $1,925.0 million subject to a $4.8 million original issue discount and change the interest rate. Interest on the First Lien Term Loan is calculated either at LIBOR plus a range of 350 to 375 basis points where LIBOR is subject to a floor of zero or an alternative base rate calculation based on the higher of prime, the federal funds effective rate plus 50 basis points or one-month LIBOR plus 100 basis points, plus a range of 250 to 275 basis points.
As a result of the refinancing, there was a change in the bank syndicate. The Company wrote-off $3.1 million of previously capitalized debt issuance costs, expensed $8.3 million of new third-party fees and capitalized $8.5 million of new debt issuance costs. At February 3, 2018, the interest rate for the First Lien Term Loan was 4.95%.
Principal payments on the First Lien Term Loan are required in quarterly installments of 0.25% of the original principal amount with the balance due upon maturity on February 3, 2024. Voluntary prepayments are permitted. Principal payments must be made on the First Lien Term Loan pursuant to an annual excess cash flow calculation. The First Lien Term Loan is subject to certain affirmative and negative covenants but no financial covenants. It is secured on a senior basis by certain fixed assets of the Company and on a junior basis by certain of liquid assets of the Company . At February 3, 2018 there was $1,910.6 million outstanding on the First Lien Term Loan.
Second Lien Term Loan
On February 3, 2017 the Company refinanced the existing senior secured second lien term loan facility (the Second Lien Term Loan) to extend the maturity date to February 3, 2025 and increase the Second Lien Term
F-18
Loan borrowings to $625.0 million, subject to a $6.2 million original issue discount. Interest is calculated either at LIBOR plus 750 basis points where LIBOR is subject to a floor of zero or an alternative base rate calculation based on the higher of the prime, the federal funds effective rate plus 50 basis points or one-month LIBOR plus 100 basis points, plus 650 basis points.
As a result of the refinancing, there was a change in the bank syndicate. The Company wrote-off $4.5 million of previously capitalized debt issuance costs, expensed $2.8 million of new third-party fees and capitalized $8.2 million of new debt issuance costs. At February 3, 2018, the interest rate for the Second Lien Term Loan was 8.95%.
The Second Lien Term Loan matures on February 3, 2025 with the entire principal balance due on such maturity date. Voluntary prepayments are permitted, subject to certain prepayment premiums. Principal payments must be made on the Second Lien Term Loan pursuant to an annual excess cash flow calculation. The Second Lien Term Loan is subject to certain affirmative and negative covenants but no financial covenants. At February 3, 2018 there was $625.0 million outstanding on the Second Lien Term Loan.
Future minimum payments
Scheduled future minimum principal payments on debt as of February 3, 2018 are as follows:
Fiscal Year: |
Dollars in
thousands |
|||
2018 |
$ | 219,750 | ||
2019 |
19,250 | |||
2020 |
19,250 | |||
2021 |
19,250 | |||
2022 |
69,250 | |||
Thereafter |
2,405,813 | |||
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Total |
$ | 2,752,563 | ||
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6. Interest Expense, net
The following details the components of interest expense for the periods presented (in thousands):
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
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Interest on debt |
$ | 127,273 | $ | 122,193 | $ | 163,210 | ||||||
Interest on capital lease and financing obligations |
5,003 | 4,244 | 4,205 | |||||||||
Debt issuance costs amortization |
7,408 | 7,693 | 4,060 | |||||||||
Original issue discount amortization |
9,440 | 9,398 | 4,403 | |||||||||
Charges related to debt refinancing |
| | 21,061 | |||||||||
Capitalized interest |
(1,288 | ) | (68 | ) | (215 | ) | ||||||
Unrealized loss on interest rate caps |
2,257 | 73 | | |||||||||
Other interest income |
| (182 | ) | | ||||||||
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Interest expense, net |
$ | 150,093 | $ | 143,351 | $ | 196,724 | ||||||
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F-19
7. Intangible Assets and Liabilities
Intangible assets and liabilities consist of the following (in thousands):
January 28, 2017 | ||||||||||||
Gross Carrying
Amount |
Accumulated
Amortization |
Net Amount | ||||||||||
Goodwill |
$ | 924,134 | $ | | $ | 924,134 | ||||||
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|
|
|
|
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Intangible Assets Not Subject to Amortization: |
||||||||||||
BJs trade name |
$ | 90,500 | $ | | $ | 90,500 | ||||||
Intangible Assets Subject to Amortization: |
||||||||||||
Member relationships |
245,000 | (146,875 | ) | 98,125 | ||||||||
Private label brands |
8,500 | (3,778 | ) | 4,722 | ||||||||
Below market leases |
120,182 | (60,370 | ) | 59,812 | ||||||||
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|
|
|
|
|
|||||||
Total intangible assets |
$ | 464,182 | $ | (211,023 | ) | $ | 253,159 | |||||
|
|
|
|
|
|
|||||||
Intangible Liabilities Subject to Amortization: |
||||||||||||
Above market leases |
$ | (30,515 | ) | $ | 12,472 | $ | (18,043 | ) | ||||
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|
|
|
|
February 3, 2018 | ||||||||||||
Gross Carrying
Amount |
Accumulated
Amortization |
Net Amount | ||||||||||
Goodwill |
$ | 924,134 | $ | | $ | 924,134 | ||||||
|
|
|
|
|
|
|||||||
Intangible Assets Not Subject to Amortization: |
||||||||||||
BJs trade name |
$ | 90,500 | $ | | $ | 90,500 | ||||||
Intangible Assets Subject to Amortization: |
||||||||||||
Member relationships |
245,000 | (163,668 | ) | 81,332 | ||||||||
Private label brands |
8,500 | (4,486 | ) | 4,014 | ||||||||
Below market leases |
120,182 | (71,152 | ) | 49,030 | ||||||||
|
|
|
|
|
|
|||||||
Total intangible assets |
$ | 464,182 | $ | (239,306 | ) | $ | 224,876 | |||||
|
|
|
|
|
|
|||||||
Intangible Liabilities Subject to Amortization: |
||||||||||||
Above market leases |
$ | (30,515 | ) | $ | 14,709 | $ | (15,806 | ) | ||||
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|
|
|
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The Company records amortization expenses of intangible assets as a component of SG&A expenses. Member relationships are amortized over a period of 15.3 years, Private label brands are amortized over 12 years and below and above market leases are amortized over the estimated benefit of the intangible asset that was created.
The Company recorded amortization expense of $31.8 million, $28.8 million and $26.0 million as a component of SG&A for the fiscal years ended January 30, 2016, January 28, 2017 and February 3, 2018, respectively. The Company estimates that amortization expense (income) related to intangible assets and liabilities will be as follows in each of the next five fiscal years (in thousands):
Below Market Leases | Above Market Leases | Other Intangibles | Total | |||||||||||||
2018 | $ | 8,636 | $ | (2,162 | ) | $ | 15,371 | $ | 21,845 | |||||||
2019 | 7,633 | (2,077 | ) | 13,491 | 19,047 | |||||||||||
2020 | 7,117 | (1,846 | ) | 11,862 | 17,133 | |||||||||||
2021 | 6,153 | (1,581 | ) | 10,483 | 15,055 | |||||||||||
2022 | 4,507 | (1,526 | ) | 9,230 | 12,211 |
F-20
8. Commitment and Contingencies
Leases
The Company is obligated under long-term leases for the rental of real estate. In addition, generally the Company is required to pay insurance, real estate taxes and other operating expenses and, in some cases, additional rentals based on a percentage of sales in excess of certain thresholds, or other factors. Many of the leases require escalating payments during the lease term. Rent expense for such leases is recognized on a straight-line basis over the lease term. The initial primary term of the real estate leases (excluding ground leases) ranges from 5 to 25 years. Most of these leases have an initial term of 20 years. The initial primary term of the ground leases ranges from 15 to 44 years, and averages approximately 22 years. As of February 3, 2018, the Company has options to renew all but three of its leases for periods that range from 5 to 65 years, and average approximately 21 years.
Future minimum lease payments of operating leases as of February 3, 2018 were as follows (in thousands):
Fiscal Year |
Dollars in
Thousands |
|||
2018 |
$ | 302,622 | ||
2019 |
303,112 | |||
2020 |
292,917 | |||
2021 |
282,214 | |||
2022 |
266,405 | |||
Thereafter |
1,978,138 | |||
|
|
|||
Total |
$ | 3,425,408 | ||
|
|
The payments above do not include future payments due under the leases for two BJs clubs, which closed in January 2011. Rent liabilities for the closed locations are included in current and noncurrent closed store obligations on the consolidated balance sheets.
Rental expense under real estate operating leases (including contingent rentals, which were not material) was $287.5 million in 2015, $298.1 million in 2016 and $301.9 million in 2017. These amounts do not include rental expense on equipment and equipment space of $0.8 million in 2015 and $0.7 million for both 2016 and 2017.
Future minimum lease payments of capital leases and financing obligations for arrangements that did not qualify for sale-lease back accounting as of February 3, 2018 are as follows (in thousands):
Fiscal Year |
Future minimum
payments |
|||
2018 |
$ | 4,791 | ||
2019 |
4,510 | |||
2020 |
4,807 | |||
2021 |
4,833 | |||
2022 |
4,894 | |||
Thereafter |
39,333 | |||
|
|
|||
63,168 | ||||
Amount representing interest |
(27,466 | ) | ||
|
|
|||
Total |
$ | 35,702 | ||
|
|
These capital lease and financing obligations are primarily included in other noncurrent liabilities on the consolidated balance sheet.
F-21
Legal Contingencies
The Company is involved in various legal proceedings that are typical of a retail business. In accordance with applicable accounting guidance, an accrual will be established for legal proceedings if and when those matters present loss contingencies that are both probable and estimable. The Company does not believe the resolution of any current proceedings will result in a material loss to the consolidated financial statements.
9. Discontinued Operations
The following tables summarize the activity for 2016 and 2017 associated with discontinued operations, which consist of closing two BJs clubs in January 2011 (in thousands):
Discontinued Operations-2016 | ||||||||||||||||||||
Liabilities
January 30, 2016 |
Charges |
Payments/
Increase |
Liabilities
January 28, 2017 |
Cumulative
Charges to Date, Net |
||||||||||||||||
BJs clubs |
$ | 9,411 | $ | 802 | $ | (1,942 | ) | $ | 8,271 | $ | 56,833 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Current portion |
$ | 2,048 | $ | 2,013 | ||||||||||||||||
Long-term portion |
7,363 | 6,258 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||
Total |
$ | 9,411 | $ | 8,271 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Discontinued Operations-2017 | ||||||||||||||||||||
Liabilities
January 28, 2017 |
Charges |
Payments/
Increase |
Liabilities
February 3, 2018 |
Cumulative
Charges to Date, Net |
||||||||||||||||
BJs clubs |
$ | 8,271 | $ | 2,766 | $ | (2,354 | ) | $ | 8,683 | $ | 59,599 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Current portion |
$ | 2,013 | $ | 2,122 | ||||||||||||||||
Long-term portion |
6,258 | 6,561 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||
Total |
$ | 8,271 | $ | 8,683 | ||||||||||||||||
|
|
|
|
The charges for BJs lease obligations are based on the present value of rent liabilities under the relevant leases, including estimated real estate taxes and common area maintenance charges, reduced by estimated income from the potential subleasing of these properties. Charges in both periods represent accretion expense on lease obligations.
On June 12, 2014, the Company entered into a sublease agreement for one of the clubs that pays a portion of BJs lease obligation through the end of the lease term. The rental income received from that sublease is included in the payments referenced in the tables above. During the second half of 2017, the Company experienced a lapse in the sublease rental income which resulted in eviction of the current tenant. In January 2018, the Company entered into a new sublease agreement for the same property which will continue to pay a portion of the BJs lease obligation through the end of the lease term. The interruption of sublease income in the second half of 2017, and adjustment of future rental income from the new sublease agreement signed in January 2018, resulted in an additional charge of $0.7 million to the reserve. In addition, the Company lowered the estimated sublease income at the other existing closed location which resulted in an additional charge of $1.4 million to the reserve. The income tax benefit recorded related to loss from discontinued operations was $0.4 million, $0.3 million and $1.1 million for 2015, 2016 and 2017, respectively.
The lease obligations are expected to be paid over the next seven years. The liabilities for the closed club leases are included in current and noncurrent closed store obligations on the consolidated balance sheet.
F-22
10. Contingently Redeemable Common Stock
The Company and certain current and former management employees are party to the Management Stockholders Agreement (the MSA). All grants of equity by the Company to the employees are governed by the terms of individual equity award agreements and the MSA. The MSA specifies certain transfer restrictions, tag-along and drag-along rights, put and call rights and various other rights and restrictions applicable to any equity held by employees. The call right permits the Company to repurchase common stock held by an employee stockholder following a minimum holding period and prior to the expiration of a specified time period following the later of the employees termination of employment with the Company or acquisition of the common stock. If the employees employment is terminated for cause, the repurchase price is the least of (a) the fair market value as of the repurchase date, (b) the fair market value at issuance or (c) the price paid by the employee stockholder for such shares. If the employees employment is terminated other than for cause, the repurchase price is the fair market value as of the repurchase date.
The MSA also gives the employees the ability to put any shares back to the Company at fair market value upon death or disability while actively employed. As neither death nor disability while actively employed is a certainty, the shares of common stock held by the employee stockholders are considered to be contingently redeemable common stock and are accounted for outside of stockholders equity until the shares of common stock are either repurchased by the Company or the put right terminates. Both the Companys repurchase right and the employee stockholders put right will terminate upon the consummation of an IPO. The contingently redeemable common stock was recorded at fair value of the common stock at the date of issuance. Because meeting the contingency is not probable, the contingently redeemable common stock is not remeasured to fair value at each reporting date. The Company has recorded $8.1 million and $10.4 million of mezzanine equity on its consolidated balance sheet related to these agreements as of January 28, 2017 and February 3, 2018, respectively.
When the Company exercises its call option to repurchase shares classified outside of stockholders equity, it is deemed to be a constructive retirement of the contingently redeemable share for accounting purposes. The Company records the excess of the fair value paid to repurchase the share over the carrying value of the contingently redeemable share within additional paid-in capital, as the Company has an accumulated deficit.
11. Stock Incentive Plans
The Company grants stock-based compensation to employees and non-employee directors, respectively, under the Fourth Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. (as further amended) (2011 Plan), and the 2012 Director Stock Option Plan of Beacon Holding Inc. (as further amended) (2012 Director Plan), which as of February 3, 2018 authorizes stock awards to be granted for up to 12,068,364 shares and 350,000, respectively. As of February 3, 2018, there were 326,669 and 276,500 shares available for future grant under the 2011 Plan and the 2012 Director Plan, respectively. All grants of equity awards under the 2011 Plan and 2012 Director Plan are conditioned on the recipient executing the MSA.
The MSA also gives the employee stockholders the ability to put vested options back to the Company at fair value upon death or disability while actively employed. These awards have been classified in the consolidated balance sheet as contingently redeemable common stock and have been presented outside of stockholders equity. See Note 10.
Stock option awards are generally granted with 60% of the awarded options vesting over a requisite service period ranging from three to five years and 40% of the awarded options vesting upon achieving pre-determined annual EBITDA targets. The awards contain a vesting catch-up provision on the performance-based portion if cumulative EBITDA targets are achieved. All options have a contractual term of ten years. The Company recognized $2.3 million ($1.4 million post-tax), $11.8 million ($7.1 million post-tax) and $9.1 million
F-23
($5.4 million post-tax) of total stock-based compensation for 2015, 2016 and 2017, respectively. As of February 3, 2018, there was approximately $4.0 million of unrecognized compensation cost, which is expected to be recognized over the next three years.
On March 24, 2016, the Company amended the EBITDA targets on options granted prior to August 31, 2015 to make the performance targets more achievable. In addition, performance based awards that remained unvested due to not achieving EBITDA targets in prior fiscal years would vest upon achieving the new targets. The Company accounted for the modification as an improbable to probable award modification and calculated the total fair value of the modified awards to be $9.0 million, of which $7.2 million was recognized in 2016 and $1.8 million was recognized in 2017.
Presented below is a summary of stock option activity and weighted-average exercise prices for year ended February 3, 2018 (options in thousands):
Number of
securities to be issued upon exercise of outstanding options |
Weighted-
average exercise price |
Weighted-average
remaining contractual life (in years) |
||||||||||
Outstanding, beginning of period |
10,430 | $ | 4.50 | |||||||||
Granted |
350 | $ | 7.00 | |||||||||
Exercised |
(1,491 | ) | $ | 2.67 | ||||||||
Forfeited |
(308 | ) | $ | 4.20 | ||||||||
|
|
|
|
|
|
|||||||
Outstanding, end of period |
8,981 | $ | 4.00 | 6.0 | ||||||||
|
|
|
|
|
|
|||||||
Vested and expected to vest, end of period |
8,981 | $ | 4.00 | 6.0 | ||||||||
|
|
|
|
|
|
|||||||
Exercisable, end of period |
6,965 | $ | 3.48 | 5.4 | ||||||||
|
|
|
|
|
|
The total intrinsic value of options exercised in 2015, 2016 and 2017 was $3.5 million, $1.2 million and $7.6 million, respectively. As of February 3, 2018, the total intrinsic value of options vested and expected to vest was $53.9 million. The Company received a tax benefit related to these option exercises of approximately $1.4 million, $0.5 million and $3.1 million in 2015, 2016 and 2017, respectively.
The fair value of the options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions (no dividends were expected):
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||
Risk-free interest rate range |
1.50% -1.76% | 1.35% -1.98% | 1.40% -1.40% | |||
Expected volatility factor |
35.0% | 35.0% | 35.0% | |||
Weighted-average expected option life (yrs.) |
5.0 | 6.0 | 5.7 | |||
Weighted-average grant-date fair value |
$1.95 | $4.40 | $2.51 |
The Company historically has been a private company and lacks certain company-specific historical and implied volatility information. Expected volatility was determined based on the historical and implied volatilities of comparable public companies. The risk-free interest rate was based on United States Treasury yields in effect at the time of the grant for notes with terms comparable to the awards. The expected option life represents an estimate of the period of time options are expected to remain outstanding based upon an average of the vesting and contractual terms of the options. Forfeitures are recorded as incurred.
F-24
12. Income Taxes
The provision (benefit) for income taxes from continuing operations includes the following (in thousands):
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Federal: |
||||||||||||
Current |
$ | 27,096 | $ | 42,268 | $ | 1,976 | ||||||
Deferred |
(17,400 | ) | (19,457 | ) | (33,219 | ) | ||||||
State: |
||||||||||||
Current |
6,381 | 9,230 | 5,220 | |||||||||
Deferred |
(4,028 | ) | (4,073 | ) | (2,404 | ) | ||||||
|
|
|
|
|
|
|||||||
Total income tax provision (benefit) |
$ | 12,049 | $ | 27,968 | $ | (28,427 | ) | |||||
|
|
|
|
|
|
A reconciliation of the statutory federal income tax rate with the Companys effective income tax rate is as follows:
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Statutory federal income tax rates |
35.0 | % | 35.0 | % | 33.7 | % | ||||||
State income taxes, net of federal tax benefit |
3.9 | 4.5 | 7.5 | |||||||||
Effect of federal rate change |
| | (136.2 | ) | ||||||||
Work opportunity and solar tax credit |
(2.1 | ) | (1.6 | ) | (17.9 | ) | ||||||
Charitable contributions |
(1.4 | ) | (0.3 | ) | (1.0 | ) | ||||||
Prior year adjustments |
0.6 | | (3.2 | ) | ||||||||
Stock options |
| | (4.8 | ) | ||||||||
Other |
(3.2 | ) | 0.9 | 1.2 | ||||||||
|
|
|
|
|
|
|||||||
Effective income tax rate |
32.8 | % | 38.5 | % | (120.7 | )% | ||||||
|
|
|
|
|
|
On December 22, 2017, the TCJA was signed into law. The TCJA includes significant changes to the Internal Revenue Code (the Code) impacting the taxation of business entities. The most significant change in the TCJA that impacts the Company as of February 3, 2018, is the reduction in the corporate federal income tax rate from 35% to 21% for tax years (or portions thereof) beginning after December 31, 2017. This change in the Code from the TCJA had a material impact on the financial statements in 2017.
ASC Topic 740, Income Taxes (ASC 740) requires the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December 22, 2017 for the TCJA. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Companys deferred taxes were re-measured utilizing the new federal income tax rate of 21%.
The US Securities and Exchange Commission (SEC) has recognized the complexity of reflecting the impacts of the TCJA, and on December 22, 2017 issued guidance in Staff Accounting Bulletin No 118 (SAB 118) which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one-year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or buckets) associated with a companys status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax
F-25
reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the TCJA being enacted.
As of February 3, 2018, the Company had not fully completed its accounting for the tax effects of the enactment of the TCJA since a complete assessment will require additional time, information, and resources than currently available to the Company. The Companys provision for income taxes for the fiscal year ended February 3, 2018 is based in part on a reasonable estimate of the effects on its existing deferred tax balances. Specifically, the Company recorded a provisional tax amount of $32.1 million to re-measure certain deferred tax assets and liabilities as a result of the enactment of the TCJA. The Company is still analyzing certain aspects of the TCJA and refining the estimate of the expected reversal of its deferred tax balances. This can potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.
Significant components of the Companys deferred tax assets and liabilities as of January 28, 2017 and February 3, 2018 were as follows (in thousands):
January 28,
2017 |
February 3,
2018 |
|||||||
Deferred tax assets: |
||||||||
Self-insurance reserves |
$ | 39,977 | $ | 27,595 | ||||
Rental step liabilities |
28,501 | 21,336 | ||||||
Compensation and benefits |
24,276 | 15,975 | ||||||
Capital lease and financing obligations |
11,274 | 7,542 | ||||||
Intangible liabilities |
7,338 | 4,408 | ||||||
Closed store obligations |
3,363 | 2,421 | ||||||
Deferred gain amortization |
8,223 | 5,279 | ||||||
Environment clean up reserve |
4,401 | 3,312 | ||||||
Startup costs |
5,977 | 3,675 | ||||||
Lease incentive gain |
4,326 | 3,029 | ||||||
Other |
19,077 | 13,677 | ||||||
|
|
|
|
|||||
Total deferred tax assets |
$ | 156,733 | $ | 108,249 | ||||
|
|
|
|
January 28,
2017 |
February 3,
2018 |
|||||||
Deferred tax liabilities: |
||||||||
Fixed assets |
$ | 116,070 | $ | 79,388 | ||||
Intangible assets |
102,955 | 62,716 | ||||||
Debt costs |
9,190 | 7,728 | ||||||
Capital lease and financings obligations |
10,596 | 7,014 | ||||||
Other |
10,822 | 8,477 | ||||||
|
|
|
|
|||||
Total deferred tax liabilities |
249,633 | 165,323 | ||||||
|
|
|
|
|||||
Net deferred tax liabilities |
$ | (92,900 | ) | $ | (57,074 | ) | ||
|
|
|
|
The ultimate realization of deferred tax assets is dependent upon the Companys ability to generate sufficient taxable income during the periods in which the temporary differences become deductible. The Company has determined that it is more likely than not that the results of future operations and the reversals of existing taxable temporary differences will generate sufficient taxable income to realize the deferred tax assets. Therefore, no valuation allowance has been recorded. In making this determination, the Company considered historical levels of income as well as projections for future periods.
F-26
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
|||||||
Balance at the beginning of the period |
$ | 5,084 | $ | 4,199 | ||||
Additions for tax positions taken during prior years |
| 607 | ||||||
Additions for tax positions taken during the current year |
56 | 43 | ||||||
Settlements |
| (260 | ) | |||||
Lapses in statute of limitations |
(941 | ) | (232 | ) | ||||
|
|
|
|
|||||
Balance at the end of the period |
$ | 4,199 | $ | 4,357 | ||||
|
|
|
|
The total amount of unrecognized tax benefits, reflective of federal tax benefits at January 28, 2017 and February 3, 2018 that, if recognized, would favorably affect the effective tax rate was $3.4 million and $3.9 million, respectively.
As of February 3, 2018, management has determined it is reasonably possible that the total amount of unrecognized tax benefits could decrease within the next twelve months by as much as $3.2 million, due to the expected resolution of state tax audits and the expiration of statute of limitations. The Companys tax years from 2012 forward remain open and are subject to examination by the IRS and various state taxing jurisdictions.
The Company classifies interest expense and any penalties related to income tax uncertainties as a component of income tax expense, which is consistent with the recognition of these items in prior reporting periods. For the periods ended January 30, 2016 and January 28, 2017, the Company had recognized $0.3 million in interest expense in each year. For the period ended February 3, 2018, the Company recognized $0.7 million in interest expense. As of January 28, 2017, and February 3, 2018, the Company had $0.3 million and $1.0 million, respectively, of accrued interest related to income tax uncertainties.
13. Retirement Plans
Under BJs 401(k) savings plans, participating employees may make pretax contributions up to 50% of covered compensation subject to federal limits. BJs matches employee contributions at 50% of the first six percent of covered compensation. The Companys expense under these plans was $8.1 million, $8.7 million and $9.6 million for 2015, 2016 and 2017, respectively.
The Company has a non-contributory defined contribution retirement plan for certain key employees. Under this plan, BJs funds annual retirement contributions for the designated participants on an after-tax basis. For the last two years, the Companys contributions equaled 5% of the participants base salary. Participants become fully vested in their contribution accounts at the end of the fiscal year in which they complete four full fiscal years of service. Pretax expense under this plan was $2.3 million in 2015 and 2016, and $2.4 million in 2017.
14. Postretirement Medical Benefits
The Company has a defined benefit postretirement medical plan which covers employees who retire after age 55 with at least 10 years of service, who are not eligible for Medicare, and who participated in a Company-sponsored medical plan. Spouses and eligible dependents are also covered under the plan. Amounts contributed by retired employees under this plan are based on years of service prior to retirement. The plan was amended in 2015 to limit eligibility to only those who meet the eligibility criteria, of age and years of service, by June 30, 2017. The plan can no longer accept any new enrollees with estimated future benefit payments ending by June 30, 2027.
F-27
The Company recognizes the funded status of the postretirement medical plan in the balance sheet. The funded status represents the difference between the projected benefit liability obligation of the plan and the fair value of the plans assets. Previously unrecognized deferred amounts such as actuarial gains and losses and the impact of plan changes are included in accumulated other comprehensive income. Changes in these amounts in future years are adjusted as they occur through accumulated other comprehensive income. The discount rates presented in the tables below were selected by referencing yields on high quality corporate bonds, using the Citigroup Pension Yield Curve.
Obligation and Funded Status
The change in obligation and funded status of the plan at January 28, 2017 and February 3, 2018 was as follows (in thousands):
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
|||||||
Change in Obligation |
||||||||
Projected benefit obligation at beginning of period |
$ | 6,182 | $ | 5,927 | ||||
Company service cost |
204 | 182 | ||||||
Interest cost |
142 | 147 | ||||||
Plan participants contributions |
302 | 316 | ||||||
Net actuarial gain/(loss) |
590 | (392 | ) | |||||
Benefit payments made directly by the Company |
(1,493 | ) | (820 | ) | ||||
|
|
|
|
|||||
Projected benefit obligation at end of period |
$ | 5,927 | $ | 5,360 | ||||
|
|
|
|
|||||
Change in Plan Assets |
||||||||
Fair value of plan assets at beginning of period |
$ | | $ | | ||||
Company contributions |
1,191 | 504 | ||||||
Plan participants contributions |
302 | 316 | ||||||
Benefit payments made directly by the Company |
(1,493 | ) | (820 | ) | ||||
Fair value of plan assets at end of period |
| | ||||||
|
|
|
|
|||||
Funded status at end of year |
$ | (5,927 | ) | $ | (5,360 | ) | ||
|
|
|
|
The funded status of the plan as of February 3, 2018 is recognized as a net liability in other noncurrent liabilities on the consolidated balance sheet. The Company expects to contribute approximately $0.7 million to the postretirement plan in 2018.
F-28
Components of Net Periodic Benefit Cost and Amounts Recognized in Other Comprehensive Income
Net periodic postretirement benefit cost for the last three fiscal years consists of the following (in thousands):
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Company service cost |
$ | 491 | $ | 204 | $ | 182 | ||||||
Interest cost |
198 | 142 | 147 | |||||||||
|
|
|
|
|
|
|||||||
689 | 346 | 329 | ||||||||||
Net prior service credit amortization |
(229 | ) | (693 | ) | (693 | ) | ||||||
Amortization of unrecognized gain |
(490 | ) | (510 | ) | (250 | ) | ||||||
|
|
|
|
|
|
|||||||
Net periodic postretirement benefit cost |
$ | (30 | ) | $ | (857 | ) | $ | (614 | ) | |||
|
|
|
|
|
|
|||||||
Discount rate used to determine cost |
2.76 | % | 2.45 | % | 2.63 | % | ||||||
Health care cost trend rates |
7.00 | % | 7.00 | % | 7.00 | % |
The change in accumulated other comprehensive income (AOCI), gross of tax, consists of the following (in thousands):
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
|||||||
AOCI at the beginning of period |
$ | (5,675 | ) | $ | (3,882 | ) | ||
Net prior service credit amortization |
693 | 693 | ||||||
Amortization of net actuarial gain |
510 | 250 | ||||||
Net actuarial (gain) loss for the period |
590 | (392 | ) | |||||
|
|
|
|
|||||
AOCI at the end of the period |
$ | (3,882 | ) | $ | (3,331 | ) | ||
|
|
|
|
The Company expects to amortize approximately $0.3 million of net actuarial gain from AOCI into net periodic postretirement benefit cost in 2018.
Assumptions
The following weighted-average assumptions were used to determine the postretirement benefit obligations:
January 28,
2017 |
February 3,
2018 |
|||||||
Discount rate |
2.63 | % | 3.00 | % | ||||
Health care cost trend rate assumed for next year |
7.00 | % | 6.50 | % | ||||
Ultimate trend rate |
5.00 | % | 5.00 | % | ||||
Year that the rate reaches the ultimate trend rate |
2021 | 2024 |
F-29
Assumed health care cost trend rates have a significant effect on the amounts reported for the post-retirement health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects as of February 3, 2018:
Effect of 1% Increase in Medical Trend Rates (in Thousands) |
||||
Postretirement benefit obligation increases by |
$ | 283 | ||
Total of service and interest cost increases by |
20 | |||
Effect of 1% Decrease in Medical Trend Rates (in Thousands) |
||||
Postretirement benefit obligation decreases by |
$ | 268 | ||
Total of service and interest cost decreases by |
19 |
Cash Flows
The estimated future benefit payments for the postretirement health care plan at February 3, 2018 are (in thousands):
Fiscal Year |
Future
minimum payments |
|||
2018 |
$ | 733 | ||
2019 |
800 | |||
2020 |
727 | |||
2021 |
712 | |||
2022 |
734 | |||
2023 to 2027 |
2,717 |
15. Asset Retirement Obligations
The following is a summary of activity relating to the liability for asset retirement obligations, which the Company will incur in connection with the future removal of gasoline tanks and related infrastructure from gasoline stations and are included in other noncurrent liabilities on the consolidated balance sheet (in thousands):
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Balance, beginning of period |
$ | 17,018 | $ | 10,714 | $ | 11,846 | ||||||
Accretion expense |
1,436 | 895 | 959 | |||||||||
Liabilities incurred during the year |
581 | 237 | 193 | |||||||||
Change in estimated liability |
(8,054 | ) | | | ||||||||
Settlement of existing liabilities |
(267 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
Balance, end of period |
$ | 10,714 | $ | 11,846 | $ | 12,998 | ||||||
|
|
|
|
|
|
In 2015, the Company changed its estimate of future cash flows for the removal of the gasoline tanks and other infrastructure at the stations. The revised estimate was based on the actual costs incurred in 2015 and other recent periods to remove these assets. This change in estimate resulted in a reduction to the asset retirement obligation liability of $8.1 million, of which $7.1 million was recorded as a reduction in SG&A expenses and $1.0 million was recorded as a reduction of the related net assets recorded in property and equipment on the consolidated balance sheet.
F-30
16. Accrued Expenses and Other Current Liabilities
The major components of accrued expenses and other current liabilities are as follows (in thousands):
January 28,
2017 |
February 3,
2018 |
|||||||
Deferred membership fee income |
$ | 116,483 | $ | 126,216 | ||||
Employee compensation |
80,903 | 82,037 | ||||||
Insurance reserves |
41,340 | 40,620 | ||||||
Repairs and maintenance |
23,758 | 18,260 | ||||||
Outstanding checks |
21,713 | 34,002 | ||||||
BJs Perks rewards |
21,125 | 22,736 | ||||||
Professional services |
19,062 | 7,626 | ||||||
Fixed asset accruals |
16,915 | 19,405 | ||||||
Accrued interest |
10,192 | 25,428 | ||||||
Sales and use taxes |
10,058 | 16,151 | ||||||
Gift card liability |
10,138 | 10,578 | ||||||
Utilities, advertising and other |
86,010 | 92,708 | ||||||
|
|
|
|
|||||
$ | 457,697 | $ | 495,767 | |||||
|
|
|
|
The following table summarizes membership fee income activity for each of the last two fiscal years (in thousands):
Fiscal Year
Ended January 28, 2017 |
Fiscal Year
Ended February 3, 2018 |
|||||||
Deferred MFI, beginning of period |
$ | 117,806 | $ | 116,483 | ||||
Cash received from members |
253,912 | 268,327 | ||||||
Revenue recognized in earnings |
(255,235 | ) | (258,594 | ) | ||||
|
|
|
|
|||||
Deferred MFI, end of period |
$ | 116,483 | $ | 126,216 | ||||
|
|
|
|
17. Other Noncurrent Liabilities
The major components of other noncurrent liabilities are as follows (in thousands):
January 28,
2017 |
February 3,
2018 |
|||||||
Workers compensation and general liability |
$ | 71,243 | $ | 72,317 | ||||
Rent escalation liability |
70,082 | 76,867 | ||||||
Capital leases and financing obligations |
35,783 | 35,147 | ||||||
Deferred gain on sale leasebacks |
18,929 | 17,639 | ||||||
Above market leases |
18,043 | 15,806 | ||||||
Lease incentives |
15,511 | 14,985 | ||||||
Asset retirement obligations |
11,846 | 12,998 | ||||||
Postretirement medical benefit and other |
30,231 | 21,634 | ||||||
|
|
|
|
|||||
$ | 271,668 | $ | 267,393 | |||||
|
|
|
|
18. Book Overdrafts
Banking arrangements provide for the daily replenishment of vendor payable bank accounts as checks are presented. The balances of checks outstanding in these bank accounts, which represent book overdrafts, totaled
F-31
approximately $62.5 million at January 28, 2017 and approximately $70.0 million at February 3, 2018. Amounts payable to merchandise vendors are included in accounts payable on the consolidated balance sheets and were approximately $40.8 million and $36.0 million at the end of 2016 and 2017, respectively. Amounts payable to non-merchandise vendors are included in accrued expenses and other current liabilities on the consolidated balance sheets and were approximately $21.7 million and $34.0 million at the end of 2016 and 2017, respectively. Changes in these balances are reflected in operating activities in the consolidated statements of cash flows.
19. Derivative Financial Instruments
Interest Rate Caps
Both the Companys First Lien Term Loan and Second Lien Term Loan are subject to interest rates based on LIBOR. The Company had interest rate hedge arrangements that effectively capped a portion of its interest rate exposure on three-month LIBOR at 1.5% through March 31, 2016 (the Interest Rate Caps). The aggregate notional amount of the Interest Rate Caps was $1.7 billion. The Company also had a 2.5% forward cap arrangement covering $1.0 billion notional of the outstanding principal balance of the First and Second Lien Term Loans from April 1, 2016 through September 29, 2017.
Hedge accounting for these arrangements was not elected and therefore all unrealized gains and losses required to value the instruments to fair value were recorded in earnings for the period of the change. Unrealized losses were $2.0 million for 2015, and not material for 2016 and 2017. Unrealized losses were recorded in interest expense in order to value the cap arrangements at fair value.
Interest Rate Swaps
The Company was party to two separate interest rate swap arrangements whereby the Company fixed a portion of its interest rate exposure on one-month LIBOR (the Interest Rate Swaps). Each of these Interest Rate Swaps was for a notional amount of $100.0 million and required us to pay the counterparty a fixed interest rate and receive from the counterparty a floating interest rate based on one-month LIBOR.
On September 9, 2015, $0.3 million was paid to terminate one of the swap agreements that had an original termination date of March 10, 2016. The realized loss of $0.3 million was included in interest expense. The remaining swap agreement expired on March 30, 2016.
The Company elected hedge accounting for the Interest Rate Swap agreements, and as such, the effective portion of the gains and losses was recorded as a component of other comprehensive income. There were $1.0 million of unrealized gains recorded in 2015, and immaterial amounts for 2016 and 2017. Unrealized gains were recorded in other comprehensive income on the Interest Rate Swaps.
20. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The fair values of the Companys derivative instruments are based on quotes received from third-party banks and represent the estimated amount the Company would pay to terminate the agreements taking into consideration current interest rates as well as the creditworthiness of the counterparties. These inputs are considered to be Level 2.
F-32
Financial Assets and Liabilities
The gross carrying amount and fair value of the Companys debt at February 3, 2018 are as follows (in thousands):
Carrying
Amount |
Fair Value | |||||||
First Lien Term Loan |
$ | 1,910,563 | $ | 1,908,174 | ||||
Second Lien Term Loan |
625,000 | 625,000 | ||||||
ABL Facility |
217,000 | 217,000 | ||||||
|
|
|
|
|||||
Total Debt |
$ | 2,752,563 | $ | 2,750,174 | ||||
|
|
|
|
The fair value of debt was determined based on quoted market prices and on borrowing rates available to the Company at February 3, 2018. These inputs are considered to be Level 2.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis. See Note 2 for further information.
The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, and accounts payable approximates their carrying value due to the short-term maturities of these instruments.
21. Earnings Per Share
The table below reconciles basic weighted-average common shares outstanding to diluted weighted-average common shares outstanding for 2015, 2016 and 2017:
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Weighted-average common shares outstanding, used for basic computation |
87,869,243 | 88,163,992 | 88,385,864 | |||||||||
Plus: Incremental shares of potentially dilutive securities |
||||||||||||
Stock options: |
2,372,111 | 2,572,087 | 3,877,713 | |||||||||
|
|
|
|
|
|
|||||||
Weighted-average number of common and dilutive potential common shares outstanding |
90,241,354 | 90,736,079 | 92,263,577 |
Stock options not included in the computation of diluted earnings were 2,681,287, 3,416,707 and 811,272 as of the end of 2015, 2016 and 2017 respectively.
F-33
22. Condensed Financial Information of Registrant (Parent Company Only)
BJS WHOLESALE CLUB HOLDINGS, INC.
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
|||||||
ASSETS |
||||||||
Investment in subsidiaries |
$ | (339,066 | ) | $ | (1,019,419 | ) | ||
|
|
|
|
|||||
Contingently redeemable common stock, par value $0.01; 1,043 and 1,456 shares issued and outstanding: |
8,145 | 10,438 | ||||||
STOCKHOLDERS DEFICIT |
||||||||
Common stock, par value $0.01; 305,000 shares authorized; 87,073 shares issued and outstanding |
871 | 871 | ||||||
Additional paid-in capital |
7,931 | 4,537 | ||||||
Accumulated deficit |
(356,013 | ) | (1,035,265 | ) | ||||
|
|
|
|
|||||
Total contingently redeemable common stock and stockholders deficit |
$ | (339,066 | ) | $ | (1,019,419 | ) | ||
|
|
|
|
BJS WHOLESALE CLUB HOLDINGS, INC.
(PARENT COMPANY ONLY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
Fiscal Year Ended
January 30, 2016 |
Fiscal Year Ended
January 28, 2017 |
Fiscal Year Ended
February 3, 2018 |
||||||||||
Equity in net income of subsidiaries |
$ | 24,104 | $ | 44,224 | $ | 50,301 | ||||||
Net income |
24,104 | 44,224 | 50,301 | |||||||||
Net income per share attributable to common stockholders: |
||||||||||||
Basic |
$ | 0.27 | $ | 0.50 | $ | 0.57 | ||||||
Diluted |
0.26 | 0.48 | 0.54 | |||||||||
Weighted average number of common shares outstanding: |
||||||||||||
Basic |
87,869 | 88,164 | 88,386 | |||||||||
Diluted |
90,241 | 90,736 | 92,264 |
A statement of cash flows has not been presented as BJs Wholesale Club, Holdings, Inc. did not have any cash as of, or for the years ended January 30, 2016, January 28, 2017 or February 3, 2018. See Note 4 for dividends paid to parent.
Basis of Presentation
These condensed parent company-only financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of BJs Wholesale Club
F-34
Holdings, Inc. (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Company. The ability of BJs Wholesale Club Holdings, Inc.s operating subsidiaries to pay dividends may be restricted due to terms of the subsidiaries first and second lien term loans and ABL credit agreements, as defined in Note 5. For example, the covenants of the ABL credit agreement restrict the payment of dividends to, among other exceptions, (i) a $25.0 million general basket, (ii) a basket for unlimited dividends and distributions if there is no event of default, availability under the ABL credit agreement is greater than 15% of the lesser of the commitments under the ABL credit agreement and the borrowing base under the ABL credit agreement for 6 months following such dividend or distribution and, if availability is less than 20% of the lesser of the commitments under the ABL credit agreement and the borrowing base under the ABL credit agreement, a 1.00 to 1.00 (or higher) fixed charge coverage ratio for 12 months after giving effect to such dividend or distribution, and (iii) following this offering, a basket for up to 6.0% per annum of the net proceeds received by or contributed to the borrowers common stock from certain of such public offerings. The covenants of the first and second lien term loan facilities restrict the payment of dividends and distributions to, among other exceptions, (i) a $25.0 million general basket, (ii) a basket for unlimited dividends and distributions if no event of default exists and the pro forma total net leverage ratio is less than or equal to 4.25 to 1.00, (iii) a growing basket based on, among other things, retained excess cash flow subject to no event of default and compliance with a pro forma interest coverage ratio of greater than or equal to 2.00 to 1.00, and (iv) following this offering, a basket for 6% per annum of the net cash proceeds received from such qualified IPO that are contributed to the borrower in cash. As of February 3, 2018, the amount of net income free of such restrictions and available for payment by BJs Wholesale Club Holdings, Inc. as dividends was $50.3 million, and the total amount of restricted net assets of consolidated subsidiaries of BJs Wholesale Club Holdings, Inc. was $144.0 million.
All subsidiaries of BJs Wholesale Club, Inc. are consolidated.
These condensed parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method.
23. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through April 18, 2018, the date at which the consolidated financial statements were available to be issued, and, with respect to the stock split described below, through June 15, 2018.
Stock Split
On June 15, 2018, the Company effected a seven to one stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Companys Contingently Redeemable Common Stock (see Note 10). Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split and adjustment of the contingently redeemable common stock conversion ratios. In connection with the stock split, the Company effected an increase in the number of authorized common shares from 20,000,000 shares to 305,000,000 shares.
24. Subsequent Events (Unaudited)
2018 Incentive Award Plan
On June 13, 2018, the Companys board of directors adopted and its stockholders approved the 2018 Incentive Award Plan (the 2018 Plan). The 2018 Plan provides for the grant of stock options, including incentive stock options, or ISOs, and nonqualified stock options, or NSOs, restricted stock, dividend equivalents, stock payments, restricted stock units, or RSUs, performance shares, other incentive awards, stock appreciation
F-35
rights, or SARs, and cash awards. The number of shares initially reserved for issuance under the 2018 Plan is the sum of (i) 12,162,689 and (ii) any shares which as of the effective date are available for issuance under the 2011 Plan or 2012 Director Plan, or are subject to awards under the 2011 Plan or 2012 Director Plan which are forfeited or lapse unexercised and which following the effective date are not issued under the 2011 Plan or 2012 Director Plan, provided, however, no more than 13,148,058 shares may be issued upon the exercise of incentive stock options. The shares may be authorized but unissued shares, or shares purchased in the open market. If an award under the 2018 Plan, 2011 Plan or 2012 Director Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the 2018 Plan. Additionally, shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award under the 2018 Plan, the 2011 Plan or the 2012 Director Plan will be added to the shares authorized for grant. The following shares may not be used again for grant under the 2018 Plan: (1) shares subject to a stock appreciation right, or SAR, that are not issued in connection with the stock settlement of the SAR on its exercise and (2) shares purchased on the open market with the cash proceeds from the exercise of options under the 2018 Plan, 2011 Plan or 2012 Director Plan.
2018 Employee Stock Purchase Plan
On June 14, 2018, the Companys board of directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan (the ESPP), which will become effective the day prior to the first day of public trading of the companys equity securities offered in this offering. The aggregate number of shares of common stock that will be reserved for issuance under our ESPP will be equal to the sum of (i) 973,014 shares and (ii) an annual increase on the first day of each calendar year beginning in 2019 and ending in 2028 equal to the lesser of (A) 486,507 shares, (B) 0.5% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of shares as determined by the board of directors.
F-36
BJS WHOLESALE CLUB HOLDINGS, INC.
(Amounts in thousands)
(Unaudited)
The accompanying notes are an integral part of the consolidated financial statements.
F-37
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended | ||||||||
November 3, 2018 | October 28, 2017 | |||||||
Net sales |
$ | 3,150,234 | $ | 3,019,389 | ||||
Membership fee income |
71,429 | 64,856 | ||||||
|
|
|
|
|||||
Total revenues |
3,221,663 | 3,084,245 | ||||||
Cost of sales |
2,629,575 | 2,523,297 | ||||||
Selling, general and administrative expenses |
499,554 | 480,285 | ||||||
Preopening expense |
2,207 | 123 | ||||||
|
|
|
|
|||||
Operating income |
90,327 | 80,540 | ||||||
Interest expense, net |
33,029 | 42,321 | ||||||
|
|
|
|
|||||
Income from continuing operations before income taxes |
57,298 | 38,219 | ||||||
Provision for income taxes |
2,730 | 15,346 | ||||||
|
|
|
|
|||||
Income from continuing operations |
54,568 | 22,873 | ||||||
Loss from discontinued operations, net of income taxes |
(137 | ) | (98 | ) | ||||
|
|
|
|
|||||
Net income and total comprehensive income |
$ | 54,431 | $ | 22,775 | ||||
|
|
|
|
|||||
Income per share attributable to common stockholdersbasic: |
||||||||
Income from continuing operations |
$ | 0.40 | $ | 0.26 | ||||
Loss from discontinued operations |
| | ||||||
|
|
|
|
|||||
Net income |
$ | 0.40 | $ | 0.26 | ||||
|
|
|
|
|||||
Income per share attributable to common stockholdersdiluted: |
||||||||
Income from continuing operations |
$ | 0.39 | $ | 0.25 | ||||
Loss from discontinued operations |
| | ||||||
|
|
|
|
|||||
Net income |
$ | 0.39 | $ | 0.25 | ||||
|
|
|
|
|||||
Weighted average number of common shares outstanding: |
||||||||
Basic |
135,018 | 88,442 | ||||||
Diluted |
139,368 | 92,285 |
The accompanying notes are an integral part of the consolidated financial statements.
F-38
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
Thirty-Nine Weeks Ended | ||||||||
November 3, 2018 | October 28, 2017 | |||||||
Net sales |
$ | 9,380,640 | $ | 9,006,022 | ||||
Membership fee income |
209,825 | 192,578 | ||||||
|
|
|
|
|||||
Total revenues |
9,590,465 | 9,198,600 | ||||||
Cost of sales |
7,858,515 | 7,578,790 | ||||||
Selling, general and administrative expenses |
1,534,314 | 1,490,117 | ||||||
Preopening expense |
4,065 | 2,156 | ||||||
|
|
|
|
|||||
Operating income |
193,571 | 127,537 | ||||||
Interest expense, net |
137,787 | 150,211 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations before income taxes |
55,784 | (22,674 | ) | |||||
Benefit for income taxes |
(7,595 | ) | (6,575 | ) | ||||
|
|
|
|
|||||
Income (loss) from continuing operations |
63,379 | (16,099 | ) | |||||
Loss from discontinued operations, net of income taxes |
(425 | ) | (308 | ) | ||||
|
|
|
|
|||||
Net income (loss) and total comprehensive income (loss) |
$ | 62,954 | $ | (16,407 | ) | |||
|
|
|
|
|||||
Income (loss) per share attributable to common stockholdersbasic: |
||||||||
Income (loss) from continuing operations |
$ | 0.58 | $ | (0.18 | ) | |||
Loss from discontinued operations |
| | ||||||
|
|
|
|
|||||
Net income (loss) |
$ | 0.58 | $ | (0.18 | ) | |||
|
|
|
|
|||||
Income (loss) per share attributable to common stockholdersdiluted: |
||||||||
Income (loss) from continuing operations |
$ | 0.55 | $ | (0.18 | ) | |||
Loss from discontinued operations |
| | ||||||
|
|
|
|
|||||
Net income (loss) |
$ | 0.55 | $ | (0.18 | ) | |||
|
|
|
|
|||||
Weighted average number of common shares outstanding: |
||||||||
Basic |
110,162 | 88,363 | ||||||
Diluted |
114,944 | 88,363 |
The accompanying notes are an integral part of the consolidated financial statements.
F-39
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CONTINGENTLY REDEEMABLE COMMON STOCK AND
STOCKHOLDERS DEFICIT
(Amounts in thousands)
(Unaudited)
Contingently
Redeemable Common Stock |
Common Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Income |
Treasury Stock |
Total
Stockholders Deficit |
||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, February 3, 2018 |
1,456 | $ | 10,438 | 87,073 | $ | 871 | $ | 2,883 | $ | (1,036,012 | ) | $ | 2,401 | | $ | | $ | (1,029,857 | ) | |||||||||||||||||||||||
Net income |
| | | | | 62,954 | | | | 62,954 | ||||||||||||||||||||||||||||||||
Common stock issued for public offering, net of related fees |
| | 43,125 | 431 | 685,458 | | | | | 685,889 | ||||||||||||||||||||||||||||||||
Common stock issued under stock incentive plans |
| | 4,396 | 44 | (44 | ) | | | | | | |||||||||||||||||||||||||||||||
Stock reclassification as a result of public offering |
(1,736 | ) | (13,202 | ) | 1,736 | 17 | 13,185 | | | | | 13,202 | ||||||||||||||||||||||||||||||
Common stock issued related to follow-on offering |
| | 1,290 | 13 | (13 | ) | | | | | | |||||||||||||||||||||||||||||||
Common stock repurchased upon vesting of stock awards |
| | | | | | | (782 | ) | (19,109 | ) | (19,109 | ) | |||||||||||||||||||||||||||||
Stock compensation expense |
| | | | 54,746 | | | | | 54,746 | ||||||||||||||||||||||||||||||||
Options exercised prior to public offering |
280 | 2,792 | | | (2,210 | ) | | | | | (2,210 | ) | ||||||||||||||||||||||||||||||
Call of shares prior to public offering |
| (28 | ) | | | (12 | ) | | | | | (12 | ) | |||||||||||||||||||||||||||||
Net shares used to pay tax withholdings upon option exercise |
| | | | (21,900 | ) | | | | | (21,900 | ) | ||||||||||||||||||||||||||||||
Cash received on option exercises |
| | | | 6,041 | | | | | 6,041 | ||||||||||||||||||||||||||||||||
Cumulative effect of change in Accounting principle |
| | | | | (6,362 | ) | | | | (6,362 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance, November 3, 2018 |
| $ | | 137,620 | $ | 1,376 | $ | 738,134 | $ | (979,420 | ) | $ | 2,401 | (782 | ) | $ | (19,109 | ) | $ | (256,618 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-40
BJS WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Thirty-Nine Weeks Ended | ||||||||
November 3, 2018 | October 28, 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income (loss) |
$ | 62,954 | $ | (16,407 | ) | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Charges for discontinued operations |
590 | 523 | ||||||
Depreciation and amortization |
122,434 | 123,404 | ||||||
Amortization of debt issuance costs and accretion of original issue discount |
5,233 | 6,347 | ||||||
Debt extinguishment and refinancing charges |
23,602 | 9,788 | ||||||
Impairment charge for asset held for sale |
3,962 | | ||||||
Other non-cash items, net |
18,714 | (1,334 | ) | |||||
Stock-based compensation expense |
54,746 | 7,649 | ||||||
Deferred income tax provision |
(2,729 | ) | (15,758 | ) | ||||
Increase (decrease) in cash due to changes in: |
||||||||
Accounts receivable |
11,233 | (13,527 | ) | |||||
Merchandise inventories |
(225,972 | ) | (151,718 | ) | ||||
Prepaid expenses and other current assets |
3,793 | (1,429 | ) | |||||
Other assets |
703 | 69 | ||||||
Accounts payable |
231,687 | 182,646 | ||||||
Change in book overdrafts |
(29,057 | ) | (14,604 | ) | ||||
Accrued expenses |
9,355 | (14,480 | ) | |||||
Accrued income taxes |
(33,773 | ) | (3,810 | ) | ||||
Closed store obligations |
(1,802 | ) | (1,737 | ) | ||||
Other noncurrent liabilities |
(4,780 | ) | 4,737 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
250,893 | 100,359 | ||||||
|
|
|
|
|||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Additions to property and equipment, net of disposals |
(103,340 | ) | (86,122 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(103,340 | ) | (86,122 | ) | ||||
|
|
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Proceeds from long term debt |
| 547,544 | ||||||
Payments on long term debt |
(32,323 | ) | (9,625 | ) | ||||
Paydown of First Lien Term Loan and extinguishment of Second Lien Term Loan |
(975,633 | ) | | |||||
Proceeds from ABL Facility |
1,302,000 | 1,276,182 | ||||||
Payments on ABL Facility |
(1,095,000 | ) | (1,069,182 | ) | ||||
Debt issuance costs paid |
(982 | ) | (24,635 | ) | ||||
Dividends paid |
| (735,492 | ) | |||||
Capital lease and financing obligations payments |
(530 | ) | (489 | ) | ||||
Net cash received (paid) from stock option exercises |
(15,277 | ) | 741 | |||||
Acquisition of treasury stock |
(19,109 | ) | | |||||
Proceeds from Initial Public Offering, net of underwriters discount and commission |
690,970 | | ||||||
Payment of Initial Public Offering costs |
(5,081 | ) | | |||||
Other financing activities |
(40 | ) | 500 | |||||
|
|
|
|
|||||
Net cash used in financing activities |
(151,005 | ) | (14,456 | ) | ||||
|
|
|
|
|||||
Net decrease in cash and cash equivalents |
(3,452 | ) | (219 | ) | ||||
Cash and cash equivalents at beginning of period |
34,954 | 31,964 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 31,502 | $ | 31,745 | ||||
|
|
|
|
|||||
Supplemental cash flow information: |
||||||||
Interest paid, net of capitalized interest |
$ | 127,253 | $ | 122,263 | ||||
Income taxes paid |
14,992 | 12,438 | ||||||
Noncash financing and investing activities: |
||||||||
Conversion of contingently redeemable common stock into common stock |
13,202 | | ||||||
Property additions included in accrued expenses |
13,070 | 22,094 |
The accompanying notes are an integral part of the consolidated financial statements.
F-41
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
BJs Wholesale Club Holdings, Inc. (the Company) is a leading warehouse club operator in the Eastern United States. As of November 3, 2018, the Company operated 216 warehouse clubs, 136 of which operate gasoline stations, in 16 states. The Company became a publicly traded entity in connection with its initial public offering (IPO) of common stock and listing on the New York Stock Exchange (NYSE) under the ticker symbol BJ.
The Company follows, and reports based on the National Retail Federations fiscal calendar. The thirteen-week periods ended November 3, 2018 and October 28, 2017 are referred to as the third quarter of 2018 and 2017, respectively.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim financial statements of BJs Wholesale Club Holdings, Inc. are unaudited and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair statement of the Companys financial statements in accordance with generally accepted accounting principles in the United States of America. References to BJs or the Company refer to BJs Wholesale Club Holdings, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.
The consolidated balance sheet as of February 3, 2018 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the quarter ended November 3, 2018 are not necessarily indicative of future results or results to be expected for the full year ending February 2, 2019. The Companys business, in common with the business of retailers generally, is subject to seasonal influences. The Companys sales and operating income have typically been highest in the fourth quarter holiday season and lowest in the first quarter of each fiscal year.
You should read these statements in conjunction with the Companys audited consolidated financial statements and related notes starting in page F-1 of the Companys final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on September 27, 2018 (the Prospectus) in connection with the selling stockholder registered offering described below.
Initial Public Offering
On July 2, 2018, the Company completed its IPO, in which the Company issued and sold 43,125,000 shares of its common stock (including 5,625,000 shares of common stock that were subject to the underwriters option to purchase additional shares) at an initial public offering price of $17.00 per share. The Company received total aggregate proceeds of $685.9 million net of underwriters discounts, commissions and other transaction expenses, which totaled $47.2 million.
On July 2, 2018, the Company used the net proceeds from the IPO to extinguish the total outstanding balance of $623.3 million of its senior secured second lien term loan facility (the Second Lien Term Loan). See Note 6, Debt and Credit Arrangements footnote, for further discussion regarding the Second Lien Term Loan extinguishment.
On October 1, 2018, certain selling stockholders completed the registered sale of 32,200,000 shares of the Companys common stock at a public offering price of $26.00 per share. Of the 32,200,000 shares sold, 4,200,000 shares represented the underwriters exercise of their overallotment option. The Company did not receive any proceeds from this offering or incur underwriters discounts or commissions on the sale. The Company incurred transaction costs of $2.4 million primarily for legal, accounting and printer services related to the offering.
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Stock Split
On June 15, 2018, the Company effected a seven-to-one stock split of its issued and outstanding shares of common stock and proportional adjustment to the existing conversion ratios for each series of the Companys Contingently Redeemable Common Stock (see Note 10). Accordingly, all shares and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split and adjustment of the contingently redeemable common stock conversion ratios.
Deferred Offering Costs
The Company capitalized certain legal, professional, accounting and other third-party fees that were directly associated with the July 2, 2018 IPO as deferred offering costs. Upon the consummation of the IPO, $47.2 million was recorded in stockholders deficit as a reduction of additional paid-in capital.
Recent Accounting Pronouncements
The accounting policies the Company follows are set forth in the Companys audited financial statements for the fiscal year ended February 3, 2018 and included in the Companys final Prospectus. There have been no material changes to these accounting policies, except as noted below for new accounting pronouncements adopted at the beginning of fiscal year 2018.
Revenue from Contracts with Customers (ASC No. 606)
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers (ASC No. 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in U.S. GAAP as of its effective date.
The Company adopted the new guidance at the beginning of fiscal year 2018 using the modified retrospective adoption method and recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of accumulated deficit. The new guidance was only applied to contracts not completed as of the initial date of application. Additionally, any contract that was modified prior to the adoption date has been reflected in the cumulative adjustment giving effect to the aggregate effect of all contract modifications prior to the initial application date. The impact of employing this practical expedient for contract modifications is immaterial. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The cumulative effect of the changes made to the Companys February 3, 2018 balance sheet for the adoption of the standard update was as follows (in thousands):
Balance
as of February 3, 2018 |
Adjustment
for new Standard |
Balance
as of February 4, 2018 |
||||||||||
Prepaid expenses and other current assets |
$ | 81,972 | $ | 7,820 | $ | 89,792 | ||||||
Accrued expenses and other current liabilities |
495,767 | 16,645 | 512,412 | |||||||||
Deferred income taxes |
57,074 | (2,463 | ) | 54,611 | ||||||||
Accumulated deficit |
(1,036,012 | ) | (6,362 | ) | (1,042,374 | ) |
The impact of the adoption of the standards update on the Companys Consolidated Statement of Operations for the thirteen and thirty-nine weeks ended November 3, 2018, resulted in an increase to cost of sales and net sales of $0.2 million and a decrease to cost of sales and net sales of $5.5 million, respectively, due to recording the allowance for returns reserve on a gross basis. The remaining impact of the adoption of the standards on the Companys Consolidated Statement of Operations for the thirteen weeks and thirty-nine weeks ended November 3, 2018 was immaterial.
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The impact of the adoption of the standards update on the Companys Consolidated Balance Sheet as of November 3, 2018 was as follows (in thousands):
As of November 3, 2018 | ||||||||||||
As
Reported |
Balance
without adoption |
Effect of
change |
||||||||||
Prepaid expenses and other current assets |
$ | 78,179 | $ | 71,603 | $ | 6,576 | ||||||
Accrued expenses and other current liabilities |
485,786 | 469,447 | 16,339 | |||||||||
Deferred income taxes |
51,810 | 54,346 | (2,536 | ) | ||||||||
Accumulated deficit |
(979,420 | ) | (972,193 | ) | (7,227 | ) |
Classification of Costs Related to Defined Benefit Pension and Other Post-Retirement Benefit Plans (ASU 2017-07)
At the beginning of fiscal year 2018, the Company adopted ASU No. 2017-07, CompensationRetirement Benefits (Topic 715: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost (ASU 2017-07). ASU 2017-07 changes how employers that sponsor defined benefit pension and/or other post-retirement benefit plans present the net periodic benefit costs in the statement of operations. Under this new guidance, an employers statement of operations presents service cost arising in the current period in the same statement line item as other employee compensation. However, all other components of current period costs related to defined benefit plans, such as prior service costs and actuarial gains and losses, are presented on the statement of operations on a line item outside (or below) operating income. ASU 2017-07 affects only the classification of certain costs on the statement of operations, not the determination of costs. Net periodic pension costs related to the Companys frozen defined benefit pension plan and post-retirement medical benefit plan were not material for the third quarter of fiscal year 2018 or prior periods. The retrospective impact of this standard on our historical financial statements is not material, and future filings will not be restated.
Modifications to Share-based Compensation Awards (ASU 2017-09)
At the beginning of fiscal year 2018, the Company adopted ASU No. 2017-09, Compensation-Stock Compensation Topic 718-Scope of Modification Accounting (ASU 2017-09). ASU 2017-09 clarifies when changes to the terms and conditions of share-based payment awards must be accounted for as modifications. Entities apply the modification accounting guidance if the value, vesting conditions, or classification of an award changes. The Company has not modified any share-based payment awards. Should the Company modify share-based payment awards in the future, it will apply the provisions of ASU 2017-09.
Definition of a Business (ASU 2017-01)
At the beginning of fiscal year 2018, the Company adopted ASU No. 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01). ASU 2017-01 assists entities in determining if acquired assets constitute the acquisition of a business or the acquisition of assets for accounting and reporting purposes. This distinction is important because goodwill can only be recognized in an acquisition of a business. Prior to ASU 2017-01, if revenues were generated immediately before and after a transaction, the acquisition was typically considered a business. Under ASU 2017-01, entities are required to further assess the substance of the processes they acquire. Should the Company commence or complete an acquisition in future periods, it will apply the provisions of ASU 2017-01.
Statement of Cash Flows (ASU 2016-15)
At the beginning of fiscal year 2018, the Company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230) (ASU 2016-15). ASU 2016-15 represents a consensus of the FASBs Emerging Issues Task Force on eight separate issues that, if present, can impact classifications on the statement of cash flows. The guidance
F-44
requires application using a retrospective transition method. The adoption of ASU 2016-15 only impacted the classification of certain insurance proceeds on the Company consolidated statement of cash flows for the first quarter of fiscal year 2017. The Companys insurance proceeds were not material for the third quarter of fiscal year 2018, and the Company had no insurance proceeds for the third quarter of fiscal year 2017. The retrospective impact of this standard on our historical financial statements is not material and future filings will not be restated.
Recently Issued Accounting Pronouncements
Leases (ASU 2016-02)
In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal 2019 and plans to utilize the transition option which does not require application of the guidance to comparative periods in the year of adoption. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be recording right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Companys consolidated balance sheets. The Company is in the process of reviewing current accounting policies, changes to business processes, systems and controls to support adoption of the new standard, which includes implementing a new lease accounting system.
Derivatives and Hedging (ASU 2017-12)
In August 2017, the FASB issued ASU 2017-12 Derivatives and Hedging (Topic 815) . The update allows hedge accounting for new types of interest rate hedges of financial instruments and simplifies the documentation requirements to qualify for hedge accounting. In addition, any gain or loss from hedge ineffectiveness will be reported in the same income statement line with the effective hedge results and the hedged transaction. The updated guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its fourth quarter of fiscal year 2018 and expects the effect of the adoption will not have a material impact on the Companys consolidated financial statements.
Non-Employee Share-Based Compensation (ASU 2018-07)
In June 2018, the FASB issued ASU 2018-07 Improvements to Nonemployee Share-Based Payment Accounting which updates the guidance to CompensationStock Compensation (Topic 718). The updated guidance aligns the measurement and classification guidance for share-based payments to non-employees with the guidance for share-based payments to employees, with certain exceptions. The updated guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018, with early adoption permitted. The Company does not anticipate the updated guidance will have a material impact on its consolidated financial statements.
Fair Value Measurement (ASU 2018-13)
In August 2018, the FASB issued ASU 2018-13 Changes to the Disclosure Requirements for Fair Value Measurement which updates the guidance to Fair Value Measurement (Topic 820). The updated guidance modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The updated guidance is effective for fiscal periods beginning after December 15, 2019 including interim periods within those fiscal years, with early adoption permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop
F-45
Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company does not anticipate the updated guidance will have a material impact on its consolidated financial statements.
Intangibles-Goodwill and Other-Internal-Use Software (ASU 2018-15)
In August 2018, the FASB issued ASU 2018-15 IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40) The update related to accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The update allows entities who are customers in hosting arrangements that are service contracts to apply the existing internal-use software guidance to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The update specifies classification for capitalizing implementation costs and related amortization expense within the financial statements and requires additional disclosures. The updated guidance is effective for fiscal reporting periods, including interim reporting within those periods, beginning after December 15, 2019. Early adoption is permitted and can be applied either retrospectively or prospectively. The Company is currently evaluating the transition methods and the impact of the adoption of this standard on its consolidated financial statements.
3. Revenue Recognition
At the beginning of fiscal year 2018, the Company adopted the provisions of ASC No. 606, Revenue from Contracts with Customers, and related amendments (ASC 606) using the modified retrospective adoption method. The following describes the changes to the Companys accounting policies due to the adoption of ASC 606:
Revenue Recognition
The Company uses the five-step model to recognize revenue:
1) |
Identify the contract with the customer; |
2) |
Identity the performance obligation(s); |
3) |
Determine the transaction price; |
4) |
Allocate the transaction price to each performance obligation if multiple obligations exist; and |
5) |
Recognize the revenue as the performance obligations are satisfied. |
Performance Obligations
The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. The Company recognizes revenue when (or as) it satisfies a performance obligation by transferring control of the goods or services to the customer.
Merchandise sales The Company recognizes sale of merchandise at clubs and gas stations at the point of sale when the customer takes possession of the goods and tenders payment. At point of sale, the performance obligation is satisfied because control of the merchandise transfers to the customer. Sales of merchandise at the Companys clubs and gas stations, excluding sales taxes, represent approximately 97% of the Companys net sales and approximately 95% of the Companys total revenues. Sales taxes are recorded as a liability at the point of sale. Revenue is recorded at the point of sale based on the transaction price on the merchandise tag, net of any applicable discounts, sales taxes and expected refunds. For e-commerce sales, the Company recognizes sales when control of the merchandise is transferred to the customer, which is typically at the shipping point.
F-46
BJs Perks Rewards The Company has a customer loyalty program for which the Company offers points based on dollars spent by the customer. The Company also has a co-branded credit card program which provides members additional reward dollars for certain purchases. The Companys BJs Perks Rewards ® members earn 2% cash back, up to a maximum of $500 per year, on all qualified purchases made with the card at BJs. The Companys My BJs Perks ® Mastercard holders earn 3% or 5% cash back on all qualified purchases made at BJs and 1% or 2% cash back on purchases made with the card outside of BJs. Cash back is in the form of electronic awards issued in $20 increments that may be used online or in-club at the register and expire six months from the date issued.
Earned awards may be redeemed on future purchases made at the Company. The Company recognizes revenue for earned awards when customers redeem such awards as part of a purchase at one of the Companys clubs or the Companys website. The Company accounts for these transactions as multiple element arrangements and allocates the transaction price to separate performance obligations using their relative fair values. The Company includes the fair value of award dollars earned in deferred revenue at the time the award dollars are earned.
Royalty revenue received in connection with the co-brand credit card program is variable consideration and is considered constrained until the card holder makes a purchase.
The Companys total deferred revenue related to the outstanding BJs Perks Rewards was $13.6 million at November 3, 2018. The timing of revenue recognition of these awards dollars is driven by actual customer activities, such as redemptions and expirations. The Company recognized $33.1 million of royalty revenue in the thirty-nine weeks ended November 3, 2018. The Company expects to recognize $9.1 million of the deferred revenue at November 3, 2018 in fiscal year 2018, and the remainder will be recognized in the years thereafter.
Membership The Company charges a membership fee to its customers. That fee allows customers to shop in the Companys clubs, shop on the Companys website and purchase gas at the Companys gas stations for the duration of the membership, which is generally 12 months. Because the Company has the obligation to provide access to its clubs, website and gas stations for the duration of the membership term, the Company recognizes membership fees on a straight-line basis over the life of the membership. The Companys deferred revenue related to membership fees was $127.1 million at November 3, 2018.
Gift Card Programs The Company sells BJs gift cards that allow the customer to redeem the card for future purchases equal to the amount of the original purchase price of the gift card. Revenue from gift card sales is recognized upon redemption of the gift card because the Companys performance obligation to redeem the gift card for merchandise is satisfied when the gift card is redeemed. Historically, the Company has recognized breakage under the remote model, which recognizes breakage income when the likelihood of the customer exercising its remaining rights becomes remote. Under the new guidance, the Company recognizes breakage in proportion to its rate of gift card redemptions. This change in breakage recognition model resulted in a $1.8 million increase to accumulated deficit upon adoption and had an immaterial impact on the Companys results of operations for the thirty-nine weeks ended November 3, 2018. Deferred revenue related to gift cards was $8.8 million immediately after the adoption and $11.0 million at November 3, 2018. The Company recognized $30.8 million of revenue from gift card redemptions in the thirty-nine weeks ended November 3, 2018 and expects to recognize approximately $10.4 million of the third quarter deferral in fiscal year 2018.
Determine the Transaction Price
The transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to estimate variable consideration (if any) and to factor that estimate into the determination of the transaction price. The Company may offer sales incentives to customers, including discounts. For retail transactions, the Company has significant experience with return patterns and relies on this experience to estimate expected returns when determining the transaction price.
F-47
Returns and Refunds The Companys products are generally sold with a right of return and may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The Company records an allowance for returns based on current period revenues and historical returns experience. The Company analyzes actual historical returns, current economic trends and changes in sales volume and acceptance of the Companys products when evaluating the adequacy of the sales returns allowance in any accounting period.
Customer Discounts Discounts given to customers are usually in the form of coupons and instant markdowns and are recognized as redeemed and recorded in contra revenue accounts, as they are part of the transaction price of the merchandise sale. Manufacturer coupons that are available for redemption at all retailers are not reduced from the sale price of merchandise.
Agent Relationships
Ancillary Business Revenue The Company enters into certain agreements with service providers that offer goods and services to the Companys members. These service providers sell goods and services including home improvement services, vision care and cell phones to the Companys customers. In exchange, the Company receives payments in the form of commissions and other fees. The Company evaluates the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations, in determining whether it is appropriate in these arrangements to record the gross amount of merchandise sales and related costs, or the net amount earned as commissions. When the Company is considered the principal in a transaction, revenue is recorded gross; otherwise, revenue is recorded on a net basis. The majority of the Companys ancillary business revenue is recorded on a net basis. Commissions received from these service providers are considered variable consideration and are constrained until the third-party customer makes a purchase from one of the service providers.
Significant Judgments
Standalone Selling Prices For arrangements that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation on a relative standalone selling price basis.
Costs Incurred to Obtain a Contract Incremental costs to obtain contracts are not material to the Company.
Policy Elections
In addition to those previously disclosed, the Company has made the following accounting policy elections and practical expedients:
Portfolio Approach The Company uses the portfolio approach when multiple contracts or performance obligations are involved in the determination of revenue recognition.
Taxes The Company excludes from the transaction price any taxes collected from customers that are remitted to taxing authorities.
Shipping and Handling Charges Charges that are incurred before and after the customer obtains control of goods are deemed to be fulfillment costs.
Time Value of Money The Companys payment terms are less than one year from the transfer of goods. Therefore, the Company does not adjust promised amounts of consideration for the effects of the time value of money.
Disclosure of Remaining Performance Obligations The Company does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations for contracts that are one year or less in
F-48
term. Additionally, the Company does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations when the transaction price is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a good or service that forms part of a series of distinct goods or services.
Disaggregation of Revenue
The Companys club retail operations, which represent substantially all the consolidated total revenues, are the Companys only reportable segment. All the Companys identifiable assets are in the United States. The Company does not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented. The following table summarizes the Companys percentage of sales disaggregated by category for the thirteen and thirty-nine weeks ended November 3, 2018:
Thirteen Weeks
Ended November 3, 2018 |
Thirty-Nine Weeks
Ended November 3, 2018 |
|||
Edible Grocery |
25% | 24% | ||
Perishables |
27% | 28% | ||
Non-Edible Grocery |
22% | 21% | ||
General Merchandise |
12% | 13% | ||
Gasoline and Other Ancillary Services |
14% | 14% |
4. Related Party Transactions
Management Agreement
The Company had a management services agreement with the Sponsors for ongoing consulting and advisory services that terminated upon the consummation of the Companys IPO. The management services agreement provided for the aggregate payment of management fees to the Sponsors (or advisory affiliates thereof) of $8.0 million per year, plus out of pocket expenses. The Company incurred no management fees for the thirteen weeks ended November 3, 2018 and incurred $2.0 million in such fees for the thirteen weeks ended October 28, 2017. The Company expensed $3.3 million and $6.1 million of management fees and out of pocket expenses for the thirty-nine weeks ended November 3, 2018 and October 28, 2017, respectively. Management fees and expenses are reported in Selling, general and administrative expenses (SG&A) in the consolidated statements of operations and comprehensive income.
One of the Companys suppliers, Advantage Solutions Inc., is controlled by affiliates of the Sponsors. Advantage Solutions Inc. is principally a provider of in-club product demonstration and sampling services, and the Company also engages them from time to time to provide ancillary support services, including for example, seasonal gift wrapping, on-floor sales assistance and display maintenance. The Company incurred approximately $11.6 million and $10.6 million of costs payable to Advantage Solutions Inc. for services rendered during the thirteen weeks ended November 3, 2018 and October 28, 2017, respectively. The Company incurred approximately $33.0 million and $29.4 million of costs payable to Advantage Solutions Inc. for services rendered during the thirty-nine weeks ended November 3, 2018 and October 28, 2017, respectively. The demonstration and sampling service fees are fully funded by merchandise vendors who participate in the program.
The Company believes the terms obtained or consideration paid or received, as applicable, in connection with the transactions were comparable to terms available or amounts that would be paid or received, as applicable, in arms-length transactions with unrelated parties.
5. Dividend Recapitalization
On February 3, 2017, the Company distributed a $735.5 million dividend to its common stockholders. In conjunction with the dividend, the Company paid $67.5 million to stock option holders of the Company as
F-49
required under the Fourth Amended and Restated 2011 Stock Option Plan of BJs Wholesale Club Holdings, Inc. (as further amended) (2011 Plan) and the 2012 Director Stock Option Plan of BJs Wholesale Club Holdings, Inc. (as further amended) (2012 Director Plan). The payments to option holders were recorded as compensation expense in SG&A in the first quarter of fiscal 2017. The Company also paid $5.4 million to employees under retention bonus arrangements, of which $4.6 million was accrued in 2016, and the remaining $0.8 million was recognized as compensation expense in the first quarter of 2017. In order to fund these payments, the Company executed the following transactions immediately prior to the payment of the dividend:
|
Refinanced and upsized the senior secured first lien term loan facility (the First Lien Term Loan) to $1,925.0 million, subject to an original issue discount (OID) of $4.8 million. |
|
Refinanced and upsized the existing senior secured second lien term loan facility (the Second Lien Term Loan) to $625.0 million, subject to an OID of $6.2 million. |
|
Amended and restated the senior secured asset based revolving credit and term facility the (ABL Facility) and borrowed $340.0 million. The maturity date on the ABL Facility was extended to February 3, 2022 and there were no changes to the material terms. |
The Company paid accrued outstanding interest of $11.0 million in conjunction with the refinancing.
6. Debt and Credit Arrangements
Debt consisted of the following at November 3, 2018, February 3, 2018 and October 28, 2017 (in thousands):
November 3,
2018 |
February 3,
2018 |
October 28,
2017 |
||||||||||
ABL Facility |
$ | 424,000 | $ | 217,000 | $ | 262,000 | ||||||
First Lien Term Loan |
1,533,890 | 1,910,563 | 1,915,375 | |||||||||
Second Lien Term Loan |
| 625,000 | 625,000 | |||||||||
Unamortized debt discount and debt issuance cost |
(19,107 | ) | (40,153 | ) | (41,745 | ) | ||||||
Less: current portion |
(389,377 | ) | (219,750 | ) | (231,250 | ) | ||||||
|
|
|
|
|
|
|||||||
Long-term debt |
$ | 1,549,406 | $ | 2,492,660 | $ | 2,529,380 | ||||||
|
|
|
|
|
|
ABL Facility
On August 17, 2018, the Company amended its ABL Facility to extend the maturity date from February 3, 2022 to August 17, 2023 and reduce the applicable interest rates and letter of credit fees on the facility. Total fees associated with the refinancing were approximately $1.0 million. The Company capitalized approximately $0.9 million of new debt issuance costs and had immaterial write-offs for previously capitalized debt issuance costs and third-party fees.
The ABL Facility is comprised of a $950.0 million revolving credit facility and a $50.0 million term loan. The ABL Facility is secured on a senior basis by certain liquid assets of the Company and secured on a junior basis by certain fixed assets of the Company. The $50.0 million term loan payment terms are restricted in that the term loan cannot be repaid unless all loans outstanding under the ABL Facility are repaid, and once repaid, cannot be re-borrowed. The availability under the $950.0 million revolving credit facility is restricted based on eligible monthly merchandise inventories and receivables as defined in the facility agreement. As amended, interest on the revolving credit facility is calculated either at LIBOR plus a range of 125 to 175 basis points or a base rate plus a range of 25 to 75 basis points; and interest on the term loan is calculated at LIBOR plus a range of 200 to 250 basis points or a base rate plus a range of 100 to 150 basis points, in all cases based on excess availability. The applicable spread of LIBOR and base rate loans at all levels of excess availability steps down by 12.5 basis points upon achieving total net leverage of 3.00 to 1.00. The ABL Facility also provides a sub-facility for issuances of letters of credit subject to certain fees defined in the ABL Facility agreement. The ABL Facility is subject to various commitment fees during the term of the facility based on utilization of the revolver.
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At November 3, 2018, there was $424.0 million outstanding in loans under the ABL Facility and $45.1 million in outstanding letters of credit. At February 3, 2018, there was $217.0 million outstanding in loans under the ABL Facility and $44.2 million in outstanding letters of credit. At October 28, 2017, there was $262.0 million outstanding in loans under the ABL Facility and $42.0 million in outstanding letters of credit.
As of November 3, 2018, the interest rate on the revolving credit facility was 3.56%, and borrowing availability was $521.6 million. As of February 3, 2018, the interest rate on the revolving credit facility was 3.08%, and borrowing availability was $574.8 million. As of October 28, 2017, the interest rate on the revolving credit facility was 2.74%, and borrowing availability was $666.7 million.
First Lien Term Loan
On February 3, 2017, the Company refinanced its First Lien Term Loan to extend the maturity date to February 3, 2024, increase the First Lien Term Loan borrowings to $1,925.0 million subject to a $4.8 million OID and change the interest rate. Interest on the First Lien Term Loan is calculated either at LIBOR plus a range of 350 to 375 basis points where LIBOR is subject to a floor of zero or an alternative base rate calculation based on the higher of prime, the federal funds effective rate plus 50 basis points or one-month LIBOR plus 100 basis points, plus a range of 250 to 275 basis points.
On August 13, 2018, the Company amended its First Lien Term Loan to reduce the applicable interest rates and reduce the principal on the loan. The Company drew $350.0 million under its ABL Facility to fund the transaction. As amended, the First Lien Term Loan has an initial principal amount of $1,537.7 million and interest is calculated either at LIBOR plus 275 to 300 basis points or a base rate plus 175 to 200 basis points based on the Company achieving a net leverage ratio of 3.00 to 1.00. Total fees associated with the refinancing were approximately $1.8 million. The Company wrote-off $4.4 million of previously capitalized debt issuance costs and OID and expensed $1.8 million of new third-party fees.
At November 3, 2018, the interest rate for the First Lien Term Loan was 5.28%. At February 3, 2018, the interest rate for the First Lien Term Loan was 4.95%. At October 28, 2017, the interest rate for the First Lien Term Loan was 4.99%.
Principal payments on the First Lien Term Loan are required in quarterly installments of 0.25% of the original principal amount with the balance due upon maturity on February 3, 2024. Voluntary prepayments are permitted subject to premium payments. Principal payments must be made on the First Lien Term Loan pursuant to an annual excess cash flow calculation. The First Lien Term Loan is subject to certain affirmative and negative covenants but no financial covenants. It is secured on a senior basis by certain fixed assets of the Company and on a junior basis by certain of liquid assets of the Company.
At November 3, 2018, there was $1,533.9 million outstanding on the First Lien Term Loan. At February 3, 2018, there was $1,910.6 million outstanding on the First Lien Term Loan. At October 28, 2017, there was $1,915.4 million outstanding on the First Lien Term Loan.
Second Lien Term Loan
On February 3, 2017, the Company refinanced its Second Lien Term Loan to extend the maturity date to February 3, 2025 and increased the Second Lien Term Loan borrowings to $625.0 million, subject to a $6.2 million OID. Interest was calculated either at LIBOR plus 750 basis points where LIBOR is subject to a floor of zero or an alternative base rate calculation based on the higher of the prime, the federal funds effective rate plus 50 basis points or one-month LIBOR plus 100 basis points, plus 650 basis points. The Second Lien Term Loan had a maturity date of February 3, 2025 with the entire principal balance due on such maturity date. Voluntary prepayments were permitted. Principal payments had to be made on the Second Lien Term Loan pursuant to an annual excess cash flow calculation. The Second Lien Term Loan was subject to certain affirmative and negative covenants but no financial covenants.
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On July 2, 2018, the Company paid off the Second Lien Term Loan by extinguishing the entire outstanding amount of $623.2 million. In connection with the debt extinguishment, the Company paid a $6.2 million prepayment premium. The Company recorded debt extinguishment charges of $19.2 million in conjunction with the pay down, of which $13.0 million represents the write-off of previously capitalized deferred debt issuance costs associated with the Second Lien Term Loan.
There was a balance of $625.0 million outstanding on the Second Lien Term Loan as of February 3, 2018 and October 28, 2017. At February 3, 2018, the interest rate for the Second Lien Term Loan was 8.95% and at October 28, 2017, the interest rate for the Second Lien Term Loan was 8.74%.
7. Interest Expense, net
The following details the components of interest expense for the periods presented (in thousands):
Thirteen
Weeks Ended |
Thirty-Nine
Weeks Ended |
|||||||||||||||
November 3,
2018 |
October 28,
2017 |
November 3,
2018 |
October 28,
2017 |
|||||||||||||
Interest on debt |
$ | 24,411 | $ | 40,537 | $ | 104,173 | $ | 119,849 | ||||||||
Interest on capital lease and financing obligations |
1,037 | 1,050 | 3,122 | 3,158 | ||||||||||||
Debt issuance costs amortization |
696 | 950 | 2,626 | 3,045 | ||||||||||||
Original issue discount amortization |
627 | 1,272 | 2,606 | 3,302 | ||||||||||||
Loss on debt extinguishment and charges related to debt refinancing |
6,246 | (1,402 | ) | 25,405 | 21,061 | |||||||||||
Capitalized interest |
12 | (86 | ) | (145 | ) | (204 | ) | |||||||||
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Interest expense, net |
$ | 33,029 | $ | 42,321 | $ | 137,787 | $ | 150,211 | ||||||||
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8. Commitments and Contingencies
The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse impact on its financial position, results of operations, or cash flows.
9. Discontinued Operations
The following tables summarize the activity for the thirty-nine weeks ended November 3, 2018 and October 28, 2017 associated with our discontinued operations, which consist of closing two BJs clubs in January 2011 (in thousands):
Discontinued Operations-Thirty-Nine Weeks ended November 3, 2018 | ||||||||||||||||||||
Liabilities
February 3, 2018 |
Charges |
Payments/
Increase |
Liabilities
November 3, 2018 |
Cumulative
Charges to Date, Net |
||||||||||||||||
BJs clubs |
$ | 8,683 | $ | 590 | $ | (1,803 | ) | $ | 7,470 | $ | 60,189 | |||||||||
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Current portion |
$ | 2,122 | $ | 2,126 | ||||||||||||||||
Long-term portion |
6,561 | 5,344 | ||||||||||||||||||
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Total |
$ | 8,683 | $ | 7,470 | ||||||||||||||||
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Discontinued Operations-Thirty-Nine Weeks ended October 28, 2017 | ||||||||||||||||
Liabilities
January 28, 2017 |
Charges |
Payments/
Increase |
Liabilities
October 28, 2017 |
|||||||||||||
BJs clubs |
$ | 8,271 | $ | 523 | $ | (1,737 | ) | $ | 7,057 | |||||||
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Current portion |
$ | 2,013 | $ | 2,013 | ||||||||||||
Long-term portion |
6,258 | 5,044 | ||||||||||||||
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Total |
$ | 8,271 | $ | 7,057 | ||||||||||||
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The charges for BJs lease obligations are based on the present value of rent liabilities under the relevant leases, including estimated real estate taxes and common area maintenance charges, reduced by estimated income from the potential subleasing of these properties. Charges in both periods represent accretion expense on lease obligations.
On June 12, 2014, the Company entered into a sublease agreement for one of the clubs that pays a portion of BJs lease obligation through the end of the lease term. The rental income received from that sublease is included in the payments referenced in the tables above. During the second half of 2017, the Company experienced a lapse in the sublease rental income which resulted in the eviction of the current tenant. In January 2018, the Company entered into a new sublease agreement for the same property with a new tenant who will continue to pay a portion of the BJs lease obligation through the end of the lease term. The interruption of sublease income in the second half of 2017, and adjustment of future rental income from the new sublease agreement signed in January 2018, resulted in an additional charge of $0.7 million to the reserve. In addition, the Company lowered the estimated sublease income at the other existing closed location which resulted in an additional charge of $1.4 million to the reserve.
10. Contingently Redeemable Common Stock
The Company and certain current and former management employees were party to the Management Stockholders Agreement (the MSA). All grants of equity by the Company to the employees were governed by the terms of individual equity award agreements and the MSA through the date of the Companys IPO. The MSA specified certain transfer restrictions, tag-along and drag-along rights, put and call rights and various other rights and restrictions applicable to any equity held by employees. The call right permitted the Company to repurchase common stock held by an employee stockholder following a minimum holding period and prior to the expiration of a specified time period following the later of the employees termination of employment with the Company or acquisition of the common stock. If the employees employment was terminated for cause, the repurchase price was the least of (a) the fair market value as of the repurchase date, (b) the fair market value at issuance or (c) the price paid by the employee stockholder for such shares. If the employees employment was terminated other than for cause, the repurchase price was the fair market value as of the repurchase date.
The MSA also gave the employees the ability to put any shares back to the Company at fair market value upon death or disability while actively employed. As neither death nor disability while actively employed was a certainty, the shares of common stock held by the employee stockholders were considered to be contingently redeemable common stock and were accounted for outside of stockholders equity until the shares of common stock were either repurchased by the Company or the put right terminated. The contingently redeemable common stock was recorded at fair value of the common stock as of the date of issuance. Because meeting the contingency was not probable, the contingently redeemable $10.4 million and $9.0 million of mezzanine equity was recorded on the Companys consolidated balance sheet related to these agreements as of February 3, 2018 and October 28, 2017, respectively. Both the Companys repurchase right, and the employee stockholders put right terminated upon the consummation of the Companys IPO and reclassified all contingently redeemable common stock to common stock on the Companys consolidated balance sheet. As of November 3, 2018, there was no contingently redeemable common stock outstanding in the Companys balance sheet.
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When the Company exercised its call option to repurchase shares classified outside of stockholders equity, it is deemed to be a constructive retirement of the contingently redeemable share for accounting purposes. The Company recorded the excess of the fair value paid to repurchase the share over the carrying value of the contingently redeemable share within additional paid-in capital, as the Company has an accumulated deficit.
11. Stock Incentive Plans
On June 13, 2018, the Companys Board of Directors adopted, and its stockholders approved, the 2018 Incentive Award Plan (the 2018 Plan). The 2018 Plan provides for the grant of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, performance shares, other incentive awards, stock appreciation rights, and cash awards. Prior to the adoption of the 2018 Plan, the Company granted stock-based compensation to employees and non-employee directors, respectively, under the 2011 Plan and the 2012 Director Plan. No further grants will be made under 2011 Plan or the 2012 Director Plan.
The 2018 Plan authorizes the issuance of 13,148,058 shares, including 985,369 shares that were reserved but not issued under the 2011 Plan and the 2012 Director Plan. If an award under the 2018 Plan, 2011 Plan or 2012 Director Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the 2018 Plan. Additionally, shares tendered or withheld to satisfy grant or exercise price, or tax withholding obligations associated with an award under the 2018 Plan, the 2011 Plan or the 2012 Director Plan will be added to the shares authorized for grant under the 2018 Plan. The following shares may not be used again for grant under the 2018 Plan: (1) shares subject to a stock appreciation right, that are not issued in connection with the stock settlement of the SAR on its exercise and (2) shares purchased on the open market with the cash proceeds from the exercise of options under the 2018 Plan, 2011 Plan or 2012 Director Plan.
The following table summarizes the Companys stock award activity during the thirty-nine weeks ended November 3, 2018 (shares in thousands):
Stock Options | Restricted Stock |
Restricted Stock
Units |
||||||||||||||||||||||
Shares |
Weighted
Average Exercise Price |
Shares |
Weighted
Average Grant Date Fair Value |
Shares |
Weighted
Average Grant Date Fair Value |
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Outstanding, February 3, 2018 |
8,981 | $ | 4.00 | | $ | | $ | |||||||||||||||||
Granted |
2,791 | 16.39 | 2,960 | 22.04 | 13 | 27.85 | ||||||||||||||||||
Exercised/vested |
(4,602 | ) | 2.90 | (1,954 | ) | 22.00 | | | ||||||||||||||||
Forfeited/canceled |
(364 | ) | 6.10 | (3 | ) | 22.00 | | | ||||||||||||||||
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Outstanding, November 3, 2018 |
6,806 | $ | 9.71 | 1,003 | $ | 22.13 | 13 | $ | 27.85 |
Stock-based compensation expense was $2.6 million and $1.9 million for the thirteen weeks ended November 3, 2018 and October 28, 2017, respectively. Stock-based compensation expense was $54.7 million and $7.6 million for the thirty-nine weeks ended November 3, 2018 and October 28, 2017, respectively.
In connection with the IPO, the Board of Directors granted the following new awards to certain employees under the 2018 Plan, subject to vesting: stock options to purchase 2,510 shares of common stock, with an exercise price of $17.00 and restricted stock in the amount of 2,943 shares with a grant date fair value of $22.00, equivalent to the closing price of the first day of trading.
Treasury Shares Acquired on Restricted Stock Awards
Upon the vesting of 1,954 restricted stock awards, 782 shares in this years thirty-nine weeks ended November 3, 2018 were reacquired to satisfy employees tax withholding obligations. These reacquired shares
F-54
were recorded as $19.1 million of treasury stock and accordingly, reduced the number of common shares outstanding by 782 shares.
12. Income Taxes
The effective income tax rate is based on estimated income from continuing operations for the year as well as discrete adjustments, if any, in the applicable quarterly periods. The Company projects the estimated annual effective tax rate for the year to be approximately 27%, excluding the tax effect of discrete events. Potential discrete adjustments include tax charges or benefits related to stock-based compensation, changes in tax legislation, settlements of tax audits and changes in uncertain tax positions, among others.
The Companys effective income tax rate from continuing operations was 4.8% and 40.2% for the thirteen weeks ended November 3, 2018 and October 28, 2017, respectively. The Companys effective income tax rate from continuing operations was a rate of (13.6)% and 29.0% for the thirty-nine weeks ended November 3, 2018 and October 28, 2017, respectively. The decrease in the effective tax rate for both the thirteen and thirty-nine weeks ended November 3, 2018, is due to stock option windfall tax benefits recorded in the current year; a reduction in the U.S. federal statutory tax rate from 35.0% to 21.0% as part of the U.S. Tax Cuts and Jobs Act (the TCJA) that was enacted in December 2017, the net reduction of liabilities for uncertain tax positions primarily resulting from the expiration of the statute of limitations; and an adjustment to the remeasurement of the Companys deferred tax balances due to TCJA. The Company previously recorded a provisional tax benefit amount of $32.1 million related to the re-measurement of the Companys deferred tax balances in its consolidated financial statements for the year ended February 3, 2018 due to the TCJA. Any changes to the provisional amounts are recorded in the period in which the adjustments are made. These changes could arise from additional analysis, changes in assumptions or interpretations the Company has made, additional guidance that may be issued and actions the Company may take as a result of the TCJA. In the thirteen weeks ended November 3, 2018, the Company recorded an additional $2.4 million tax benefit as a result of updating certain estimates and filing its federal tax return for the year ended February 3, 2018.
13. Postretirement Medical Benefits
Net periodic benefit cost recognized for the thirteen weeks and thirty-nine weeks ended November 3, 2018 and October 28, 2017 consists of the following (in thousands):
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 3,
2018 |
October 28,
2017 |
November 3,
2018 |
October 28,
2017 |
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Company service cost |
$ | 36 | $ | 46 | $ | 108 | $ | 137 | ||||||||
Interest cost |
38 | 37 | 113 | 111 | ||||||||||||
Net prior service credit amortization |
(174 | ) | (174 | ) | (521 | ) | (521 | ) | ||||||||
Amortization of unrecognized gain |
(79 | ) | (63 | ) | (237 | ) | (188 | ) | ||||||||
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Net periodic postretirement benefit cost |
$ | (179 | ) | $ | (154 | ) | $ | (537 | ) | $ | (461 | ) | ||||
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The components of net periodic benefit cost are included in the line item SG&A in the income statement.
14. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or exit price. The inputs used to measure fair value are generally classified into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
F-55
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not observable for the asset or liability.
Level 3: Unobservable inputs for the asset or liability.
The fair value of the Companys debt was determined based on comparable quoted market prices and on borrowing rates available to the Company at November 3, 2018, February 3, 2018 and October 28, 2017. These inputs are considered to be Level 2. At November 3, 2018, the fair value of total debt was $1,959.3 million compared to a carrying value of $1,957.9 million. At February 3, 2018, the fair value of total debt was $2,750.2 million compared to a carrying value of $2,752.6 million. At October 28, 2017, the fair value of total debt was $2,721.6 million compared to a carrying value of $2,802.4 million.
15. Earnings Per Share
The following table summarizes the computation of basic and diluted net income per share attributable to common stockholders:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 3,
2018 |
October 28,
2017 |
November 3,
2018 |
October 28,
2017 |
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Weighted-average common shares outstanding, used for basic computation |
135,018,238 | 88,442,052 | 110,162,167 | 88,363,302 | ||||||||||||
Plus: Incremental shares of potentially dilutive securities |
4,349,499 | 3,842,956 | 4,781,572 | | ||||||||||||
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Weighted-average number of common and dilutive potential common shares outstanding |
139,367,737 | 92,285,008 | 114,943,739 | 88,363,302 |
Stock options of 652,743 and 1,569,949 were not included in the computation of diluted earnings for the thirteen and thirty-nine weeks ended November 3, 2018, respectively, because their inclusion would have been anti-dilutive. Similarly, stock options of 1,663,426 and 2,017,695 were excluded from the computation of diluted earnings for the thirteen and thirty-nine weeks ended October 28, 2017, respectively.
16. Assets Held for Sale
The Companys club in Hooksett, New Hampshire was relocated to Manchester, New Hampshire in March 2018.
In fiscal year 2018, the Company recorded an impairment loss of $4.0 million on the fixed assets of the Hooksett, New Hampshire location to lower the carrying value of the fixed assets to its estimated fair value less cost to sell. This charge is included within SG&A in the income statement.
On August 15, 2018, the Company closed on the sale of the Hooksett, New Hampshire location and received net proceeds of $6.1 million in exchange for all assets related to the club. The Company has no future obligations, outstanding liens or continuing involvement with this location.
17. Subsequent Events
On November 13, 2018, the Company entered into three forward starting interest rate swaps. Through these arrangements, which are effective on February 13, 2019, the Company has fixed the LIBOR component of $1,200.0 million of its floating rate debt at a rate of approximately 3.0%. The Company intends to elect hedge accounting for the agreements and expects the derivatives to be highly effective.
F-56
Up to 58,345,145 Shares
BJs Wholesale Club Holdings, Inc.
Common Stock
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth all the costs and expenses, other than underwriting discounts, payable in connection with the sale from time to time of the shares of common stock being registered hereby. Except as otherwise noted, the registrant will pay all of the costs and expenses set forth in the following table. All amounts shown below are estimates, except the SEC registration fee, the FINRA filing fee:
Amount | ||||
SEC registration fee |
$ | 189,514 | ||
FINRA filing fee |
* | |||
Accounting fees and expenses |
200,000 | |||
Legal fees and expenses |
100,000 | |||
Transfer agent and registrar fees |
20,000 | |||
Printing and engraving expenses |
95,000 | |||
Miscellaneous expenses |
50,000 | |||
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Total |
$ | 654,514 | ||
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* |
These fees are calculated based on the amount of securities offered and accordingly cannot be estimated at this time. To the extent required, any applicable prospectus supplement will set forth the estimated aggregate amount of expenses payable in respect of any offering of securities. |
Item 14. Indemnification of Directors and Officers
Section 102 of the Delaware law allows a corporation to eliminate the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except in cases where the director breached his or her duty of loyalty to the corporation or its stockholders, failed to act in good faith, engaged in intentional misconduct or a knowing violation of the law, willfully or negligently authorized the unlawful payment of a dividend or approved an unlawful stock redemption or repurchase or obtained an improper personal benefit. Our certificate of incorporation contains a provision which eliminates directors personal liability as set forth above.
Our certificate of incorporation and bylaws provide in effect that we shall indemnify our directors and officers to the extent permitted by the Delaware law. Section 145 of the Delaware law provides that a Delaware corporation has the power to indemnify its directors, officers, employees and agents in certain circumstances. Subsection (a) of Section 145 of the Delaware law empowers a corporation to indemnify any director, officer, employee or agent, or former director, officer, employee or agent, who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding provided that such director, officer, employee or agent acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, provided that such director, officer, employee or agent had no reasonable cause to believe that his or her conduct was unlawful.
Subsection (b) of Section 145 of the Delaware law empowers a corporation to indemnify any director, officer, employee or agent, or former director, officer, employee or agent, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth
II-1
above, against expenses (including attorneys fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer or employee of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by him or her in connection therewith; that indemnification provided by Section 145 shall not be deemed exclusive of any other rights to which the party seeking indemnification may be entitled; and the corporation is empowered to purchase and maintain insurance on behalf of a director, officer, employee or agent of the corporation against any liability asserted against him or her or incurred by him or her in any such capacity or arising out of his or her status as such whether or not the corporation would have the power to indemnify him or her against such liabilities under Section 145; and that, unless indemnification is ordered by a court, the determination that indemnification under subsections (a) and (b) of Section 145 is proper because the director, officer, employee or agent has met the applicable standard of conduct under such subsections shall be made by (1) a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders.
We have in effect insurance policies for general officers and directors liability insurance covering all of our officers and directors. In addition, we have entered into indemnification agreements with our directors and officers. These indemnification agreements may require us, among other things, to indemnify each such director or officer for certain expenses, including attorneys fees, judgments, fines and settlement amounts incurred by such director or officer in any action or proceeding arising out of his or her service as one of our directors or officers.
Item 15. Recent Sales of Unregistered Securities
During the three years preceding the filing of this registration statement, we have issued the following securities which were not registered under the Securities Act of 1933, as amended (the Securities Act):
During the past three years, we issued options to purchase an aggregate of 4,152,750 shares of common stock under the 2011 Stock Option Plan and the Director Stock Option Plan.
The issuances of the securities in the transactions described above were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Rules 506 and 701 promulgated thereunder. The securities were issued directly by the registrant and did not involve a public offering or general solicitation. The recipients of such securities represented their intentions to acquire the securities for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
See the Exhibit Index attached to this registration statement, which is incorporated by reference herein.
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(b) Financial Statement Schedules.
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or the notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the registrant may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the registrant and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the registrant and will be governed by the final adjudication of such issue.
The undersigned hereby undertakes:
1. |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
a. |
to include any prospectus required by Section 10(a)(3) of the registrant; |
b. |
to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and |
c. |
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
2. |
That for the purpose of determining any liability under the registrant, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
3. |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
4. |
That, for the purpose of determining liability under the registrant to any purchaser: |
a. |
if the registrant is relying on Rule 430B: |
i. |
each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
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ii. |
each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the registrant shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
b. |
if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; |
5. |
To deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information; |
6. |
That for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and |
7. |
that for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
II-4
INDEX TO EXHIBITS
II-5
II-6
Exhibit No. |
Exhibit Description |
|
23.1 | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm. | |
23.2 | Consent of Latham & Watkins LLP (included in Exhibit 5.1). | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Linkbase Document |
|
Confidential treatment of certain provisions has been granted by the SEC. |
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Westborough, Commonwealth of Massachusetts, on this 8 th day of February, 2019.
BJS WHOLESALE CLUB HOLDINGS, INC. | ||||
By: |
/s/ Robert W. Eddy |
|||
Name: | Robert W. Eddy | |||
Title: |
Executive Vice President, Chief
Financial and Administrative Officer |
II-8
POWER OF ATTORNEY
We, the undersigned officers and directors of BJs Wholesale Club Holdings, Inc. hereby severally constitute and appoint Robert W. Eddy and Graham N. Luce, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature |
Title |
Date |
||
/s/ Christopher J. Baldwin Christopher J. Baldwin |
Chairman, President, Chief Executive Officer and Director (principal executive officer) |
February 8, 2019 | ||
/s/ Robert W. Eddy Robert W. Eddy |
Executive Vice President, Chief Financial
(principal financial officer) |
February 8, 2019 | ||
/s/ Laura L. Felice Laura L. Felice |
Senior Vice President, Controller (principal accounting officer) |
February 8, 2019 | ||
/s/ Cameron Breitner Cameron Breitner |
Director | February 8, 2019 | ||
/s/ Nishad Chande Nishad Chande |
Director | February 8, 2019 | ||
/s/ J. Kristofer Galashan J. Kristofer Galashan |
Director | February 8, 2019 | ||
/s/ Lars Haegg Lars Haegg |
Director | February 8, 2019 | ||
/s/ Ken Parent Ken Parent |
Director | February 8, 2019 | ||
/s/ Christopher H. Peterson Christopher H. Peterson |
Director | February 8, 2019 |
II-9
Signature |
Title |
Date |
||
/s/ Jonathan A. Seiffer Jonathan A. Seiffer |
Director | February 8, 2019 | ||
/s/ Robert Steele Robert Steele |
Director | February 8, 2019 | ||
/s/ Judith L. Werthauser Judith L. Werthauser |
Director | February 8, 2019 |
II-10
Exhibit 1.1
BJs Wholesale Club Holdings, Inc.
Common Stock, par value $0.01 per share
Underwriting Agreement
[]
[]
As representatives (the Representatives) of the several Underwriters named in Schedule I hereto
c/o []
Ladies and Gentlemen:
The stockholders named in Schedules II-A and II-B hereto (each such stockholder a Selling Stockholder and together, the Selling Stockholders) propose, subject to the terms and conditions stated in this agreement (this Agreement), to sell, severally and not jointly, to the Underwriters named in Schedule I hereto (the Underwriters) an aggregate of [] shares of common stock (the [Firm] Shares), par value $0.01 per share (Stock), of BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company) [and, at the election of the Underwriters, up to [] additional shares of Stock (the Optional Shares)] [(the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the Shares)].
1. (i) The Company represents and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement including a prospectus (the Base Prospectus) on Form S-1 (File No. 333-[]) (the Initial Registration Statement) in respect of the Shares has been filed with the Securities and Exchange Commission (the Commission); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a Rule 462(b) Registration Statement), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the Act), which became effective upon filing, no other document with respect to the Initial Registration Statement has been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose or pursuant to Section 8A of the Act has been initiated or, to the knowledge of the Company, threatened by the Commission (the Base Prospectus included in the Initial Registration Statement and each preliminary prospectus supplement filed with the Commission pursuant to Rule 424 of the rules and regulations of the Commission under the Act is hereinafter called a Preliminary Prospectus; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus or final prospectus supplement (including the Base Prospectus) filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A or Rule 430C under the Act to be part of the Initial Registration Statement, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the Registration Statement; the Base Prospectus or, if applicable, the most recent preliminary prospectus (including the Base Prospectus) relating to the Shares that was filed with the Commission pursuant to Rule 424(b) under the Act prior to the Applicable Time (as defined in Section 1(i)(c) hereof) is hereinafter called the Pricing Prospectus; and the final prospectus or final prospectus supplement (including the Base Prospectus), in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the Prospectus; and any issuer free writing prospectus as defined in Rule 433 under the Act relating to the Shares is hereinafter called an Issuer Free Writing Prospectus);
1
(b) (A) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and (B) each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with the Underwriter Information (as defined in Section 9(c) of this Agreement);
(c) For the purposes of this Agreement, the Applicable Time is [] [a.m./p.m.] (Eastern time) on the date of this Agreement. The Pricing Prospectus, as supplemented by the information listed on Schedule IV(b) hereto, taken together (collectively, the Pricing Disclosure Package), as of the Applicable Time, did not, and as of each Time of Delivery (as defined in Section 4(a) of this Agreement) will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Disclosure Package, as of the Applicable Time, did not, and as of each Time of Delivery will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to statements or omissions made in reliance upon and in conformity with the Underwriter Information;
(d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement and any amendment or supplement thereto, as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, and as of each Time of Delivery, contain an untrue statement of a material fact or omit to state a material fact (in the case of the Registration Statement, required to be stated therein or) necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with the Underwriter Information;
(e) Neither the Company nor any of its subsidiaries has, since the date of the latest audited financial statements included in the Pricing Prospectus, (i) sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court, governmental, regulatory or arbitrator action, order or decree or (ii) entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole, in each case, otherwise than as set forth or contemplated in the Pricing Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Pricing Prospectus, there has not been (x) any change in the capital stock (other than as a result of the exercise, if any, of stock options or the settlement of other equity-based awards described as outstanding in, and the award, if any, of stock options, restricted stock or other equity-based awards in the ordinary course of business pursuant to the Companys employee benefit plans that are described in the Pricing Prospectus and the Prospectus) or long-term debt of the Company or any of its
2
subsidiaries, (y) any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock or (z) any Material Adverse Effect (as defined below) except, in each case as set forth or contemplated in the Pricing Prospectus; as used in this Agreement, Material Adverse Effect shall mean any material adverse change or effect, or any development involving a prospective material adverse change or effect, in or affecting (i) the business, properties, general affairs, management, financial position, stockholders equity or results of operations of the Company and its subsidiaries, taken as a whole, or (ii) the ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated in the Pricing Prospectus and the Prospectus;
(f) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Pricing Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, and neither the Company nor any subsidiary has notice of any claim affecting or questioning the rights of the Company or any subsidiary to the continued possession of the property or buildings held under any lease, in each case with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries;
(g) Each of the Company and each of its subsidiaries has been (i) duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the Pricing Prospectus, and (ii) duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except, in the case of this clause (ii), where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and the Company does not own or control, directly or indirectly, any corporation, association or other entity other than (i) the subsidiaries listed in Exhibit 21.1 to the Registration Statement, and (ii) any corporation, association or entity which if considered in the aggregate as a single subsidiary would not constitute a significant subsidiary (as such term is defined in Item 1-02(w) of Regulation S-X) as of the end of the Companys most recent year.
(h) The Company has an authorized capitalization as set forth in the Pricing Prospectus and the Prospectus and all of the issued shares of capital stock of the Company, including the Shares to be sold by the Selling Stockholders, have been duly and validly authorized and issued and are fully paid and non-assessable and conform to the descriptions thereof contained in the Pricing Prospectus and the Prospectus; except as described in the Pricing Prospectus, there are no outstanding instruments convertible into or exchangeable for, or warrants, rights or options to purchase from the Company, or obligations of the Company to issue, any shares of capital stock or other equity interests of the Company or any of its subsidiaries; and all of the issued shares of capital stock or other equity interests, as applicable, of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and (except, in the case of any foreign subsidiary, for directors qualifying shares and except as otherwise set forth in the Pricing Prospectus) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for such liens or encumbrances described in the Pricing Prospectus and the Prospectus;
(i) The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated in this Agreement and the Pricing Prospectus will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, as applicable, (A) any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any
3
of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except, in the case of this clause (A) for such conflicts, defaults, breaches, or violations that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (B) the certificate of incorporation or by-laws (or other applicable organizational document) of the Company or any of its subsidiaries, or (C) any statute or law applicable to the Company or any of its subsidiaries or any of their properties or any judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties, except in the case of this clause (C) for such violations that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the sale of the Shares, the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated by this Agreement and the Pricing Prospectus, except such as have been obtained under the Act, the approval by the Financial Industry Regulatory Authority, Inc. (FINRA) of the underwriting terms and arrangements and such consents, approvals, authorizations, registrations or qualifications as may be required under the New York Stock Exchange (the Exchange) or state securities laws or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters;
(j) Neither the Company nor any of its subsidiaries is (i) in violation of its certificate of incorporation or by-laws (or other applicable organizational document), (ii) in violation of any statute or law applicable to the Company or any of its subsidiaries or any of their properties or any judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties, or (iii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their properties or assets may be bound, except, in the case of the foregoing clauses (ii) and (iii), for such violations or defaults as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(k) The statements set forth in the Pricing Prospectus and the Prospectus under the caption Description of Capital Stock, insofar as they purport to constitute a summary of the terms of the Stock, under the caption Material U.S. Federal Tax Considerations for Non-U.S. Holders of Our Common Stock, insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects;
(l) Other than as set forth in the Pricing Prospectus, there are no legal, governmental or regulatory proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries (or such officer or director), would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and, to the knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities, regulatory organizations or others;
(m) The Company is not an investment company, as such term is defined in the Investment Company Act of 1940, as amended (the Investment Company Act);
(n) At the time of filing the Initial Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or any offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Act) of the Shares, and at the date hereof, the Company was not and is not an ineligible issuer, as defined under Rule 405 under the Act;
(o) PricewaterhouseCoopers LLP, who have certified the financial statements of the Company and its subsidiaries, is an independent public accounting firm with respect to the Company within the meaning of the Act and the rules and regulations of the Commission thereunder and the Public Company Accounting Oversight Board;
4
(p) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) that (i) complies with the applicable requirements of the Exchange Act, (ii) has been designed by the Companys principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and (iii) is sufficient to provide reasonable assurance that (A) transactions are executed in accordance with managements general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C) access to assets is permitted only in accordance with managements general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and the Companys internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting (whether or not remediated);
(q) Since the date of the latest audited financial statements included in the Pricing Prospectus, there has been no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting;
(r) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the applicable requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Companys principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective;
(s) The Company has the full right, power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the actions contemplated hereby and in the Pricing Prospectus; all action required to be taken for the due and proper authorization, execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated in this Agreement and the Pricing Prospectus has been duly and validly taken; and this Agreement has been duly executed and delivered by the Company;
(t) None of the Company or any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, controlled affiliate or other person acting on behalf of the Company or any of its subsidiaries has (i) made, offered, promised or authorized any unlawful contribution, gift, entertainment or other unlawful expense; (ii) made, offered, promised or authorized any direct or indirect unlawful payment; or (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, the Bribery Act 2010 of the United Kingdom or any other applicable anti-bribery or anti-corruption law; and the Company and, to the knowledge of the Company, its controlled affiliates have conducted their businesses in compliance with applicable anti-bribery and anti-corruption laws and have instituted and maintain policies and procedures designed to promote and achieve compliance with such laws and with the representation and warranty contained herein;
(u) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record keeping and reporting requirements of the Bank Secrecy Act of 1970, as amended by the USA PATRIOT ACT of 2001, and the rules and regulations promulgated thereunder, and the anti-money laundering laws of all jurisdictions in which the Company and its subsidiaries conduct business, the rules and regulations thereunder and any
5
related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency having jurisdiction over the Company or any of its subsidiaries (collectively, the Money Laundering Laws) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened;
(v) None of the Company or any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, controlled affiliate or other person acting on behalf of the Company or any of its subsidiaries is, or is owned or controlled by one or more individuals or entities that is, (i) currently the subject or the target of any sanctions administered or enforced by the U.S. Government, including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) or the U.S. Department of State and including, without limitation, designation as a specially designated national or blocked person, the European Union, Her Majestys Treasury, the United Nations Security Council, or other relevant sanctions authority (collectively, Sanctions) or (ii) located, organized or resident in a country or territory that is the subject or target of Sanctions; the Company will not directly or indirectly use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund or facilitate any activities of or business with any person, or in any country or territory, that, at the time of such funding, is the subject or the target of Sanctions or (ii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions; the Company, its subsidiaries, and to the knowledge of the Company, their respective directors, officers, agents, employees, controlled affiliates and other persons acting on behalf of the Company are in compliance with applicable Sanctions in all material respects; and for the past five years, the Company and its subsidiaries have not knowingly engaged in and are not now knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned country;
(w) The financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus, together with the related schedules and notes, present fairly in all material respects the financial position of the Company and its subsidiaries at the dates indicated and the statement of operations, stockholders equity and cash flows of the Company and its subsidiaries for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) applied on a consistent basis throughout the periods involved; and the pro forma financial information and the related notes thereto included in the Registration Statement, the Pricing Prospectus and the Prospectus have been prepared in accordance with the applicable requirements of the Securities Act and the assumptions underlying such pro forma financial information are reasonable and are set forth in the Registration Statement, the Pricing Prospectus and the Prospectus;
(x) Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, with respect to each employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA)) that is sponsored, maintained or contributed to by the Company (each, a Plan), (i) no failure to satisfy the minimum funding standards of Sections 302 and 303 of ERISA or Section 412 of the Internal Revenue Code of 1986, as amended from time to time (the Code), or other event of the kind described in Section 4043(c) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred; (ii) to the extent required by applicable law to be funded, the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (iii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred, excluding transactions effected pursuant to a statutory or administrative exemption and (iv) each Plan is in material compliance with applicable law, including, without limitation, ERISA and the Code. Except as would not have a Material Adverse Effect,
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neither the Company nor, to the knowledge of the Company, any trade or business, whether or not incorporated, that, together with the Company, would be deemed to be a single employer within the meaning of Section 4001(b) of ERISA or Section 414 of the Code (an ERISA Affiliate) has incurred or reasonably expects to incur any liability with respect to any Plan under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default). Except as would not have a Material Adverse Effect, neither the Company nor any of its subsidiaries has any material liability in respect of any post-employment health, medical or life insurance benefits for former, current or future employees of the Company or any subsidiary, except as required to avoid excise tax under Section 4980B of the Code or any similar law. None of the Company, any of its subsidiaries or, except as would not reasonably be expected to have a Material Adverse Effect to the Company or any of its subsidiaries, any of its ERISA Affiliates, sponsors, contributes to or has any obligation to contribute to any multiemployer pension plan (as defined in Section 3(37) of ERISA). Each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service upon which it can rely and, to the knowledge of the Company, nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. To the knowledge of the Company, there is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental agency or any foreign regulatory agency with respect to any Plan that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect to the Company or its subsidiaries;
(y) The Company and its subsidiaries have paid all federal, state, local and foreign taxes and filed all tax returns required to be paid or filed through the date hereof, except for any taxes which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP, or where the failure to pay or file would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and except as otherwise disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, there is no tax deficiency that has been asserted in writing against the Company or any of its subsidiaries or any of their respective properties or assets, except for such deficiencies as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(z) The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations (collectively, the Government Licenses) issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the Registration Statement, the Pricing Prospectus and the Prospectus, except where the failure to possess or make the same would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received notice of any revocation or modification (or proceedings related thereto) of any Governmental License or has any reason to believe that any Governmental License will not be renewed in the ordinary course, in each case, except where such revocation, modification, or non-renewal would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(aa) The Company and its subsidiaries own or possess, or believe they can acquire on commercially reasonable terms, adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other intellectual property rights (collectively, Intellectual Property) necessary for the conduct of their respective businesses as currently conducted and as currently
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proposed to be conducted, and the conduct of their respective businesses do not and will not conflict in any material respect with any such rights of others. The Company and its subsidiaries have not received any notice of any claim of infringement, misappropriation or conflict with any such rights of others in connection with its Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, in each case, which would reasonably be expected to have a Material Adverse Effect;
(bb) The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are customary for businesses such as the Companys and its subsidiaries; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business;
(cc) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (i) the Company and its subsidiaries and their respective operations and facilities are in compliance with applicable Environmental Laws, which compliance includes, without limitation, obtaining and being in compliance with any permits, licenses or other governmental authorizations or approvals, and having made all filings and provided all financial assurances and notices, required for the ownership and operation of the business (as currently conducted and as currently proposed to be conducted), properties and facilities of the Company or its subsidiaries under applicable Environmental Laws; (ii) neither the Company nor any of its subsidiaries has received any written communication, whether from a governmental authority, citizens group, employee or other person, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law; (iii) there is no claim, action or cause of action based on or pursuant to any Environmental Law filed with a court or governmental authority pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, (iv) there is no governmental investigation with respect to which the Company or any of its subsidiaries has received written notice regarding any actual or potential liability on the part of the Company pursuant to any Environmental Law, and neither the Company nor any of its subsidiaries has received written notice by any person or entity alleging any such liability; (v) neither the Company nor any of its subsidiaries is conducting or paying for, in whole or in part, any investigation, response or other corrective action pursuant to any Environmental Law at any site or facility, nor is any of them subject or a party to any order, judgment or decree issued by a governmental authority, which imposes any obligation or liability under any Environmental Law; (vi) neither the Company nor any of its subsidiaries owns, occupies, or operates any real property contaminated with Materials of Environmental Concern; (vii) to the knowledge of the Company, no lien, charge, encumbrance or restriction has been recorded pursuant to any Environmental Law with respect to any assets, facility or property owned, operated or leased by the Company or any of its subsidiaries; and (viii) to the knowledge of the Company there are no past or present actions, activities, circumstances, conditions or occurrences, including, without limitation, the Release or threatened Release of any Material of Environmental Concern, that could reasonably be expected to result in a violation of or liability under any Environmental Law on the part of the Company or any of its subsidiaries.
For purposes of this Agreement, Environment means ambient air, indoor air, surface water, groundwater, drinking water, soil, surface and subsurface strata, and natural resources such as wetlands, flora and fauna. Environmental Laws means, to the extent applicable to the Company or any of its subsidiaries, all federal, state, local and foreign laws or regulations, ordinances, codes, orders, decrees, judgments, other requirement or rule of law (including applicable principles of common law) and injunctions issued, promulgated or entered thereunder, relating to pollution or protection of the Environment or human health, including without limitation, those relating to (i) the Release or threatened Release of Materials of Environmental Concern; and (ii) the manufacture, processing, distribution, use,
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generation, treatment, storage, transport, handling or recycling of Materials of Environmental Concern. Materials of Environmental Concern means any substance, material, or waste, compound, or constituent, in any form, that is defined, listed or regulated as hazardous or toxic (or terms of similar regulatory intent or meaning) under Environmental Law, including, without limitation, petroleum and petroleum by-products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls, and toxic mold. Release means any release, spill, emission, discharge, deposit, disposal, leaking, pumping, pouring, dumping, emptying, migrating, injection or leaching into the Environment;
(dd) The Company has operated its business in a manner compliant in all material respects with all privacy, data security and data protection industry and regulatory guidance, laws and regulations applicable to the Companys collection, handling, usage, disclosure, storage and processing of all personally identifiable data (Personal Data), along with all other data, including without limitation, IP addresses, mobile device identifiers and website usage activity data (Device and Activity Data) and confidential, sensitive or proprietary business information (Business Data); the Company has implemented and maintains policies and procedures reasonably designed to ensure material compliance with all applicable privacy, data security and data protection industry and regulatory guidance, laws and regulations; the Company requires third parties to which it provides any Personal Data, Device and Activity Data or Business Data to maintain the privacy and security of such Personal Data, Device and Activity Data or Business Data; and the Company has not experienced any security incident that has compromised the privacy and/or security of any Personal Data, Device and Activity Data, or Business Data, except as would not reasonably be expected to have a Material Adverse Effect;
(ee) No labor disturbance by or dispute with employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened, and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of its or its subsidiaries principal suppliers, contractors or customers, in each case, except as would not reasonably be expected to have a Material Adverse Effect;
(ff) Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, no person has the right to require the Company or any of its subsidiaries to register any securities for sale under the Act by reason of the filing of the Registration Statement with the Commission or the and sale of the Shares;
(gg) No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries, on the other, that is required by the Act to be described in the Registration Statement and the Prospectus and that is not so described in such documents and in the Pricing Prospectus;
(hh) No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Prospectus or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith;
(ii) Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in the Registration Statement, the Pricing Disclosure Package and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects and, to the extent required, the Company has obtained the written consent to the use of such data from such sources;
(jj) Neither the Company nor any of its affiliates has taken, directly or indirectly, any action which is designed to or which has constituted or which would reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares;
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(kk) There is and has been no failure on the part of the Company or, to the knowledge of the Company, any of the Companys directors or officers, in their capacities as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated in connection therewith (the Sarbanes-Oxley Act), applicable as of the effective date of the Registration Statement, including Section 402 related to loans and Sections 302 and 906 related to certifications;
(ll) There are no debt securities or preferred stock issued, or guaranteed by, the Company or any of its subsidiaries that are rated by a nationally recognized statistical rating organization, as such term is defined in Section 3(a)(62) of the Exchange Act; and
(mm) Neither the Company or any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company or any of its subsidiaries or any Underwriter for a brokerage commission, finders fee or like payment in connection with the offering and sale of the Shares.
(ii) Each of the Selling Stockholders, severally and not jointly, represents and warrants to, and agrees with, each of the Underwriters and the Company that:
(a) All consents, approvals, authorizations and orders necessary for the execution and delivery by such Selling Stockholder of this Agreement and the Power of Attorney and the Custody Agreement referred to below, as applicable, and for the sale and delivery of the Shares to be sold by such Selling Stockholder hereunder, have been obtained, except for such consents, approvals, authorizations and orders as would not, individually or in the aggregate, reasonably be expected to materially impact such Selling Stockholders ability to perform its obligations under this Agreement; and such Selling Stockholder has full right, power and authority to enter into this Agreement, the Power-of-Attorney and the Custody Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling Stockholder hereunder;
(b) The sale of the Shares to be sold by such Selling Stockholder hereunder and the compliance by such Selling Stockholder with this Agreement, the Power of Attorney and the Custody Agreement, as applicable, and the consummation of the transactions herein and therein contemplated will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which such Selling Stockholder is a party or by which such Selling Stockholder is bound or to which any of the property or assets of such Selling Stockholder is subject, (ii) if such Selling Stockholder is a corporation or partnership, result in any violation of the provisions of the Articles of Incorporation and By-Laws or the Partnership Agreement, as applicable, of such Selling Stockholder or (iii) conflict with or result in a breach or violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over such Selling Stockholder or any of its subsidiaries or any property or assets of such Selling Stockholder, except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, reasonably be expected to materially impact such Selling Stockholders ability to perform its obligations under this Agreement; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental body or agency is required for the performance by such Selling Stockholder of its obligations under this Agreement, the Power of Attorney and the Custody Agreement, as applicable, and the consummation by such Selling Stockholder of the transactions contemplated by this Agreement, the Power of Attorney and the Custody Agreement, as applicable, in connection with the Shares to be sold by such Selling Stockholder hereunder, except the registration under the Act of the Shares, the approval by FINRA of the underwriting terms and arrangements, the approval for listing on the Exchange and such consents, approvals, authorizations, orders, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters;
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(c) Such Selling Stockholder has, and immediately prior to each Time of Delivery (as defined in Section 4 hereof) such Selling Stockholder will have, good and valid title to, or a valid security entitlement within the meaning of Section 8-501 of the New York Uniform Commercial Code in respect of, the Shares to be sold by such Selling Stockholder hereunder at such Time of Delivery, free and clear of all liens, encumbrances, equities or claims; and, upon delivery of such Shares and payment therefor pursuant hereto, good and valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, will pass to the several Underwriters;
(d) Such Selling Stockholder, to the extent not a natural person, has been duly organized and is validly existing and in good standing under the laws of its respective jurisdiction of organization;
(e) On or prior to the date of the Pricing Prospectus, such Selling Stockholder has executed and delivered to the Underwriters an agreement substantially in the form of Exhibit C hereto;
(f) Such Selling Stockholder has not taken, directly or indirectly, any action which is designed to or which has constituted or which would reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares;
(g) The Registration Statement and Preliminary Prospectus did, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided that such representations and warranties set forth in this paragraph (g) shall apply, with respect to a Selling Stockholder, only to statements or omissions made in the Registration Statement, the Preliminary Prospectus, the Prospectus and any further amendments or supplements to the Registration Statement, the Preliminary Prospectus and the Prospectus that are made in reliance upon and in conformity with written information furnished to the Company by such Selling Stockholder in writing expressly for use therein; provided, further, that it is agreed that such information furnished by such Selling Stockholder to the Company consists only of (A) the legal name, address and the number of Shares owned by such Selling Stockholder before and after the offering, (B) the other information with respect to such Selling Stockholder (excluding percentages) which appear in the table (and corresponding footnotes) under the caption Principal and Selling Stockholders, and (C) with respect to any Selling Stockholder that is an executive officer of the Company or a member of the Companys board of directors, the biography of such Selling Stockholder set forth under the caption Management in the Pricing Prospectus or the Prospectus (with respect to such Selling Stockholder, the Selling Stockholder Information );
(h) In order to document the Underwriters compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions herein contemplated, such Selling Stockholder will deliver to you prior to or at the First Time of Delivery a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof);
(i) Certificates in negotiable form or book entry security entitlements representing all of the Shares to be sold by each Selling Stockholder named in Schedule II-B hereunder have been placed in custody under a Custody Agreement, in the form heretofore furnished to you (the Custody Agreement), duly executed and delivered by such Selling Stockholder to American Stock Transfer & Trust Company, LLC, as custodian (the Custodian), and such Selling Stockholder has duly executed and delivered a Power of Attorney, in the form heretofore furnished to you (the Power of Attorney), appointing the persons
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indicated in Schedule II-B hereto, and each of them, as such Selling Stockholders attorneys-in-fact (the Attorneys-in-Fact) with authority to execute and deliver this Agreement on behalf of such Selling Stockholder, to determine the purchase price to be paid by the Underwriters to the Selling Stockholders as provided in Section 2 hereof, to authorize the delivery of the Shares to be sold by such Selling Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder in connection with the transactions contemplated by this Agreement and the Custody Agreement; each of the Custody Agreement and Power of Attorney constitutes a legal, valid and binding obligation of such Selling Stockholder and enforceable in accordance with their terms.
(j) The Shares represented by the certificates held in custody for each Selling Stockholder named in Schedule II-B hereto under the Custody Agreement are subject to the interests of the Underwriters hereunder; the arrangements made by such Selling Stockholder for such custody, and the appointment by such Selling Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable; the obligations of the Selling Stockholders hereunder shall not be terminated by operation of law, whether by the death or incapacity of any individual Selling Stockholder or, in the case of an estate or trust, by the death or incapacity of any executor or trustee or the termination of such estate or trust, or in the case of a partnership or corporation, by the dissolution of such partnership or corporation, or by the occurrence of any other event; if any individual Selling Stockholder or any such executor or trustee should die or become incapacitated, or if any such estate or trust should be terminated, or if any such partnership or corporation should be dissolved, or if any other such event should occur, before the delivery of the Shares to be sold by such Selling Stockholder hereunder, certificates representing the Shares to be sold by such Selling Stockholder hereunder shall be delivered by or on behalf of the Selling Stockholders named in Schedule II-B hereto in accordance with the terms and conditions of this Agreement and of the Custody Agreements; and actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as if such death, incapacity, termination, dissolution or other event had not occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of such death, incapacity, termination, dissolution or other event;
(k) Such Selling Stockholder is not (i) an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), (ii) a plan or account subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the Code) or (iii) an entity deemed to hold plan assets of any such plan or account under Section 3(42) of ERISA, 29 C.F.R. 2510.3-101, or otherwise; and
(l) Such Selling Stockholder will not directly or indirectly use the proceeds of the offering of the Shares to be sold by such Selling Stockholder hereunder, or lend, contribute or otherwise make available such proceeds, to any subsidiary, joint venture partner or other person or entity (i) to fund or facilitate any activities of or business with any person, or in any country or territory, that, at the time of such funding, is the subject or the target of Sanctions or (ii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
(iii) Each of the Selling Stockholders listed on Schedule II-B, severally and not jointly, represents and warrants to each of the Underwriters that such Selling Stockholder is not prompted by any material non-public information concerning the Company or any of its subsidiaries that is not disclosed in the Pricing Prospectus to sell its Shares pursuant to this Agreement.
2. Subject to the terms and conditions herein set forth, [(a)] each of the Selling Stockholders agrees, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from each of the Selling Stockholders, at a purchase price per share of $[], the number of [Firm] Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Shares to be sold by each of the Selling Stockholders as set forth
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opposite their respective names in Schedules II-A and II-B hereto by a fraction, the numerator of which is the aggregate number of Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Shares to be purchased by all of the Underwriters from all of the Selling Stockholders hereunder and [(b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, each of the Selling Stockholders agrees, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from each of the Selling Stockholders, at the purchase price per share set forth in clause (a) of this Section 2 ( provided that the purchase price per Optional Share shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the [Firm] Shares but not payable on the Optional Shares), that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder.]
[The Selling Stockholders, as and to the extent indicated in Schedules II-A and II-B hereto, hereby grant, severally and not jointly, to the Underwriters the right to purchase at their election up to [] Optional Shares, at the purchase price per share set forth in the paragraph above ( provided that the purchase price per Optional Share shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the [Firm] Shares but not payable on the Optional Shares). Any such election to purchase Optional Shares shall be made in proportion to the maximum number of Optional Shares to be sold by all Selling Stockholders as set forth in Schedules II-A and II-B hereto. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Company, the Selling Stockholders named in Schedule II-A hereto and the Attorneys-in-Fact, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you, the Company, the Selling Stockholders named in Schedule II-A hereto and the Attorneys-in-Fact otherwise agree in writing, earlier than two or later than ten business days after the date of such notice.]
3. Upon the authorization by you of the release of the [Firm] Shares, the several Underwriters propose to offer the [Firm] Shares for sale upon the terms and conditions set forth in the Pricing Prospectus and the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in book-entry form, and in such authorized denominations and registered in such names as the Representatives may request upon at least forty-eight hours prior notice to the Company and the Selling Stockholders shall be delivered by or on behalf of the Selling Stockholders to the Representatives, through the facilities of the Depository Trust Company (DTC), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Custodian to the Representatives at least forty-eight hours in advance. The Company and the Selling Stockholders will cause the certificates, if any, representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the Designated Office). The time and date of such delivery and payment shall be, with respect to the [Firm] Shares, 9:30 a.m., New York City time, on [] or such other time and date as the Representatives, the Company, the Selling Stockholders named in Schedule II-A hereto and the Attorneys-in-Fact may agree upon in writing[, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by the Representatives in the written notice given by the Representatives of the Underwriters election to purchase such Optional Shares, or such other time and date as the Representatives, the Company, the Selling Stockholders named in Schedule II-
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A hereto and the Attorneys-in-Fact may agree upon in writing.] Such time and date for delivery of the [Firm] Shares is herein called the First Time of Delivery, such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the Second Time of Delivery, and each such time and date for delivery is herein called a Time of Delivery.
(b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 8 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 8(m) hereof, will be delivered at the offices of [] (the Closing Location), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 4:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, New York Business Day shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commissions close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish you with copies thereof; to file promptly all material required to be filed by the Company with the Commission pursuant to Rule 433(d) under the Act; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Shares, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose or pursuant to Section 8A of the Act, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Shares or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may reasonably request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation, subject itself to taxation in any jurisdiction if it is not otherwise so subject or file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement (or such other time as may be agreed to between the Representatives and the Company) and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus
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or the Pricing Disclosure Package, as applicable, as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) or the Pricing Disclosure Package, as applicable, is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus or the Pricing Disclosure Package, as applicable, in order to comply with the Act, to promptly notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Prospectus or the Pricing Disclosure Package, as applicable, or a supplement to the Prospectus or the Pricing Disclosure Package, as applicable, which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable (which may be satisfied by filing such information with the Commissions Electronic Data Gathering Analysis and Retrieval System (EDGAR)), but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and including the date [] days after the date of the Prospectus (the Lock-Up Period), not to (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any securities of the Company that are substantially similar to the Shares, including but not limited to any options or warrants to purchase shares of Stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or otherwise (other than (A) the Shares to be sold hereunder, (B) any shares of Stock issued upon the conversion or exchange of convertible or exchangeable securities outstanding as of the date of this Agreement and described in the Pricing Prospectus, (C) any shares of Stock issued (including upon the exercise of options) and grants of stock options, restricted stock units, or other equity based awards pursuant to any employee stock option plan, equity incentive plan, or any other employee benefit plan described in the Pricing Prospectus, or (D) a registration statement on Form S-8 relating to any employee benefit plan described in the Pricing Prospectus), without prior written consent of [], provided that (x) no public announcement of a confidential or non-public submission of a registration statement with the Commission shall be made, (y) the Company shall provide written notice to the Representatives at least two business days prior to any confidential or non-public submission and (z) no such confidential or non-public submission shall become a publicly available registration statement during the Lock-Up Period;
(f) So long as the Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act, to furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; provided , however , that the Company may satisfy the requirements of this subsection by filing such information on EDGAR;
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(g) During a period of three years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; provided , however , that the Company may satisfy the requirements of this subsection by filing such information on EDGAR;
(h) To not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Stock;
(i) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 3a(c) of the Commissions Informal and Other Procedures (17 C.F.R. 202.3a);
(j) Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Companys trademarks, servicemarks and corporate logo for use on the website, if any, operated by such Underwriter for the purpose of facilitating the on-line offering of the Shares (the License); provided , however , that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred; and
(k) To deliver to the Representatives, on the date of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of additional documentation necessary to comply with 31 CFR § 1010.230, and the Company undertakes to provide such additional supporting documentation as the Representatives may reasonably request in connection with the verification of the foregoing certification.
6. (a) The Company represents and agrees that, without the prior consent of the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus as defined in Rule 405 under the Act; each Selling Stockholder represents and agrees that, without the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus; each Underwriter represents and agrees that, without the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus required to be filed with the Commission; any such free writing prospectus the use of which has been consented to by the Company and the Representatives is listed on Schedule IV(a) and Schedule IV(b) hereto;
(b) The Company has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending; and
(c) The Company agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Company
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will give prompt notice thereof to the Representatives and, if requested by the Representatives, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided , however , that this representation and warranty shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with the Underwriter Information.
7. (a) The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Companys counsel and accountants in connection with the registration of the Shares under the Act and all other fees and expenses in connection with the preparation, printing, reproduction and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky Memorandum; (iv) all fees and expenses in connection with listing the Shares on the Exchange; (v) the filing fees incident to, and the reasonable fees and disbursements of counsel for the Underwriters in connection with, any required review by FINRA of the terms of the sale of the Shares; (vi) the cost of preparing stock certificates, if applicable; (vii) the cost and charges of any transfer agent or registrar; (viii) all expenses of the Company in connection with any road show presentation to potential investors ( provided that any expenses or costs associated with any chartered plane used in connection with any road show presentation to potential investors will be paid 50% by the Company and 50% by the Underwriters; provided further that no plane shall be chartered pursuant to this clause (viii) without the Companys prior written consent); (ix) the fees, disbursements and expenses of [], as counsel for the Selling Stockholders named in Schedule II-B; and (x) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section; provided that the fees and expenses of counsel for the Underwriters to be reimbursed by the Company pursuant to clauses (iii) and (v) hereof shall not exceed $[] in the aggregate.
(b) Each Selling Stockholder, severally and not jointly, covenants and agrees with the several Underwriters that such Selling Stockholder will pay or cause to be paid all costs and expenses incident to the performance of such Selling Stockholders obligations with respect to: (i) any fees and expenses of counsel for such Selling Stockholder other than the fees of [] being paid for by the Company and; (ii) all expenses and taxes incident to the sale and delivery of the Shares to be sold by such Selling Stockholder to the Underwriters hereunder, provided that in connection with this clause (iii) the Representatives agree to pay New York State stock transfer tax, and each Selling Stockholder agrees to reimburse the Representatives for associated carrying costs if such tax payment is not rebated on the day of payment and for any portion of such tax payment not rebated.
(c) Each Selling Stockholder will deliver to the Representatives: (i) on the date of this Agreement, to the extent applicable to such Selling Stockholder, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of any additional documentation necessary to comply with 31 CFR § 1010.230 and (ii) prior to or at the Closing Date, a properly completed and executed Internal Revenue Service (IRS) Form W-9 or an IRS Form W-8, as appropriate, together with all required attachments to such form.
(d) Except as provided in this Section, and Sections 9 and 12 hereof, it is understood that the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make.
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8. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Selling Stockholders herein are, at and as of the Applicable Time and such Time of Delivery, true and correct, the condition that the Company and the Selling Stockholders shall have performed all of its respective obligations hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; all material required to be filed by the Company pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Company has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 p.m., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose or pursuant to Section 8A of the Act shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of the Pricing Prospectus, Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction;
(b) [], counsel for the Underwriters, shall have furnished to you their written opinion and 10b-5 statement, dated such Time of Delivery, in form and substance reasonably satisfactory to you and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;
(c) Latham & Watkins LLP, counsel for the Company, shall have furnished to you their written opinion and 10b-5 statement, dated such Time of Delivery, in form and substance reasonably satisfactory to you, to the effect set forth in Exhibit A hereof;
(d) Latham & Watkins LLP, counsel for the Selling Stockholders in Schedule II-A hereto, shall have furnished to you their written opinion with respect to each of the Selling Stockholders for whom they are acting as counsel, dated such Time of Delivery, in form and substance reasonably satisfactory to you, to the effect set forth in Exhibit B-1 hereof;
(e) [], counsel for the Selling Stockholders in Schedule II-B hereto, shall have furnished to you their written opinion with respect to each of the Selling Stockholders for whom they are acting as counsel, dated such Time of Delivery, in form and substance reasonably satisfactory to you, to the effect set forth in Exhibit B-2 hereof;
(f) On the date of the Prospectus at a time prior to or contemporaneously with the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, PricewaterhouseCoopers LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you;
(g) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court, governmental, regulatory or arbitrator action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus, and (ii) since the respective dates as of which information is given in the Pricing Prospectus there shall not have been any change in the capital stock (other than as a result of the exercise, if any, of stock options or the settlement of other equity-based awards described as outstanding in, and the award, if any, of stock options, restricted stock or other equity-based awards in the
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ordinary course of business pursuant to the Companys employee benefit plans that are described in, the Pricing Prospectus and the Prospectus) or long-term debt of the Company or any of its subsidiaries, any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock or any change or effect, or any development involving a prospective change or effect, in or affecting (x) the business, properties, general affairs, management, financial position, stockholders equity or results of operations of the Company and its subsidiaries, taken as a whole, except as set forth or contemplated in the Pricing Prospectus and the Prospectus, or (y) the ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated in the Pricing Prospectus and the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Pricing Prospectus and the Prospectus;
(h) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange; (ii) a suspension or material limitation in trading in the Companys securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in your judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Pricing Prospectus and the Prospectus;
(i) (i) The Shares to be sold at such Time of Delivery shall have been duly listed on the Exchange and (ii) FINRA shall not have raised any objection with respect to the fairness or reasonableness of the underwriting, or other arrangements of the transactions, contemplated hereby;
(j) The Company shall have obtained and delivered to the Underwriters executed copies of an agreement from the persons listed on Schedule III hereto, substantially to the effect set forth in Exhibit C hereof (the Lock-Up Agreement) in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement;
(l) The Company and the Selling Stockholders shall have furnished or caused to be furnished to you at such Time of Delivery certificates of (i) the chief financial officer and one additional executive officer of the Company, (ii) each of the Selling Stockholders in Schedule II-A, and (iii) the Selling Stockholders in Schedule II-B severally, respectively, satisfactory to you as to the accuracy of the representations and warranties of the Company and the Selling Stockholders, respectively, herein at and as of such Time of Delivery, as to the performance by the Company and the Selling Stockholders in all material respects of all of their respective obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (g) of this Section, as to such other matters as you may reasonably request; and
(m) On or prior to each Time of Delivery, the Company shall have furnished to the Representatives such further certificates and documents as the Representatives may reasonably request.
All opinions, letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters, it being agreed that payment for and delivery of the Shares will be conclusive evidence that such documents are satisfactory.
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9. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereto, or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any roadshow as defined in Rule 433(h) under the Act (a roadshow), or any issuer information filed or required to be filed pursuant to Rule 433(d) under the Act, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with Underwriter Information.
(b) Each of the Selling Stockholders, severally and not jointly, will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any roadshow, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto or any Issuer Free Writing Prospectus, or any roadshow, in reliance upon and in conformity with the Selling Stockholder Information furnished to the Company by such Selling Stockholder expressly for use therein; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided , that the liability of each of the Selling Stockholders pursuant to this subsection 9(b) shall not exceed the product of the number of Shares sold by such Selling Stockholder [including any Optional Shares] and the public offering price of the Shares as set forth in the Prospectus after deducting any underwriting discounts and commissions for such Shares but before applicable offering expenses and taxes (with respect to each Selling Stockholder, the Selling Stockholder Proceeds ).
(c) Each Underwriter will, severally and not jointly, indemnify and hold harmless the Company and each Selling Stockholder against any losses, claims, damages or liabilities to which the Company or such Selling Stockholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereto, or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Pricing Prospectus or the
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Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or any roadshow, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or any roadshow, in reliance upon and in conformity with the Underwriter Information; and will reimburse the Company and each Selling Stockholder for any legal or other expenses reasonably incurred by the Company or such Selling Stockholder in connection with investigating or defending any such action or claim as such expenses are incurred. As used in this Agreement with respect to an Underwriter and an applicable document, Underwriter Information shall mean the information furnished in writing to the Company by such Underwriter through the Representatives expressly for use therein; it being understood and agreed upon that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: [].
(d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; provided that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under the preceding paragraphs of this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under the preceding paragraphs of this Section 9. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the contrary; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
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(e) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b), or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Stockholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Stockholders on the one hand or the Underwriters on the other and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, each of the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), (i) no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) the contribution by any Selling Stockholders pursuant to this subsection (e) shall not exceed its Selling Stockholder Proceeds (reduced by any amounts such Selling Stockholder paid under subsection (b) above). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint and the Selling Stockholders obligations in this subsection (e) to contribute are several in proportion to their Selling Stockholder Proceeds.
(f) The obligations of the Company and the Selling Stockholders under this Section 9 shall be in addition to any liability which the Company and the Selling Stockholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act and each broker-dealer affiliate of any Underwriter and their respective directors and officers; and the obligations of the Underwriters under this Section 9 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to each person, if any, who controls the Company or any Selling Stockholder within the meaning of the Act.
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10. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company and the Selling Stockholders shall be entitled to a further period of thirty-six hours within which to procure another party or other parties reasonably satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Selling Stockholders that you have so arranged for the purchase of such Shares, or the Company or a Selling Stockholder notifies you that it has so arranged for the purchase of such Shares, you or the Company or the Selling Stockholders shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments or supplements to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term Underwriter as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you, the Company and the Selling Stockholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company and the Selling Stockholders shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you, the Company and the Selling Stockholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company and the Selling Stockholders shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement [(or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Selling Stockholders to sell the Optional Shares)] shall thereupon terminate, without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholders, except for the expenses to be borne by the Company, the Selling Stockholders and the Underwriters as provided in Section 7 hereof and the indemnity and contribution agreements in Section 9 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
11. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Selling Stockholders and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter or broker-dealer affiliate of any Underwriter or their respective directors or officers, or the Company, or any of the Selling Stockholders or any officer or director or controlling person of the Company, or any controlling person of any Selling Stockholder and shall survive delivery of and payment for the Shares.
12. If this Agreement shall be terminated pursuant to Section 10 hereof, neither the Company nor the Selling Stockholders shall then be under any liability to any Underwriter except as provided in Sections 7 and 9 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of any of the Selling Stockholders as provided herein, each of the defaulting Selling Stockholders pro rata (based on the number of Shares to be sold by such Selling Stockholder hereunder) will reimburse the Underwriters
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through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company and the Selling Stockholders shall then be under no further liability to any Underwriter except as provided in Sections 7 and 9 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you; and in all dealings with any Selling Stockholder named in Schedule II-B hereunder, you and the Company shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of such Selling Stockholder made or given by any or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the Representatives in care of: []; if to any Selling Stockholder shall be delivered or sent by mail, telex or facsimile transmission to Christopher J. Baldwin, Laura L. Felice and Graham N. Luce, Attorneys-in-Fact, c/o the Company at the address of the Company set forth on the cover of the Registration Statement, Attention: General Counsel; if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth on the cover of the Registration Statement, Attention: Secretary; and if to any stockholder that has delivered a lock-up letter described in Section 8(j) hereof shall be delivered or sent by mail to his or her respective address provided in Schedule III hereto or such other address as such stockholder provides in writing to the Company; provided , however , that any notice to an Underwriter pursuant to Section 9(d) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Selling Stockholders by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof.
In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company and the Selling Stockholders, which information may include the name and address of their respective clients, as well as other information that will allow the underwriters to properly identify their respective clients.
14. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters and their respective directors and officers, the Company and the Selling Stockholders and, to the extent provided in Sections 9 and 11 hereof, the officers and directors of the Company and each person who controls the Company, any Selling Stockholder or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement. As used herein, the term business day shall mean any day when the Commissions office in Washington, D.C. is open for business.
16. The Company and the Selling Stockholders acknowledge and agree that (i) the purchase and sale of the Shares pursuant to this Agreement is an arms-length commercial transaction between the Company and the Selling Stockholders, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Company or any Selling Stockholder, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company or any Selling Stockholder with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or any Selling Stockholder on other
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matters) or any other obligation to the Company or any Selling Stockholder except the obligations expressly set forth in this Agreement and (iv) the Company and each Selling Stockholder has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company and each Selling Stockholder agrees that it will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company or any Selling Stockholder, in connection with such transaction or the process leading thereto.
17. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company, the Selling Stockholders and the Underwriters, or any of them, with respect to the subject matter hereof.
18. This Agreement, any controversy, dispute or claim arising under or related thereto and any transaction contemplated by this Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws that would result in the application of any other law than the laws of the State of New York. The Company and each Selling Stockholder agrees that any suit or proceeding arising in respect of this Agreement or any transaction contemplated by this Agreement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in The City and County of New York and the Company and each Selling Stockholder agrees to submit to the jurisdiction of, and to venue in, such courts.
19. The Company, each Selling Stockholder and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
20. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.
21. Notwithstanding anything herein to the contrary, the Company and the Selling Stockholders are authorized to disclose to any persons the U.S. federal and state income tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company and the Selling Stockholders relating to that treatment and structure, without the Underwriters imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, tax structure is limited to any facts that may be relevant to that treatment.
If the foregoing is in accordance with your understanding, please sign and return to us counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters, the Company and each of the Selling Stockholders. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company and the Selling Stockholders for examination upon request, but without warranty on your part as to the authority of the signers thereof.
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Any person executing and delivering this Agreement as Attorney-in-Fact for a Selling Stockholder named in Schedule II-B hereto represents by so doing that he has been duly appointed as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and binding Power-of-Attorney that authorizes such Attorney-in-Fact to take such action.
[Signature Pages Follow]
Very truly yours, |
||
BJs Wholesale Club Holdings, Inc. | ||
By: | ||
Name: | ||
Title: | ||
[SELLING STOCKHOLDER] By: [] |
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By: | ||
Title: | ||
Date: |
[] | ||
By: | ||
Name: | ||
Title: | ||
As Attorney-in-Fact acting on behalf of each of the Selling Stockholders listed on Schedule II-B hereto |
Accepted as of the date hereof: |
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[] |
||
By: |
||
Name: |
||
Title: |
On behalf of each of the Underwriters named in Schedule I to this Agreement
SCHEDULE I
Underwriter |
Total Number
of [Firm] Shares to be Purchased |
[Number of
Optional Shares to be Purchased if Maximum Option Exercised] |
||||||
[] |
[ | ] | [ | ] | ||||
Total |
[ | ] | [ | ] | ||||
|
|
|
|
SCHEDULE II-A
Total Number
of [Firm] Shares to be Sold |
[Number of
Optional Shares to be Sold if Maximum Option Exercised] |
|||||||
[] |
[ | ] | [ | ] | ||||
[] |
[ | ] | [ | ] | ||||
|
|
|
|
|||||
Total |
[ | ] | [ | ] | ||||
|
|
|
|
SCHEDULE II-B
Selling Stockholder |
Total Number of [Firm] Shares to be Sold |
[Number of Optional Shares to be Sold if Maximum Option Exercised] |
||
[] |
[] | [] | ||
Total |
[] | [] |
SCHEDULE III
Parties to Lock-Up Agreements
1. []
SCHEDULE IV
(a) |
Issuer Free Writing Prospectuses not included in the Pricing Disclosure Package: |
Electronic roadshow dated []
(b) |
Information other than the Pricing Prospectus that comprise the Pricing Disclosure Package: |
The public offering price per share for the Shares is $[].
The number of [Firm] Shares purchased by the Underwriters is [].
Exhibit A
Form of Latham & Watkins LLP Opinion as Counsel for
the Company
Exhibit B-1
Form of Latham & Watkins LLP Opinion as Counsel for
the Selling Stockholders Named in Schedule II-A
Exhibit B-2
Form of [] Opinion as Counsel for
the Selling Stockholders Named in Schedule II-B
Exhibit C
Form of Lock-Up Agreement
Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BJS WHOLESALE CLUB HOLDINGS, INC.
The present name of the corporation is BJs Wholesale Club Holdings, Inc. (the Corporation ). The Corporation was incorporated under the name Beacon Holding Inc. by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware (the DE Secretary ) on June 24, 2011. An Amended and Restated Certificate of Incorporation (the Amended and Restated Certificate ) was filed with the DE Secretary on September 29, 2011. This Second Amended and Restated Certificate of Incorporation of the Corporation, which restates and integrates and also further amends the provisions of the Amended and Restated Certificate, as amended, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware (the DGCL ) and by the written consent of its stockholder in accordance with Section 228 of the General Corporation Law of the State of Delaware. The Amended and Restated Certificate is hereby amended, integrated and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is BJs Wholesale Club Holdings, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporations registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE AND DURATION
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the DGCL. The Corporation is to have a perpetual existence.
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of stock that the Corporation shall have authority to issue is 305,000,000, which shall be divided into two classes as follows:
300,000,000 shares of common stock, par value $0.01 per share ( Common Stock ); and
5,000,000 shares of preferred stock, par value $0.01 per share ( Preferred Stock ).
Section 1. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority
in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL or any successor provision thereof, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.
Section 2. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the Board ) is hereby authorized to provide from time to time by resolution or resolutions for the creation and issuance, out of the authorized and unissued shares of Preferred Stock, of one or more series of Preferred Stock by filing a certificate (a Certificate of Designation ) pursuant to the DGCL, setting forth such resolution and, with respect to each such series, establishing the designation of such series and the number of shares to be included in such series and fixing the voting powers (full or limited, or no voting power), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of the shares of each such series, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any series of Preferred Stock may, to the extent permitted by law, provide that such series shall be superior to, rank equally with or be junior to the Preferred Stock of any other series. The powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock may be different from those of any and all other series at any time outstanding. Except as otherwise expressly provided in this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock), no vote of the holders of shares of Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock so authorized in accordance with this Second Amended and Restated Certificate of Incorporation. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) or pursuant to the DGCL. Unless otherwise provided in the Certificate of Designation establishing a series of Preferred Stock, the Board may, by resolution or resolutions, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of such series and, if the number of shares of such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
ARTICLE V
BOARD OF DIRECTORS
For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:
Section 1. Except as otherwise provided in this Second Amended and Restated Certificate of Incorporation and the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board. Except as otherwise provided in this Second Amended and Restated Certificate of Incorporation, the number of directors which shall constitute the whole Board shall be fixed exclusively by one or more resolutions adopted from time to time by the Board. Except as otherwise expressly provided by the bylaws of the Corporation (as the same may be amended and/or restated from time to time, the Bylaws ) or delegated by resolution of the Board, the Board shall have the exclusive power and authority to appoint and remove officers of the Corporation.
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Section 2. Other than any directors elected by the separate vote of the holders of one or more series of Preferred Stock, the Board shall be and is divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board. At the first annual meeting of stockholders following the date the Common Stock is first publicly traded (the IPO Date ), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the IPO Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the IPO Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, at each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. If the number of such directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director. Any such director shall hold office until the annual meeting at which his or her term expires and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal from office. The Board is authorized to assign members of the Board already in office to their respective class.
Section 3. Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of stock of the Corporation entitled to vote on the election of such director.
Section 4. Except as otherwise expressly required by law, and subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, any vacancies on the Board resulting from death, resignation, disqualification, retirement, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum, and shall not be filled by the stockholders. Any director appointed in accordance with the preceding sentence shall hold office for a term that shall coincide with the remaining term of the class to which the director shall have been appointed and until such directors successor shall have been elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal.
Section 5. During any period when the holders of any series of Preferred Stock have the special right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such series of Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such directors successor shall have been duly elected and qualified, or until such directors right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation establishing any series of Preferred Stock), whenever the holders of any series of Preferred Stock having the special right to elect additional directors are divested of such right pursuant to this Second Amended and Restated Certificate of Incorporation (including any such Certificate of Designation), the terms of office of all such additional directors elected by the holders of such series, or elected to fill any vacancies resulting from the death, resignation,
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disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.
Section 6. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
Section 7. Except as may otherwise be set forth in the resolution or resolutions of the Board providing for the issuance of one or more series of Preferred Stock, and then only with respect to such series of Preferred Stock, cumulative voting in the election of directors is specifically denied.
ARTICLE VI
STOCKHOLDERS
Section 1. At any time prior to the Trigger Event, any action required or permitted to be taken by the stockholders of the Corporation may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation. From and after the Trigger Event, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation (and may not be taken by consent of the stockholders in lieu of a meeting) provided, however, that any action required or permitted to be taken by the holders of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable certificate of designation relating to such series of Preferred Stock.
Section 2. Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, at any time by the Chairman of the Board of Directors or a resolution adopted by the affirmative vote of the majority of the then-serving members of the Board of Directors, but such special meetings may not be called by stockholders or any other Person or Persons. Notwithstanding the immediately preceding sentence, prior to the Trigger Event, special meetings of stockholders of the Corporation may be called by the Secretary of the Corporation at the request of a Principal Stockholder.
Section 3. Advance notice of stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
Section 1. To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended, automatically and without further action, upon the date of such amendment.
Section 2. The Corporation, to the fullest extent permitted by law, shall indemnify and advance expenses to any Person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she is or was a
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director or officer of the Corporation or any predecessor of the Corporation, or, while serving as a director or officer of the Corporation, serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation.
Section 3. The Corporation, to the fullest extent permitted by law, may indemnify and advance expenses to any Person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she is or was an employee or agent of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as an employee or agent at the request of the Corporation or any predecessor to the Corporation.
Section 4. Neither any amendment nor repeal of this Article VII, nor the adoption by amendment of this Second Amended and Restated Certificate of Incorporation of any provision inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any action or proceeding accruing or arising (or that, but for this Article VII, would accrue or arise) prior to such amendment or repeal or adoption of an inconsistent provision.
ARTICLE VIII
EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery (the Chancery Court ) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder of the Corporation to the Corporation or to the Corporations stockholders, (c) any action arising pursuant to any provision of the DGCL or the Bylaws or this Second Amended and Restated Certificate of Incorporation (as either may be amended from time to time) or (d) any action asserting a claim against the Corporation governed by the internal affairs doctrine. To the fullest extent permitted by law, any Person purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consents to the provisions of this Article VIII.
ARTICLE IX
CERTAIN STOCKHOLDER RELATIONSHIPS
Section 1. In recognition and anticipation that (i) certain directors, principals, officers, employees and/or other representatives of the Principal Stockholders and their Affiliates (as defined below) may serve as directors, officers or agents of the Corporation, (ii) the Principal Stockholders and their Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (iii) members of the Board who are not employees of the Corporation ( Non-Employee Directors ) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this Article IX are set forth to regulate and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as they may involve any of the Principal Stockholders, the Non-Employee Directors or their respective Affiliates and the powers, rights, duties and liabilities of the Corporation and its directors, officers and stockholders in connection therewith.
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Section 2. None of (i) the Principal Stockholders or any of their Affiliates or (ii) any Non-Employee Director or his or her Affiliates (the Persons (as defined below) identified in (i) and (ii) above being referred to, collectively, as Identified Persons and, individually, as an Identified Person ) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities. To the fullest extent permitted by law, the Corporation hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity which may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in Section 3 of this Article IX. Subject to Section 3 of this Article IX, in the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself, herself or himself and the Corporation or any of its Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for itself, herself or himself, or offers or directs such corporate opportunity to another Person.
Section 3. The Corporation does not renounce its interest in any corporate opportunity offered to any Non-Employee Director if such opportunity is expressly offered to such Person solely in his or her capacity as a director or officer of the Corporation, and the provisions of Section 2 of this Article IX shall not apply to any such corporate opportunity.
Section 4. In addition to and notwithstanding the foregoing provisions of this Article IX, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Corporation if it is a business opportunity that (i) the Corporation is neither financially or legally able, nor contractually permitted, to undertake, (ii) from its nature, is not in the line of the Corporations business or is of no practical advantage to the Corporation or (iii) is one in which the Corporation has no interest or reasonable expectancy.
Section 5. For purposes of this Article IX, Affiliate shall mean (a) in respect of any Principal Stockholder, any Person that, directly or indirectly, is controlled by such Principal Stockholder, controls such Principal Stockholder or is under common control with such Principal Stockholder and shall include (i) any principal, member, director, partner, stockholder, officer, employee or other representative of any of the foregoing (other than the Corporation and any entity that is controlled by the Corporation) and (ii) any funds or vehicles advised by Affiliates of such Principal Stockholder, (b) in respect of a Non-Employee Director, any Person that, directly or indirectly, is controlled by such Non-Employee Director (other than the Corporation and any entity that is controlled by the Corporation) and (c) in respect of the Corporation, any Person that, directly or indirectly, is controlled by the Corporation.
Section 6. To the fullest extent permitted by law, any Person purchasing or otherwise acquiring or holding any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
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ARTICLE X
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
Section 1. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by this Second Amended and Restated Certificate of Incorporation and the DGCL, and all rights, preferences and privileges herein conferred upon stockholders, directors or any other persons herein are granted by and pursuant to this Second Amended and Restated Certificate of Incorporation in its current form or as hereafter amended are granted subject to the right reserved in this Article X. Notwithstanding the foregoing, from and after the Trigger Event, notwithstanding any other provisions of this Second Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of stock required by law or by this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of stock entitled to vote thereon, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI, VII, VIII and IX and this Article X.
Section 2. The Board is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, the Bylaws. Notwithstanding the foregoing, from and after the Trigger Event, notwithstanding any other provisions of this Second Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of stock required by law or by this Second Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of stock entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the Corporation to alter, amend or repeal, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith.
ARTICLE XI
DGCL SECTION 203
Section 1. The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.
ARTICLE XII
DEFINITIONS
As used in this Second Amended and Restated Certificate of Incorporation, except as otherwise expressly provided herein and unless the context requires otherwise, the following terms shall have the following meanings:
Affiliate means, other than as set forth in Section 5 of Article IX, with respect to any Person, any other Person that controls, is controlled by, or is under common control with such Person. For the purposes of this definition, control, when used with respect to any Person, means the power to direct or cause the direction of the affairs or management of that Person, whether through the ownership of voting securities, as trustee (or the power to appoint a trustee), personal representative or executor, by contract, credit arrangement or otherwise and controlled and controlling have meanings correlative to the foregoing.
Exchange Act means the Securities Exchange Act of 1934, as amended.
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Person means any individual, general partnership, limited partnership, limited liability company, corporation, trust, business trust, joint stock company, joint venture, unincorporated association, cooperative or association or any other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity.
Principal Stockholders means investment funds affiliated with or advised by CVC Capital Partners and Leonard Green & Partners, L.P., and their successors.
Trigger Event means the first date on which the Principal Stockholders cease to beneficially own (directly or indirectly) more than 50% of the voting power of the outstanding shares of Common Stock. For the purpose of this Second Amended and Restated Certificate of Incorporation, beneficial ownership shall be determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
* * * *
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IN WITNESS WHEREOF, BJs Wholesale Club Holdings, Inc. has caused this Second Amended and Restated Certificate of Incorporation to be executed by its duly authorized officer on this 2nd day of July, 2018.
BJS WHOLESALE CLUB HOLDINGS, INC. | ||
By: |
/s/ Graham N. Luce |
|
Name: |
Graham N. Luce |
|
Title: |
SVP, Secretary |
[BJs Wholesale Club Holdings, Inc. - Signature Page to Second Amended and Restated Certificate of Incorporation]
Table of Contents
Page | ||||||||
Article I - Corporate Offices |
1 | |||||||
1.1 | Registered Office | 1 | ||||||
1.2 | Other Offices | 1 | ||||||
Article II - Meetings of Stockholders |
1 | |||||||
2.1 | Place of Meetings | 1 | ||||||
2.2 | Annual Meeting | 1 | ||||||
2.3 | Special Meeting | 1 | ||||||
2.4 | Advance Notice Procedures for Business Brought before a Meeting | 2 | ||||||
2.5 | Advance Notice Procedures for Nominations of Directors | 5 | ||||||
2.6 | Notice of Stockholders Meetings | 7 | ||||||
2.7 | Manner of Giving Notice; Affidavit of Notice | 7 | ||||||
2.8 | Quorum | 8 | ||||||
2.9 | Adjourned Meeting; Notice | 8 | ||||||
2.10 | Conduct of Business | 8 | ||||||
2.11 | Voting | 8 | ||||||
2.12 | Record Date for Stockholder Meetings and Other Purposes | 9 | ||||||
2.13 | Proxies | 10 | ||||||
2.14 | List of Stockholders Entitled to Vote | 10 | ||||||
2.15 | Inspectors of Election | 10 | ||||||
Article III - Directors |
11 | |||||||
3.1 | Powers | 11 | ||||||
3.2 | Number of Directors | 11 | ||||||
3.3 | Election, Qualification and Term of Office of Directors | 11 | ||||||
3.4 | Resignation and Vacancies | 11 | ||||||
3.5 | Place of Meetings; Meetings by Telephone | 12 | ||||||
3.6 | Regular Meetings | 12 | ||||||
3.7 | Special Meetings; Notice | 12 | ||||||
3.8 | Quorum | 13 | ||||||
3.9 | Board Action by Written Consent without a Meeting | 13 | ||||||
3.10 | Fees and Compensation of Directors | 13 | ||||||
Article IV - Committees |
13 | |||||||
4.1 | Committees of Directors | 13 | ||||||
4.2 | Committee Minutes | 14 | ||||||
4.3 | Meetings and Actions of Committees | 14 | ||||||
Article V - Officers |
14 | |||||||
5.1 | Officers | 14 | ||||||
5.2 | Appointment of Officers | 15 | ||||||
5.3 | Subordinate Officers | 15 | ||||||
5.4 | Removal and Resignation of Officers | 15 | ||||||
5.5 | Vacancies in Offices | 15 |
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Table of Contents
(continued)
Page | ||||||||
5.6 | Representation of Shares of Other Corporations | 15 | ||||||
5.7 | Authority and Duties of Officers | 15 | ||||||
Article VI - Records |
16 | |||||||
Article VII - General Matters |
16 | |||||||
7.1 | Execution of Corporate Contracts and Instruments | 16 | ||||||
7.2 | Stock Certificates | 16 | ||||||
7.3 | Lost Certificates | 16 | ||||||
7.4 | Shares Without Certificates | 17 | ||||||
7.5 | Dividends | 17 | ||||||
7.6 | Fiscal Year | 17 | ||||||
7.7 | Seal | 17 | ||||||
7.8 | Transfer of Stock | 17 | ||||||
7.9 | Stock Transfer Agreements | 17 | ||||||
7.10 | Registered Stockholders | 18 | ||||||
7.11 | Waiver of Notice | 18 | ||||||
Article VIII - Notice by Electronic Transmission |
18 | |||||||
8.1 | Notice by Electronic Transmission | 18 | ||||||
8.2 | Definition of Electronic Transmission | 19 | ||||||
Article IX - Indemnification |
19 | |||||||
9.1 | Indemnification of Directors and Officers | 19 | ||||||
9.2 | Indemnification of Others | 19 | ||||||
9.3 | Prepayment of Expenses | 20 | ||||||
9.4 | Determination; Claim | 20 | ||||||
9.5 | Non-Exclusivity of Rights | 20 | ||||||
9.6 | Insurance | 20 | ||||||
9.7 | Other Indemnification | 20 | ||||||
9.8 | Continuation of Indemnification | 21 | ||||||
9.9 | Amendment or Repeal; Interpretation | 21 | ||||||
Article X - Amendments |
21 | |||||||
Article XI - Forum Selection |
21 | |||||||
Article XII - Definitions |
22 |
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Second Amended and Restated Bylaws of
BJs Wholesale Club Holdings, Inc.
Article I - Corporate Offices
1.1 Registered Office .
The address of the registered office of BJs Wholesale Club Holdings, Inc. (the Corporation ) in the State of Delaware, and the name of its registered agent at such address, shall be as set forth in the Corporations certificate of incorporation, as the same may be amended and/or restated from time to time (the Certificate of Incorporation ).
1.2 Other Offices .
The Corporation may have additional offices at any place or places, within or outside the State of Delaware, as the Corporations board of directors (the Board ) may from time to time establish or as the business of the Corporation may require.
Article II - Meetings of Stockholders
2.1 Place of Meetings .
Meetings of stockholders shall be held at such place, if any, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the DGCL ). In the absence of any such designation or determination, stockholders meetings shall be held at the Corporations principal executive office.
2.2 Annual Meeting .
The Board shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 may be transacted. The Board may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board.
2.3 Special Meeting .
Special meetings of the stockholders may be called only by such Persons and only in such manner as set forth in the Certificate of Incorporation. The Board may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board.
No business may be transacted at any special meeting of stockholders other than the business specified in the notice of such meeting.
2.4 Advance Notice Procedures for Business Brought before a Meeting .
(i) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in a notice of meeting given by or at the direction of the Board, (b) if not specified in a notice of meeting, otherwise brought before the meeting by the Board or the chairperson of the meeting, or (c) otherwise properly brought before the meeting by a stockholder present in Person who (A)(1) was a stockholder of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the Exchange Act ), which proposal has been included in the proxy statement for the annual meeting. The foregoing clause (c) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the Corporations notice of meeting given by or at the direction of the Person calling the meeting pursuant to the Certificate of Incorporation and Section 2.3 of these bylaws. For purposes of this Section 2.4 and Section 2.5 of these bylaws, present in Person shall mean that the stockholder proposing that the business be brought before the annual or special meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative of such proposing stockholder, appear at such annual meeting, and a qualified representative of such proposing stockholder shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or Person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or Person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or Person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust. This Section 2.4 shall apply to any business that may be brought before an annual or special meeting of stockholders other than nominations for election to the Board at an annual meeting, which shall be governed by Section 2.5 of these bylaws. Stockholders seeking to nominate Persons for election to the Board must comply with Section 2.5 of these bylaws, and this Section 2.4 shall not be applicable to nominations for election to the Board except as expressly provided in Section 2.5 of these bylaws.
(ii) Without qualification, for business to be properly brought before an annual meeting by a stockholder, the stockholder must (a) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (b) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholders notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding years annual meeting (which date shall, for purposes of the Corporations first annual meeting of stockholders after its shares of Common Stock (as defined in the Certificate of Incorporation) are first publicly traded, be deemed to have occurred on June 14, 2018); provided, however , that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90 th ) day prior to such annual meeting or, if later, the tenth (10 th ) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, Timely Notice ). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.
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(iii) To be in proper form for purposes of this Section 2.4, a stockholders notice to the Secretary shall set forth:
(a) As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporations books and records); and (B) the number of shares of each class or series of stock of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of stock of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as Stockholder Information );
(b) As to each Proposing Person, (A) the full notional amount of any securities that, directly or indirectly, underlie any derivative security (as such term is defined in Rule 16a-1(c) under the Exchange Act) that constitutes a call equivalent position (as such term is defined in Rule 16a-1(b) under the Exchange Act) ( Synthetic Equity Position ) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of stock of the Corporation; provided that, for the purposes of the definition of Synthetic Equity Position, the term derivative security shall also include any security or instrument that would not otherwise constitute a derivative security as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and, provided , further , that any Proposing Person satisfying the requirements of Rule 13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule 13d-1(b)(1) under the Exchange Act solely by reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Persons business as a derivatives dealer, (B) any rights to dividends on the shares of any class or series of stock of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (C) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (D) any other material relationship between such Proposing Person, on the one hand, and the Corporation or any affiliate of the Corporation, on the other hand, (E) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation or any affiliate of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) and (F) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (F) are referred to as Disclosable Interests ); provided ,
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however , that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and
(c) As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration), (C) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other Person or entity (including their names) in connection with the proposal of such business by such stockholder and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided , however , that the disclosures required by this Section 2.4(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.
(iv) For purposes of this Section 2.4, the term Proposing Person shall mean (a) the stockholder providing the notice of business proposed to be brought before an annual meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, or (c) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation.
(v) A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(vi) Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
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(vii) In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(viii) For purposes of these bylaws, public disclosure shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
2.5 Advance Notice Procedures for Nominations of Directors .
(i) Nominations of any Person for election to the Board at an annual meeting may be made at such meeting only (a) by or at the direction of the Board, including by any committee or Persons authorized to do so by the Board or these bylaws, or (b) by a stockholder present in Person (as defined in Section 2.4) (1) who was a beneficial owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.5 as to such notice and nomination. The foregoing clause (b) shall be the exclusive means for a stockholder to make any nomination of a Person or Persons for election to the Board at any annual meeting of stockholders.
(ii) Without qualification, for a stockholder to make any nomination of a Person or Persons for election to the Board at an annual meeting, the stockholder must (a) provide Timely Notice (as defined in Section 2.4(ii) of these bylaws) thereof in writing and in proper form to the Secretary of the Corporation, (b) provide the information, agreements and questionnaires with respect to such stockholder and its candidate for nomination as required to be set forth by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as described above.
(iii) To be in proper form for purposes of this Section 2.5, a stockholders notice to the Secretary shall set forth:
(a) As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(iii)(a) of these bylaws) except that for purposes of this Section 2.5, the term Nominating Person shall be substituted for the term Proposing Person in all places it appears in Section 2.4(iii)(a);
(b) As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(iii)(b), except that for purposes of this Section 2.5 the term Nominating Person shall be substituted for the term Proposing Person in all places it appears in Section 2.4(iii)(b) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(iii)(c) shall be made with respect to nomination of each Person for election as a director at the meeting); and
(c) As to each candidate whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such candidate for nomination that would be required to be set forth in a stockholders notice pursuant to this Section 2.5 if such
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candidate for nomination were a Nominating Person, (B) all information relating to such candidate for nomination that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such candidates written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each candidate for nomination or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the registrant for purposes of such rule and the candidate for nomination were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (A) through (C) are referred to as Nominee Information ), and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(vi).
(iv) For purposes of this Section 2.5, the term Nominating Person shall mean (a) the stockholder providing the notice of the nomination proposed to be made at the meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, and (c) any other participant in such solicitation.
(v) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(vi) To be eligible to be a candidate for election as a director of the Corporation at an annual meeting, a candidate must be nominated in the manner prescribed in this Section 2.5 and the candidate for nomination, whether nominated by the Board or by a stockholder of record, must have previously delivered (in accordance with the time period prescribed for delivery in a notice to such candidate given by or on behalf of the Board), to the Secretary at the principal executive offices of the Corporation, (a) a completed written questionnaire (in the form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such candidate for nomination and (b) a written representation and agreement (in the form provided by the Corporation) that such candidate for nomination (A) is not, and will not become a party to, any agreement, arrangement or understanding with any Person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director of the Corporation that has not been disclosed therein and (B) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to all directors and in effect during such Persons term in office as a director (and, if requested by any candidate for nomination, the Secretary of the Corporation shall provide to such candidate for nomination all such policies and guidelines then in effect).
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(vii) The Board may also require any proposed candidate for nomination as a Director to furnish such other information as may reasonably be requested by the Board in writing prior to the meeting of stockholders at which such candidates nomination is to be acted upon in order for the Board to determine the eligibility of such candidate for nomination to be an independent director of the Corporation in accordance with the Corporations Corporate Governance Guidelines.
(viii) In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.
(ix) No candidate shall be eligible for nomination as a director of the Corporation unless such candidate for nomination and the Nominating Person seeking to place such candidates name in nomination has complied with this Section 2.5, as applicable. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the candidate in question (but in the case of any form of ballot listing other qualified nominees, only the ballots cast for the nominee in question) shall be void and of no force or effect.
(x) Notwithstanding anything in these Bylaws to the contrary, no candidate for nomination shall be eligible to be seated as a director of the Corporation unless nominated and elected in accordance with this Section 2.5.
2.6 Notice of Stockholders Meetings .
Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with either Section 2.7 or Section 8.1 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in Person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.7 Manner of Giving Notice; Affidavit of Notice .
Notice of any meeting of stockholders shall be deemed given:
(i) if mailed, when deposited in the U.S. mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporations records; or
(ii) if electronically transmitted as provided in Section 8.1 of these bylaws.
An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
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2.8 Quorum .
Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in Person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in Person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these bylaws until a quorum is present or represented.
2.9 Adjourned Meeting; Notice .
When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in Person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting.
2.10 Conduct of Business .
The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the Person presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairperson of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairperson of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other Persons as the chairperson of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
2.11 Voting .
Except as may be otherwise provided in the Certificate of Incorporation, these bylaws or the DGCL, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.
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Except as otherwise provided by the Certificate of Incorporation, at all duly called or convened meetings of stockholders at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. Except as otherwise provided by the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law, or pursuant to any regulation applicable to the Corporation or its securities, each other matter presented to the stockholders at a duly called or convened meeting at which a quorum is present shall be decided by the affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes) on such matter.
2.12 Record Date for Stockholder Meetings and Other Purposes .
In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting; and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
To the extent stockholder action by written consent is permitted by the Certificate of Incorporation, in order that the Corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board, (i) when no prior action of the Board is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, and (ii) if prior action by the Board is required by law, the record date for such purpose shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of capital stock, or for the purposes of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
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2.13 Proxies .
Each stockholder entitled to vote at a meeting of stockholders may authorize another Person or Persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but, no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.
2.14 List of Stockholders Entitled to Vote .
The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Corporations principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.14 or to vote in Person or by proxy at any meeting of stockholders.
2.15 Inspectors of Election .
Before any meeting of stockholders, the Corporation shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The Corporation may designate one or more Persons as alternate inspectors to replace any inspector who fails to act. If any Person appointed as inspector or any alternate fails to appear or fails or refuses to act, then the chairperson of the meeting shall appoint a Person to fill that vacancy.
Such inspectors shall:
(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting and the validity of any proxies and ballots;
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(ii) count all votes or ballots;
(iii) count and tabulate all votes;
(iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector(s); and
(v) certify its or their determination of the number of shares represented at the meeting and its or their count of all votes and ballots.
Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspection with strict impartiality and according to the best of such inspectors ability. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such Persons to assist them in performing their duties as they determine. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the corporation, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election.
Article III - Directors
3.1 Powers .
Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
3.2 Number of Directors .
Subject to the Certificate of Incorporation, the total number of directors constituting the Board shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3 Election, Qualification and Term of Office of Directors .
Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy or newly created directorship, shall hold office until the expiration of the term of the class, if any, for which elected and until such directors successor is elected and qualified or until such directors earlier death, resignation or removal. Directors need not be stockholders. The Certificate of Incorporation or these bylaws may prescribe qualifications for directors.
3.4 Resignation and Vacancies .
Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. The resignation shall take effect at the time specified therein or upon the happening of an event specified therein, and if no time or event is specified, at the time of its receipt. When one or more directors so resigns and the resignation is effective at a future date or upon the happening of an event to occur on a future
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date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the Certificate of Incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director appointed in accordance with the preceding sentence shall hold office for the remainder of the term of the class, if any, to which the director is appointed and until such directors successor shall have been elected and qualified. A vacancy in the Board shall be deemed to exist under these bylaws in the case of the death, removal or resignation of any director.
3.5 Place of Meetings; Meetings by Telephone .
The Board may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in Person at the meeting.
3.6 Regular Meetings .
Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.
3.7 Special Meetings; Notice .
Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the total number of directors constituting the Board.
Notice of the time and place of special meetings shall be:
(i) |
delivered Personally by hand, by courier or by telephone; |
(ii) |
sent by United States first-class mail, postage prepaid; |
(iii) |
sent by facsimile or electronic mail; or |
(iv) |
sent by other means of electronic transmission, |
directed to each director at that directors address, telephone number, facsimile number or electronic mail address, or other address for electronic transmission, as the case may be, as shown on the Corporations records.
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If the notice is (i) delivered Personally by hand, by courier or by telephone, (ii) sent by facsimile or electronic mail, or (iii) sent by other means of electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by U.S. mail, it shall be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporations principal executive office) nor the purpose of the meeting.
3.8 Quorum .
At all meetings of the Board, the directors entitled to cast a majority of the votes of the whole Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
3.9 Board Action by Written Consent without a Meeting .
Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.10 Fees and Compensation of Directors .
Unless otherwise restricted by the Certificate of Incorporation or these bylaws, the Board shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.
Article IV - Committees
4.1 Committees of Directors .
The Board may designate one (1) or more committees, each committee to consist, of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Corporation.
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4.2 Committee Minutes .
Each committee shall keep regular minutes of its meetings and report the same to the Board when required.
4.3 Meetings and Actions of Committees .
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:
(i) |
Section 3.5 (place of meetings and meetings by telephone); |
(ii) |
Section 3.6 (regular meetings); |
(iii) |
Section 3.7 (special meetings and notice); |
(iv) |
Section 3.9 (action without a meeting); and |
(v) |
Section 7.11 (waiver of notice), |
with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However :
(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;
(ii) special meetings of committees may also be called by resolution of the Board or by the chairperson of the applicable committee; and
(iii) the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this Section 4.3, provided that such rules do not violate the provisions of the Certificate of Incorporation or applicable law.
Article V - Officers
5.1 Officers .
The officers of the Corporation shall include a president and a secretary. The Corporation may also have, at the discretion of the Board, a chairperson of the Board and a vice chairperson of the Board from among its members, a chief executive officer, a chief financial officer, a treasurer, one (1) or more vice presidents, one (1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same Person.
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5.2 Appointment of Officers .
The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws.
5.3 Subordinate Officers .
The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board or an authorized officer (as applicable), may from time to time determine.
5.4 Removal and Resignation of Officers .
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
5.5 Vacancies in Offices .
Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Sections 5.2 and 5.3, as applicable.
5.6 Representation of Shares of Other Corporations .
The chairperson of the Board, the chief executive officer, the president, any vice president, the treasurer, the secretary or assistant secretary of this Corporation, or any other Person authorized by the Board, the chief executive officer, the president or a vice president, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such Person directly or by any other Person authorized to do so by proxy or power of attorney duly executed by such Person having the authority.
5.7 Authority and Duties of Officers .
All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be provided herein or designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.
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Article VI - Records
A stock ledger consisting of one or more records in which the names of all of the Corporations stockholders of record, the address and number of shares registered in the name of each such stockholder, and all issuances and transfers of stock of the corporation are recorded in accordance with Section 224 of the DGCL shall be administered by or on behalf of the Corporation. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, or one or more electronic networks or databases (including one or more distributed electronic networks or databases), provided that the records so kept can be converted into clearly legible paper form within a reasonable time and, with respect to the stock ledger, that the records so kept (i) can be used to prepare the list of stockholders specified in Sections 219 and 220 of the DGCL, (ii) record the information specified in Sections 156, 159, 217(a) and 218 of the DGCL, and (iii) record transfers of stock as governed by Article 8 of the Uniform Commercial Code.
Article VII - General Matters
7.1 Execution of Corporate Contracts and Instruments .
The Board may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
7.2 Stock Certificates .
The shares of the Corporation shall be uncertificated, provided that the Board by resolution may provide that some or all of the shares of any class or series of stock of the Corporation shall be represented by certificates. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two officers authorized to sign stock certificates representing the number of shares registered in certificate form. The chairperson or vice chairperson of the Board, the president, vice president, the treasurer, any assistant treasurer, the secretary or any assistant secretary of the Corporation shall be specifically authorized to sign stock certificates. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
7.3 Lost Certificates .
The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owners legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
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7.4 Shares Without Certificates
The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.
7.5 Dividends .
The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporations capital stock.
The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.
7.6 Fiscal Year .
The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.
7.7 Seal .
The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
7.8 Transfer of Stock .
Shares of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holders attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate Person or Persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the Persons from and to whom it was transferred.
7.9 Stock Transfer Agreements .
The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
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7.10 Registered Stockholders .
The Corporation:
(i) shall be entitled to recognize the exclusive right of a Person registered on its books as the owner of shares to receive dividends and to vote as such owner; and
(ii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
7.11 Waiver of Notice .
Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver, signed by the Person entitled to notice, or a waiver by electronic transmission by the Person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a Person at a meeting shall constitute a waiver of notice of such meeting, except when the Person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these bylaws.
Article VIII - Notice by Electronic Transmission
8.1 Notice by Electronic Transmission .
Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:
(i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and
(ii) such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent, or other Person responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed given:
(i) |
if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; |
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(ii) |
if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; |
(iii) |
if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and |
(iv) |
if by any other form of electronic transmission, when directed to the stockholder. |
An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
8.2 Definition of Electronic Transmission .
An electronic transmission means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Article IX - Indemnification
9.1 Indemnification of Directors and Officers .
The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding ) by reason of the fact that he or she, or a Person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys fees, judgments, fines ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred by such Person in connection with any such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to indemnify a Person in connection with a Proceeding (or part thereof) initiated by such Person only if the Proceeding (or part thereof) was authorized in the specific case by the Board.
9.2 Indemnification of Others .
The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a Person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such Person in connection with any such Proceeding.
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9.3 Prepayment of Expenses .
The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys fees) incurred by any officer or director of the Corporation, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition; provided, however , that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Person to repay all amounts advanced if it should be ultimately determined that the Person is not entitled to be indemnified under this Article IX or otherwise.
9.4 Determination; Claim .
If a claim for indemnification (following the final disposition of such Proceeding) under this Article IX is not paid in full within sixty (60) days, or a claim for advancement of expenses under this Article IX is not paid in full within thirty (30) days after a written claim therefor has been received by the Corporation, the claimant may thereafter (but not before) file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.
9.5 Non-Exclusivity of Rights .
The rights conferred on any Person by this Article IX shall not be exclusive of any other rights which such Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
9.6 Insurance .
The Corporation may purchase and maintain insurance on behalf of any Person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.
9.7 Other Indemnificatio n .
The Corporations obligation, if any, to indemnify or advance expenses to any Person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such Person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
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9.8 Continuation of Indemnification .
The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the Person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such Person.
9.9 Amendment or Repeal ; Interpretation .
Any repeal or modification of this Article IX shall not adversely affect any right or protection (i) hereunder of any Person in respect of any act or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.
Any reference to an officer of the Corporation in this Article IX shall be deemed to refer exclusively to the chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer, a secretary or a treasurer appointed pursuant to Article V of these bylaws, and to any president, vice president, assistant secretary, assistant treasurer, or other officer of the Corporation appointed by (x) the Board pursuant to Article V of these Bylaws or (y) an officer to whom the Board has delegated the power to appoint officers pursuant to Article V of these bylaws, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the board of directors (or equivalent governing body) of such other entity pursuant to the certificate of incorporation and bylaws (or equivalent organizational documents) of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any Person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise has been given or has used the title of vice president or any other title that could be construed to suggest or imply that such Person is or may be an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such Person being constituted as, or being deemed to be, an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Article IX.
Article X - Amendments
The Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however , that, from and after the Trigger Event, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least 66 2/3% of the voting power of all the then-outstanding shares of voting stock of the Corporation with the power to vote at an election of directors, voting together as a single class.
Article XI - Forum Selection
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery (the Chancery Court ) of the State of Delaware (or, in the event that the Chancery Court does not
21
have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder of the Corporation to the Corporation or to the Corporations stockholders, (iii) any action arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these bylaws (as either may be amended from time to time) or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine.
Article XII - Definitions
As used in these bylaws, unless the context otherwise requires, the term:
Affiliate means, with respect to any Person, any other Person that controls, is controlled by, or is under common control with such Person. For the purposes of this definition, control, when used with respect to any Person, means the power to direct or cause the direction of the affairs or management of that Person, whether through the ownership of voting securities, as trustee (or the power to appoint a trustee), Personal representative or executor, by contract, credit arrangement or otherwise and controlled and controlling have meanings correlative to the foregoing.
Person means any individual, general partnership, limited partnership, limited liability company, corporation, trust, business trust, joint stock company, joint venture, unincorporated association, cooperative or association or any other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity.
Principal Stockholder means investment funds affiliated with or advised by CVC Capital Partners and Leonard Green & Partners, L.P. or any of its affiliates or successors.
Trigger Event means the first date on which the Principal Stockholder ceases collectively to beneficially own (directly or indirectly) more than 50% of the voting power of the outstanding shares of Common Stock. For the purpose of these bylaws, beneficial ownership shall be determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
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BJs Wholesale Club Holdings, Inc.
Certificate of Amendment and Restatement of Bylaws
The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Corporation ), and that the foregoing bylaws were approved on June 14, 2018, effective as of July 2, 2018 by the Corporations board of directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 2nd day of July, 2018.
/s/ Graham N. Luce |
||
Graham N. Luce | ||
SVP, Secretary |
[BJs Wholesale Club Holdings, Inc. Signature Page to Amended and Restated Bylaws]
Exhibit 4.1
EXECUTION VERSION
STOCKHOLDERS AGREEMENT
BY AND AMONG
BEACON HOLDING INC.,
GREEN EQUITY INVESTORS V, L.P.,
GREEN EQUITY INVESTORS SIDE V, L.P.,
BEACON COINVEST LLC AND
CVC BEACON LLC
SEPTEMBER 30, 2011
TABLE OF CONTENTS
Page | ||||||
ARTICLE I. CORPORATE GOVERNANCE; INFORMATION RIGHTS |
1 | |||||
Section 1.01 |
Initial Board of Directors |
1 | ||||
Section 1.02 |
Subsequent Board of Directors |
2 | ||||
Section 1.03 |
Action by Board of Directors |
4 | ||||
Section 1.04 |
Confidentiality |
5 | ||||
Section 1.05 |
Information Rights |
6 | ||||
Section 1.06 |
Stockholder Consent |
7 | ||||
ARTICLE II. TRANSFER OF STOCK |
8 | |||||
Section 2.01 |
Resale of Securities |
8 | ||||
Section 2.02 |
Subscription Right |
8 | ||||
Section 2.03 |
Stockholder Exit Right |
9 | ||||
Section 2.04 |
Transfers and Counterparties to the Agreement |
10 | ||||
Section 2.05 |
Transaction Expenses |
11 | ||||
Section 2.06 |
Legends |
11 | ||||
Section 2.07 |
Regulatory Matters |
11 | ||||
ARTICLE III. REGISTRATION RIGHTS |
11 | |||||
Section 3.01 |
Requested Registration |
11 | ||||
Section 3.02 |
Company Registration |
14 | ||||
Section 3.03 |
Company Control |
15 | ||||
Section 3.04 |
Expenses of Registration; Cooperation |
16 | ||||
Section 3.05 |
Registration Procedures |
16 | ||||
Section 3.06 |
Indemnification |
18 | ||||
Section 3.07 |
Information by the Stockholders |
20 | ||||
Section 3.08 |
Market Stand-off Agreement |
20 | ||||
Section 3.09 |
Transfer of Registration Rights |
20 | ||||
Section 3.10 |
Termination |
20 |
i
ARTICLE IV. CVC CLASS B STOCK |
20 | |||||
Section 4.01 |
Transfer to the Company |
20 | ||||
Section 4.02 |
Sale to CVC |
21 | ||||
ARTICLE V. TERMINATION |
22 | |||||
Section 5.01 |
Initial Public Offering |
22 | ||||
Section 5.02 |
Voluntary Termination |
22 | ||||
ARTICLE VI. REPRESENTATIONS; WARRANTIES AND COVENANTS |
22 | |||||
Section 6.01 |
Representations and Warranties of the Stockholders |
22 | ||||
Section 6.02 |
Representations and Warranties of the Company |
23 | ||||
Section 6.03 |
Entitlement of the Company and the Stockholders to Rely on Representations and Warranties |
23 | ||||
ARTICLE VII. INTERPRETATION OF THIS AGREEMENT |
23 | |||||
Section 7.01 |
Defined Terms |
23 | ||||
Section 7.02 |
Directly or Indirectly |
30 | ||||
Section 7.03 |
Governing Law |
30 | ||||
Section 7.04 |
Section Headings |
30 | ||||
ARTICLE VIII. COMPLIANCE EFFORTS |
30 | |||||
Section 8.01 |
Violation of Law |
30 | ||||
ARTICLE IX. MISCELLANEOUS |
30 | |||||
Section 9.01 |
Actions Following a Buyback Event or CVC Exit |
30 | ||||
Section 9.02 |
Limitations on Dividends and Issuances |
31 | ||||
Section 9.03 |
Notices |
31 | ||||
Section 9.04 |
Successors and Assigns |
32 | ||||
Section 9.05 |
Entire Agreement |
33 | ||||
Section 9.06 |
Amendment and Waiver |
33 | ||||
Section 9.07 |
Business Opportunities; No Recourse |
33 |
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Section 9.08 |
Severability |
33 | ||||
Section 9.09 |
Counterparts |
34 | ||||
Section 9.10 |
Recapitalization, Exchange, Etc. Affecting the Companys Stock |
34 | ||||
Section 9.11 |
Submission to Jurisdiction; Waiver of Jury Trial |
34 | ||||
Section 9.12 |
Specific Performance |
34 | ||||
Section 9.13 |
Conflict with Organizational Documents |
34 | ||||
Section 9.14 |
No Third Party Liability |
35 | ||||
Section 9.15 |
Stockholder Acting as Creditor |
35 | ||||
Section 9.16 |
Costs Associated with Class B Stock |
35 | ||||
Section 9.17 |
Indemnification |
35 | ||||
Section 9.18 |
Tax Treatment |
36 | ||||
Schedule A - LGP Investors |
||||||
Schedule B - CVC Investors |
iii
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (the Agreement ), dated as of September 30, 2011, by and among BEACON HOLDING INC., a Delaware corporation (the Company ), the investment funds listed on Schedule A hereto (together, with their Permitted Transferees, individually, respectively, GEI V and GEI Side V and GEI Co-invest and collectively, LGP ) and the entity listed on Schedule B hereto (together, with its Permitted Transferees, CVC and CVC, together with LGP, the Stockholders and respectively, the Stockholder Groups ).
R E C I T A L S
WHEREAS, the Company has entered into that certain Merger Agreement (the Merger Agreement ), dated as of June 28, 2011, by and among BJs Wholesale Club, Inc., a Delaware corporation ( BJs ), the Company and Beacon Merger Sub Inc., a Delaware corporation (the Transitory Subsidiary ), pursuant to which the Transitory Subsidiary will be merged with and into BJs (the Merger ), with BJs being the surviving entity of the Merger and a wholly-owned subsidiary of the Company;
WHEREAS, the closing (the Closing ) of the Merger is taking place on the date hereof (the Closing Date );
WHEREAS, as of the Closing, funds affiliated with CVC but not parties to this Agreement purchased shares of Class A Stock and Class B Stock (the Holdings Common Stock );
WHEREAS, immediately after the Closing, such funds contributed the Holdings Common Stock to CVC and as a result each Stockholder will hold the number of shares of Class A Stock and Class B Stock set forth opposite such Stockholders name on Schedule A and Schedule B hereto;
WHEREAS, this Agreement shall become effective upon the Closing; and
WHEREAS, the Stockholders and the Company desire to promote their mutual interests by agreeing to certain matters relating to the operations of the Company and the disposition and voting of the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I.
CORPORATE GOVERNANCE; INFORMATION RIGHTS
Section 1.01 Initial Board of Directors . The initial Board of Directors of the Company (the Initial Board of Directors ) as of the Closing shall consist of the following directors and the parties hereto shall take all necessary action, in accordance with applicable law, to cause the following individuals to constitute the Initial Board of Directors:
Name of Director |
Type of Director |
|
Jonathan Sokoloff | Nominated by GEI V | |
Jonathan Seiffer | Nominated by GEI V | |
J. Kristofer Galashan | Nominated by GEI Side V | |
Christopher Stadler | Nominated by CVC | |
Cameron Breitner | Nominated by CVC | |
Ken Parent | Independent Director | |
Laura J. Sen | Chief Executive Officer of BJs |
Each Director shall hold office until such Directors death, disability, resignation or removal, or until such Directors successor shall have been duly elected and qualified, in each case in accordance with the terms of Article I hereof and of the by-laws of the Company (the By- Laws ). Each Stockholder hereby consents to the election of the nominees to such Initial Board of Directors as listed above, effective as of the Closing.
Section 1.02 Subsequent Board of Directors .
(a) Nomination .
(i) The parties hereto shall cause the By-Laws to provide, as of the Closing Date and from time to time, that the board of directors of the Company (the Board , and each director of the Board, a Director ) shall consist of not less than one (1) and not more than eleven (11) Directors. The Stockholders and the Company agree that:
1) |
in all events, each of CVC, on the one hand, and GEI V and GEI Side V, on the other hand, shall be entitled to nominate an equal number of Directors (the maximum number of directors each of CVC, on the one hand, and GEI V and GEI Side V, on the other hand, shall be entitled to nominate is three and the minimum number of directors GEI V shall be entitled to nominate is one); provided, that in the event that CVC, on the one hand, and GEI V and GEI Side V, on the other hand, have not nominated an equal number of Directors that are serving as directors of the Company, each Director nominated by the Stockholder Group nominating the greater number of Directors (as compared to the other Stockholder Group) (the Over-Nominating Stockholder ) shall be entitled to cast one vote and each Director nominated by the Stockholder nominating the lesser number of Directors (as compared to the other Stockholder) (the Under-Nominating Stockholder ) shall be entitled to cast a number of votes equal to the quotient obtained by dividing the number of Directors nominated by the Over-Nominating |
2
Stockholder by the number of Directors nominated by the Under- Nominating Stockholder for so long as the Over-Nominating Stockholder has a greater number of nominees serving as Directors of the Company; and |
2) |
in all events, the Board may have one Director that is an executive officer of the Company (the Non Sponsor Director ) and one or more independent directors, in either case to be mutually agreed by unanimous vote of CVC, on the one hand, and GEI V and GEI Side V, on the other hand (the Independent Directors ). Laura J. Sen, the Chief Executive Officer of BJs and the Company, shall be the initial Non-Sponsor Director and Ken Parent shall initially be an Independent Director. All Independent Directors and Non-Sponsor Directors may be removed at any time by mutual written agreement of CVC, on the one hand, and GEI V and GEI Side V, on the other hand. |
(ii) Except as set forth in Section 1.02(b), each committee of the Board shall have an equal number of members designated by mutual agreement of each of CVC, on the one hand, and GEI V and GEI Side V, on the other hand.
(b) Alcohol Business Committee . The Company shall establish and maintain an Alcohol Business Committee of the Board consisting of three (3) members of the Board appointed by the Board; provided that until a Buyback Event has occurred, no CVC Director may be a member of the Alcohol Business Committee.
(c) Voting Agreement . At any annual or special meeting, or pursuant to any action by written consent of the holder of Shares, each Stockholder agrees to vote all Shares owned or held of record by such holder to elect (or to execute such written consent consenting to the election of) the nominees designated pursuant to subsection (a) above.
(i) Each Stockholder further agrees, at any annual or special meeting, or pursuant to any action by written consent of the holder of Shares, (A) in the event that a vacancy is created on the Board at any time by death, disability, retirement, resignation, removal (with or without cause) or delay in appointment of a Director designated by GEI V and GEI Side V pursuant to subsection (a) above (the LGP Directors and each, a LGP Director ), to vote all Shares owned or held of record by it for the individual nominated to fill such vacancy by such Stockholder and (B) solely at the request of either such nominating Stockholder, to vote to remove any LGP Director, with or without cause.
(ii) Each Stockholder further agrees, at any annual or special meeting, or pursuant to any action by written consent of the holders of Shares, (A) in the event that a vacancy is created on the Board at any time by death, disability, retirement, resignation, removal (with or without cause) or delay in appointment of a Director designated by CVC pursuant to subsection (a) above (the CVC Directors and each, a CVC Director ), to vote all Shares owned or held of record by it for the individual nominated
3
to fill such vacancy by CVC and (B) solely at the request of CVC, to vote to remove any CVC Director, with or without cause.
(iii) The voting agreements contained in the preceding clauses (i) and (ii) are coupled with an interest and may not be revoked or amended except as set forth in this Agreement.
(d) Non-Sponsor Director and Independent Directors; Vacancies Generally .
(i) In the event that a vacancy is created on the Board at any time by death, disability, retirement, resignation, removal (with or without cause) or delay of the Non- Sponsor Director or an Independent Director, a successor may be nominated in accordance with Section 1.02(a)(i)(2).
(ii) If any Stockholder entitled to do so fails at any time to nominate the maximum number of persons for election to the Board that such Stockholder is entitled to nominate pursuant to this Agreement, then each directorship in respect of which such Stockholder so failed to make a nomination will remain vacant until such vacancy is filled by a nominee selected by such Stockholder.
(e) Governance Expense . Unless otherwise agreed by LGP and CVC, no Director shall receive any fees or other compensation for his or her service as a Director.
Section 1.03 Action by Board of Directors . The Company and the Stockholders shall each cause the following procedures to be followed by the Board:
(a) Quorum . A quorum of the Board shall consist of a at least one-third (1/3) of the number of votes represented by the Directors then in office (a Quorum ) but in all events shall include at least one LGP Director and one CVC Director. A Quorum must be present at Board meetings (whether in person or by telephone, videoconference or otherwise) to conduct business. A Quorum must exist at all times during any Board meeting, including the reconvening of a meeting adjourned, in order for any action taken at such meeting to be valid.
(b) Voting . All actions of the Board shall require the affirmative vote of a majority of the number of votes represented by the Directors at any meeting at which a Quorum is present, or a majority of the members of a committee of the Board, to the extent such actions shall be lawfully delegated to such committee. Notwithstanding the foregoing sentence or any other provision of this Agreement to the contrary, the Stockholders and the Company agree that, in all events: (i) all actions of the Board shall require the approval of all of the LGP Directors and all of the CVC Directors present and (ii) the affirmative vote of all LGP Directors and all CVC Directors present shall be sufficient to constitute the approval of any matter put before the Board.
(c) Action without Meeting . Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if a consent or consents in writing shall evidence a majority of the number of votes represented
4
by the Directors, provided that at least one LGP Director and one CVC Director consent thereto, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
Section 1.04 Confidentiality.
(a) Each holder of Shares agrees and acknowledges that the Directors designated by the Stockholders may share confidential, non-public information about the Company and any of its Subsidiaries with any of the Stockholders.
(b) No holder of Shares (collectively, the Confidential Investors ) shall disclose any information relating to the Company or any Subsidiary (the Confidential Information ) without the prior written consent of the Board; provided that (i) Confidential Information may be disclosed if required by applicable law, regulation, legal process or any stock exchange or other self-regulatory organization (subject to the provisions of clause (c) below) and (ii) each Confidential Investor may disclose Confidential Information to its, and its Affiliates, partners, members, advisors, employees, agents, accountants, attorneys and Affiliates and representatives thereof that are actively engaged in the monitoring or oversight of such Confidential Investors investment in the Company and its Subsidiaries (collectively, the Representatives ), so long as (x) such Representatives agree to keep such information confidential (or the Confidential Investor directs such Representative to keep such information confidential, in which case such Confidential Investors shall be liable for any failure on the part of its Representatives to so keep such information confidential), and to limit their use of such information to the use and monitoring of such Confidential Investors investment in the Company and its Subsidiaries; provided that such Representatives shall be entitled to report summary financial data to the current or prospective limited partners, members or other investors of a Stockholder, and (y) the sharing of such Confidential Information with such Representatives does not violate any applicable law or regulation. The term Confidential Information does not include information that (A) is or has become generally available to the public other than as a result of a direct or indirect disclosure by a Confidential Investor or any of its representatives in breach of the provisions hereof or (B) was within the possession of a Confidential Investor or any of its representatives from a source other than the Company prior to its being furnished to such Confidential Investor by or on behalf of the Company; provided , that in the case of (B) above, the source of such information was not known by such Confidential Investor to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the Company with respect to such information.
(c) In the event that any Confidential Investor is required by applicable law, regulation, legal process or any stock exchange or other self-regulatory organization, to disclose any of the Confidential Information, such Confidential Investor shall promptly notify the Company in writing so that the Company may seek a protective order or other appropriate remedy. Nothing herein shall be deemed to prevent any Confidential Investor from honoring a subpoena (or governmental order) that seeks discovery of the Confidential Information if (A) a motion for a protective order, motion to quash and/or other motion filed to prevent the production or disclosure of the Confidential Information has been denied or is not made; provided , however , that such Confidential Investor shall disclose only that portion of the Confidential Information which such Confidential Investors legal counsel advises is required and that it exercise commercially reasonable efforts to preserve the confidentiality of the
5
remainder of the Confidential Information; or (B) the Company consents in writing to having the Confidential Information produced or disclosed pursuant to the subpoena (or governmental order). In no event will any Confidential Investor or any of its representatives oppose any action by the Company to obtain a protective order or other relief to prevent the disclosure of the Confidential Information or to obtain reliable assurance that confidential treatment will be afforded the Confidential Information. The Company shall promptly reimburse the Confidential Investor for any reasonable costs and expenses (including fees and disbursements of counsel) incurred in connection with any action that the Confidential Investor may be required to take, or is requested by the Company to take, under this Section 1.04.
Section 1.05 Information Rights .
(a) The Company will furnish CVC, GEI V and GEI Side V, so long as each such Stockholder holds Shares, with the following information:
(i) As soon as available, and in any event within 90 days after the end of each fiscal year of the Company, the consolidated balance sheet of the Company and its Subsidiaries as at the end of each such fiscal year and the consolidated statements of income, cash flows and changes in stockholders equity for such year of the Company and its Subsidiaries, setting forth in each case in comparative form the figures for the next preceding fiscal year, accompanied by the report of independent certified public accountants of recognized national standing, to the effect that, except as set forth therein, such consolidated financial statements have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior years and fairly present in all material respects the financial condition of the Company and its Subsidiaries at the dates thereof and the results of their operations and changes in their cash flows and stockholders equity for the periods covered thereby.
(ii) As soon as available, and in any event within 45 days after the end of each fiscal quarter of the Company, the consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter and the consolidated statements of income, cash flows and changes in stockholders equity for such quarter and the portion of the fiscal year then ended of the Company and its Subsidiaries, setting forth in each case the figures for the corresponding periods of the previous fiscal year in comparative form, all in reasonable detail.
(iii) As soon as available, and in any event within 30 days after the end of each month, the consolidated balance sheet of the Company and its Subsidiaries as at the end of such month and the consolidated statements of income, cash flows and changes in stockholders equity for such month and the portion of the fiscal year then ended of the Company and its Subsidiaries, setting forth in each case the figures for the corresponding periods of the previous fiscal year in comparative form, all in reasonable detail.
(iv) To the extent permitted by, and not inconsistent with, applicable law, regularly reported financial information (e.g. comparable store sales figures) and such other information as CVC, GEI V or GEI Side V may reasonably request or any other
6
information that is delivered by the Company or the Board to either CVC, GEI V or GEI Side V.
(b) Upon the request of CVC, GEI V or GEI Side V, so long as such Stockholder holds Shares, such Stockholder and any representatives of such Stockholder shall have (i) reasonable access (at reasonable times and upon reasonable notice) to all executive officers and accountants of the Company and its Subsidiaries and (ii) reasonable access (at reasonable times and upon reasonable notice) to all premises, properties, books, records (including tax records), contracts, financial and operating data and information and documents pertaining to the Company and its Subsidiaries and shall be entitled to make copies of such books, records, contracts, data, information and documents as such Stockholder or its representatives may reasonably request.
Section 1.06 Stockholder Consent . Notwithstanding any action taken by the Board, the affirmative vote of each of CVC, GEI V and GEI Side V so long as each such Stockholder holds Shares, shall be required for each of the following matters:
(a) Any determination of the Company pursuant to Sections 3.01(c)(i), 8.01 and 9.16;
(b) Adoption or amendment of any equity based incentive plan;
(c) Any incurrence of indebtedness, assumption of indebtedness or guarantee of indebtedness;
(d) Any acquisition, merger or similar transaction;
(e) Any dividend, redemption or repurchase of equity interests (other than from any holder of Equity Interests of the Company in accordance with any agreement related to such Equity Interests entered into by the Company), or distribution of assets by the Company (the parties acknowledge that they have no current intention to declare dividends on Class B Stock);
(f) Any issuance of equity interests of the Company except as provided in Section 3.01;
(g) Any naming, hiring or terminating of the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President or the Chief Operating Officer of the Company or any of its Subsidiaries;
(h) Any amendment of the Organizational Documents of the Company or its Subsidiaries;
(i) Any Affiliate Transactions with a Stockholder by the Company or any Subsidiary;
(j) Any winding up, dissolution, liquidation or bankruptcy filing of the Company or any of its Subsidiaries;
7
(k) Any change of auditors of the Company;
(l) Any entry by the Company or any Subsidiary into a new line of business outside of the business of owning and operating warehouse clubs; and
(m) The inception, defense or settlement of any material claim (other than in the ordinary course of business), litigation or governmental investigation.
ARTICLE II.
TRANSFER OF STOCK
Section 2.01 Resale of Securities .
(a) No Stockholder shall Transfer any Shares other than in accordance with the provisions of this Article II. Any Transfer or purported Transfer made in violation of this Article II or any pledge or encumbrance that is not included in the definition of Transfer shall be null and void and of no effect, and the Company will not recognize on its books and records or give effect to such Transfer.
(b) Notwithstanding any other provision of this Agreement to the contrary, no Stockholder shall Transfer any Shares other than pursuant to (i) Section 2.01(c), (ii) Section 2.03, (iii) Article III or (iv) Section 4.01.
(c) A Stockholder may Transfer its Shares to a Permitted Transferee of such Stockholder; provided that each Permitted Transferee of any Stockholder to which Shares are Transferred shall, and such Stockholder shall cause such Permitted Transferee to, Transfer back to such Stockholder (or to another Permitted Transferee of such Stockholder) any Shares it owns if such Permitted Transferee ceases to be a Permitted Transferee of such Stockholder.
(d) In addition, and without limitation to Section 2.07 of this Agreement, no Stockholder shall be entitled to Transfer its Shares at any time if such Transfer would:
(i) violate the Securities Act, or any state (or other jurisdiction) securities or Blue Sky laws applicable to the Company or the Shares; or
(ii) cause the Company to become subject to the registration requirements of the U.S. Investment Company Act of 1940, as amended from time to time.
Section 2.02 Subscription Right.
(a) If at any time after the date hereof, the Company proposes to issue equity securities of any kind (the term equity securities shall include for these purposes any warrants, options or other rights to acquire equity securities and debt securities convertible or exercisable into or exchangeable for equity securities) of the Company to any Person, except for issuances (1) to any director, employee, or consultant of or to the Company or any of its Subsidiaries pursuant to an equity-incentive plan approved by the Board, (2) pursuant to a stock split, subdivision, or similar transaction or dividend applicable to the outstanding equity interests
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of the Company as a dividend or share split of any equity interests then outstanding, (3) pursuant to an Initial Public Offering, (4) to lenders in connection with the incurrence of indebtedness or (5) as full or partial consideration in, or otherwise in connection with, any merger, acquisition or joint venture with another business enterprise, then, the Company shall:
(i) give written notice setting forth in reasonable detail (A) the designation and all of the terms and provisions of the securities proposed to be issued (the Proposed Securities ), including, where applicable, the voting powers, preferences and relative participating, optional or other special rights, and the qualification, limitations or restrictions thereof and dividend rate and maturity; (B) the price and other terms of the proposed sale of such securities; (C) the amount of such securities proposed to be issued; and (D) such other information as each Stockholder may reasonably request in order to evaluate the proposed issuance; and
(ii) offer to issue to each Stockholder a portion of the Proposed Securities equal to the total number of the Proposed Securities multiplied by a fraction, the numerator of which shall be the number of shares of Class A Stock then owned by such Stockholder and the denominator of which shall be the aggregate number of outstanding shares of Class A Stock (or, to the extent permitted by any other agreement of holders of Equity Securities, vested options to purchase shares of Class A Stock) (the Subscription Right ).
(b) Each Stockholder must exercise its Subscription Right hereunder within ten (10) Business Days after receipt of such notice from the Company and such Subscription Right may be exercised with respect to any amount of the Proposed Securities available for purchase by such Stockholder. The closing of any such sale shall not occur less than ten (10) Business Days following the receipt by the Company of the last notice by a holder of Shares exercising such Subscription Right. At the Closing, the Company shall issue the certificates evidencing the Shares to be conveyed to each holder of Shares that exercised such Subscription Right, duly endorsed and in negotiable form with any required documentary stamps affixed thereto or with an instrument evidencing the Transfer reasonably acceptable to such holder of Shares.
(c) Upon the expiration of the offering period described above, the Company will be free to sell such Proposed Securities that the Stockholders have not elected to purchase during the ninety (90) days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to the Stockholders. Any Proposed Securities offered or sold by the Company after such 90 day period must be reoffered to the Stockholders pursuant to this Section 2.04.
(d) The election by a Stockholder not to exercise its Subscription Rights under this Section 2.02 in any one instance shall not affect its right (other than in respect of a reduction in its percentage holdings) as to any subsequent proposed offer or reoffer. Any sale of such securities by the Company without first giving the Stockholders the rights described in this Section 2.02 shall be void and of no force or effect.
Section 2.03 Stockholder Exit Right.
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(a) Following the sixth anniversary of the date hereof, a Stockholder shall have the right, by delivery of a written notice to the Company (an Exit Notice ), to demand that the Company consummate a sale of the Company to any Person other than any Stockholder or any Affiliate of any Stockholder pursuant to a sale process (a Demand Sale ). The Company shall promptly pursue a Demand Sale after receiving an Exit Notice (including appointing investment banking and legal advisors which are reasonably acceptable to each Stockholder).
(b) If the Company complies with an Exit Notice through a Demand Sale, the sale of the Company may take the form of a stock sale, asset sale, merger or any other form whatsoever, to be determined by the Company; provided , that the Demand Sale shall be structured in a way to sell all of the Shares or, in the case of an asset sale, sell all or substantially all of the assets of the Company and distribute the proceeds to the Stockholders. For the avoidance of doubt, in any Demand Sale pursuant to this Section 2.03, each Stockholder shall be entitled to the same pro rata portion of the total consideration as such holders pro rata ownership of the outstanding shares of Class A Stock.
(c) The Stockholders agree to cooperate in good faith and to use their respective commercially reasonable efforts to, and instruct their Director designees to expeditiously assist with, the Demand Sale, including by (i) agreeing not to exercise any rights of appraisal which may be available in connection with such Demand Sale, (ii) consenting to and raising no objections to such Demand Sale, (iii) executing any Share purchase agreement, merger agreement or other agreement customary and necessary with respect to such Demand Sale, and (iv) voting all of its Shares in favor of the transaction relating to such Demand Sale and against any alternative transaction; provided that (X) the terms of such agreements shall apply equally to all Stockholders; (Y) such agreements may require the Stockholders (and any investment funds which hold equity interests in a Stockholder) to refrain post-closing for up to five years from competing with the Company and its Subsidiaries in the paid membership warehouse club business in the United States and (Z) except as in accordance with Section 2.03(d), such agreements shall not permit recourse to the Stockholders.
(d) In connection with a Demand Sale, to the extent that the Stockholders are to provide any indemnification or otherwise assume any other post-closing liabilities, the Stockholders shall do so severally and not jointly (and on a pro rata basis in accordance with the proceeds to be received by such Stockholder), other than with respect to any individual representation made by the Stockholders (which such individual representations shall be limited to capacity, ownership of the Shares to be sold by it (including its ability to convey title free and clear of all liens, encumbrances, adverse claims or similar restrictions), no conflicts with agreements to which it is a party, no conflicts with law, authority and enforceability on its part) and in no event will the Stockholders respective potential liability thereunder exceed the proceeds received by such Stockholder.
Section 2.04 Transfers and Counterparties to the Agreement . In each case of a Transfer by a Stockholder to a Permitted Transferee and in any other case necessitated by future amendments to this Agreement, a Transfer of any Shares by any Stockholder pursuant to this Agreement shall not become effective unless and until the Transferee (unless already a party to this Agreement) executes and delivers to the Company a counterpart to this Agreement.
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Section 2.05 Transaction Expenses. Except as otherwise set forth in Section 9.16, each Stockholder shall bear its pro-rata share of the costs and expenses of any transaction in which it sells Shares (based upon the net proceeds received by such Stockholder in such transaction) to the extent such costs are incurred for the benefit of all holders of Shares and are not otherwise paid by the Company or the acquiring party.
Section 2.06 Legends . Each certificate (if certificated) evidencing the Shares acquired by the Stockholders will bear the following legends reflecting the restrictions on the Transfer of such securities contained in this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE PROVISIONS OF THE STOCKHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 30, 2011, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND THE STOCKHOLDERS PARTY THERETO, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND ANY TRANSFER IN VIOLATION OF SUCH STOCKHOLDERS AGREEMENT SHALL BE NULL AND VOID.
Section 2.07 Regulatory Matters . No Stockholder shall Transfer any equity interests in the Company prior to receipt of all regulatory or legal approvals that, based on advice of counsel, are required for such Transfer. To the extent that any regulatory or legal filings are so required in connection with such proposed Transfer, the Company shall cooperate and use its commercially reasonable efforts to obtain or, if applicable, assist such Stockholders in obtaining, such approvals. For the avoidance of doubt, commercially reasonable efforts of the Company under this Section 2.07 shall include the payment by the Company of reasonable fees and expenses of the Company or its subsidiaries related to such regulatory or legal filings.
ARTICLE III.
REGISTRATION RIGHTS.
Section 3.01 Requested Registration .
(a) Initial Public Offering . Following the fourth anniversary of the Closing Date, a Stockholder (an Initiating Investor ) may elect to cause an Initial Public Offering. If an Initiating Investor elects to cause such an Initial Public Offering, the Initiating
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Investor shall provide notice to the Company and the other Stockholder of its election to cause an Initial Public Offering, and as part of such notice the Initiating Investor will notify the Company and the other Stockholder of whether it intends to include any of the Registrable Securities held by such Initiating Investor in such Initial Public Offering and the Company will, as soon as practicable, use its commercially reasonable efforts to effect such Registration (including, without limitation, filing post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and as would permit or facilitate the sale and distribution of all of the Equity Securities of the Company and, in the event that such Initiating Investor intends to include all or a part of the Registrable Securities held by such Initiating Investor in such Initial Public Offering, all or such portion of such Registrable Securities of the Initiating Investor as are specified in such request, together with, solely if the Initiating Investor has elected to include all or a part of the Registrable Securities held by such Initiating Investor in such Initial Public Offering, all or such portion of the Registrable Securities of the other Stockholder joining in such request as are specified in a written request of such other Stockholder received by the Company within fifteen (15) Business Days after written notice from the Initiating Investor is given to such other Stockholder pursuant to this sentence.
(b) Request for Registration .
(i) Following the occurrence of an Initial Public Offering, subject to Section 3.08, an Initiating Investor may elect to cause the Company to effect a Registration with respect to all or a part of the Registrable Securities held by such Initiating Investor on Form S-1 (or any successor form) in an amount greater than $25 million dollars (an S-1 Demand ). In the event such Initiating Investor provides notice to the Company of its election to cause an S-1 Demand, the Company will (A) promptly give written notice of the proposed Registration to the other Stockholder; and (B) as soon as practicable, use its commercially reasonable efforts to effect such Registration (including, without limitation, filing post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities of the Initiating Investor as are specified in such request, together with all or such portion of the Registrable Securities of the other Stockholder joining in such request as are specified in a written request of such other Stockholder received by the Company within fifteen (15) Business Days after written notice from the Company is given under Section 3.01(b)(i)(A) above.
(ii) If the Company shall receive from an Initiating Investor, at any time after the Company is eligible to register Registrable Securities on Form S-3, a written request that the Company effect a Registration with respect to all or a part of the Registrable Securities held by such Initiating Investor on Form S-3 in an amount greater than five million dollars ($5,000,000), the Company will (A) promptly give written notice of the proposed Registration to the other Stockholder, and (B) as soon as practicable, use its commercially reasonable efforts to effect such Registration (including, without limitation, filing post-effective amendments, appropriate
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qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities of the Initiating Investor as are specified in such request, together with all or such portion of the Registrable Securities of the other Stockholder joining in such request as are specified in a written request of the other Stockholder received by the Company within fifteen (15) Business Days after written notice from the Company is given under Section 3.01(b)(ii)(A) above; provided that the Company shall not be obligated to effect, or take any action to effect, any such Registration pursuant to this Section 3.01(b)(ii) after the Company has effected three (3) such Registrations requested by such Initiating Investor pursuant to this Section 3.01(b)(ii) during the previous twelve (12) month period.
(iii) If the Registration pursuant to Section 3.01(b)(ii) is for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or any successor provisions) (a Shelf Registration), the Company shall use reasonable best efforts to maintain continuously in effect, supplement and amend, if necessary, the Shelf Registration, as required by the instructions applicable to such registration form or by the Securities Act, until there are no remaining Registrable Securities;
(iv) If at any time, the Shelf Registration ceases to be effective, the Company shall file, not later than 30 days after such prior Shelf Registration ceased to be effective, and use its reasonable best efforts to cause to become effective a new Shelf Registration as soon as practicable. If, after any Shelf Registration has become effective, it is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority, the Company shall use its reasonable best efforts to prevent the issuance of any stop order suspending the effectiveness of the Shelf Registration or of any order preventing or suspending the use of any prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment.
(c) Underwriting .
(i) If an Initiating Investor intends to distribute the Registrable Securities covered by its request by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to Section 3.01(a) or Section 3.01(b) or prior to the takedown of any Registrable Securities registered pursuant to Section 3.01(b)(ii) and in each case the Company shall have the right to select the managing underwriter or underwriters to administer the Registration; provided that such managing underwriter or underwriters shall be reasonably acceptable to each Stockholder participating in such Registration if both Stockholders are participating in such Registration, or solely to the Stockholder participating in such Registration if the other Stockholder is not participating in such Registration. For the avoidance of doubt, the Board shall have the right to select the managing underwriter or underwriters to administer the Registration in an Initial Public Offering.
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(ii) If the Stockholder that is not an Initiating Investor requests inclusion of Registrable Securities in any Registration or underwriting contemplated by Section 3.01(a) or Section 3.01(b), the Initiating Investor may condition such offer on such other Stockholders acceptance of the further applicable provisions of this Article III. The Initiating Investor whose Registrable Securities are to be included in such Registration shall (together with the other Stockholder proposing to distribute its Registrable Securities through such underwriting) complete and execute all questionnaires, indemnities, powers of attorney and other documents required for such underwriting and enter into an underwriting agreement in customary form, with the representative of the underwriter or underwriters selected for such underwriting.
(iii) Notwithstanding any other provision of this Section 3.01, if, in any Registration contemplated by Section 3.01(a) or Section 3.01(b), the managing underwriter advises the Company and the Stockholders in writing that marketing factors require a limitation on the number of Registrable Securities to be underwritten, the number of Registrable Securities included in the Registration by the Initiating Investor and the other Stockholder shall in each case be reduced on a pro rata basis (based on the number of Registrable Securities proposed to be included in such Registration), by such minimum number of Registrable Securities as is necessary to comply with such request. For the avoidance of doubt, none of the Equity Securities being Registered by the Company for its own account in an Initial Public Offering pursuant to Section 3.01(a) shall be excluded. No Registrable Securities or any other securities excluded from the underwriting by reason of the underwriters marketing limitation shall be included in such Registration. If the other Stockholder who has requested inclusion in such Registration as provided above disapproves of the terms of the underwriting (including the terms of any indemnification required of such other Stockholder in the underwriting agreement related to such Registration), such Person may elect to withdraw therefrom by written notice to the Company, the underwriter and the Initiating Investor. The securities so withdrawn shall also be withdrawn from Registration.
Section 3.02 Company Registration.
(a) Following the consummation of an Initial Public Offering, if the Company shall determine to Register any of its Equity Securities either for its own account (other than a Registration (x) relating solely to employee stock or benefit plans, (y) relating solely to a Commission Rule 145 transaction, or (z) on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities) or for the account of other holders of Equity Securities of the Company or to sell registered securities from a Shelf Registration in an underwritten offering, the Company will:
(i) promptly give to each Stockholder a written notice thereof;
(ii) promptly give to each Stockholder a written notice of any underwriting of a shelf takedown; and
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(iii) include in such Registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by the Stockholders within fifteen (15) days after receipt of the last written notice from the Company described in clause (i) above; provided that in the case of a shelf takedown such request shall be made in time to be included in the shelf takedown. Such written request may specify all or a part of the Stockholders Registrable Securities.
(b) Underwriting .
(i) If the Registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Stockholders as a part of the written notice given pursuant to Section 3.02(a)(i). In such event, the right of each Stockholder to include its Registrable Securities in such Registration pursuant to this Section 3.02 shall be conditioned upon such Stockholders participation in such underwriting and the inclusion of such Stockholders Registrable Securities in the underwriting to the extent provided herein. Each Stockholder whose Registrable Securities are to be included in such Registration shall (together with the Company) agrees to sell such Stockholders Registrable Securities on the basis provided in any customary underwriting arrangements approved by the Company and complete and execute all customary questionnaires, power of attorney, indemnities and other documents, in each case in customary form, required for such underwriting arrangements and enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for underwriting by the Company.
(ii) Notwithstanding any other provision of this Section 3.02, if the representative of the underwriter or underwriters determines that marketing factors require a limitation on the number of Registrable Securities to be underwritten, the representative may (subject to the allocation priority set forth below) exclude from such Registration and underwriting some or all of the Registrable Securities which would otherwise be underwritten pursuant hereto. The Company shall so advise all Stockholders requesting Registration, and the number of Registrable Securities that may be included in the Registration and underwriting by each of the Stockholders shall be reduced, on a pro rata basis (based on the number of Registrable Securities proposed to be in included in such Registration), by such minimum number of shares as is necessary to comply with such limitation. For the avoidance of doubt, none of the Equity Securities being Registered by the Company for its own account shall be excluded. If any of the Stockholders disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.
Section 3.03 Company Control . The Stockholders shall not be permitted to sell any securities pursuant to Section 3.01 or 3.02 at any time that the Board determines in good faith that it would be materially detrimental to the Company or its stockholders for sales of securities to be made; provided that all Stockholders shall be treated consistently in connection with each such determination; and provided further , that the Company shall promptly notify each
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Stockholder in writing of any such action and provided further , that any such delay may not last more than sixty (60) days and such delays may not be in effect more than one hundred and twenty (120) days during any three hundred and sixty-five (365) day period.
Section 3.04 Expenses of Registration; Cooperation.
(a) All Registration Expenses incurred in connection with any Registration, qualification or compliance pursuant to this Article III shall be borne by the Company, except that the costs and expenses of more than one special counsel to any Stockholder shall be borne by such Stockholder.
(b) The Company and its Subsidiaries and their respective directors and officers shall cooperate with the Stockholders (including, but not limited to, participation in any road-show or similar equity marketing meetings and the preparation of the materials related thereto) and use their commercially reasonable efforts to consummate such Registration in a timely manner.
Section 3.05 Registration Procedures . In the case of each Registration effected by the Company pursuant to this Article III, the Company will keep the Stockholders, as applicable, advised in writing as to the initiation of each Registration and as to the completion thereof. At its expense, the Company will, subject to the terms of this Article III:
(a) keep such Registration that has become effective continuously current and effective, and not subject to any stop order, injunction or other similar order or requirement of the Commission, until the earlier of (x) the expiration of the Required Period and (y) the date on which all Registrable Securities covered by such Registration (i) have been disposed of pursuant to such Registration or (ii) cease to be Registrable Securities. In the event of any stop order, injunction or other similar order or requirement of the Commission or any other governmental or regulatory authority relating to any Registration, the Required Period for such Registration will be extended by the number of days during which such stop order, injunction or similar order or requirement is in effect. No request for Registration for purposes of Section 3.01(a) or (b) shall be deemed to have been effected while (x) such Registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory authority or (y) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of such applicable underwriting agreement by the Initiating Investor.
(b) furnish such number of prospectuses, offer documents and other documents incident thereto as each of the Stockholders, as applicable, from time to time may reasonably request;
(c) notify each Stockholder of Registrable Securities covered by such Registration at any time when a prospectus relating thereto is required to be delivered under the Securities Act or other applicable law of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement
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of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(d) furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion and negative assurance letter, dated as of such date, of the counsel representing the Company for the purposes of such Registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Stockholders participating in such Registration, addressed to the underwriters, if any, and to the Stockholders participating in such Registration and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Stockholders participating in such Registration, addressed to the underwriters, if any, and if permitted by applicable accounting standards, to the Stockholders participating in such Registration;
(e) before filing any registration statement, prospectus, offer document and other documents incident or any amendments or supplements thereto, the Company shall furnish to and afford each Stockholder covered by such document, and its advisors, and the managing underwriters, if any, a reasonable opportunity to review and comment on copies of all such documents (including copies of all exhibits thereto) proposed to be filed;
(f) make available upon reasonable advance notice for inspection by any Stockholder of such Registrable Securities, any underwriter participating in any such distribution and any attorney, accountant or other professional retained by any such Stockholder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to conduct a reasonable investigation for purposes of Section 11(a) of the Securities Act and other applicable antifraud and securities laws and cause the Companys officers, directors and employees to make available for inspection all information reasonably requested by such Stockholders in connection with such Offer Document;
(g) use its commercially reasonable efforts to cause all Registrable Securities covered by a Registration to be listed or qualified for trading on any stock exchange or quotation service on which the Companys outstanding Shares are listed or qualified for trading;
(h) cooperate with each Stockholder and the managing underwriter, if any, participating in the disposition of such Registrable Securities in connection with any filings required to be made with the Financial Industry Regulatory Authority or any other analogous regulation; and
(i) use its commercially reasonable efforts to take all other steps reasonably necessary to effect the Registration, qualification, offering and sale of the Registrable Securities covered by a Registration contemplated hereby and enter into any other customary agreements and take such other actions, including participation in roadshows, as are
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reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.
Section 3.06 Indemnification.
(a) To the extent permitted by law, the Company will indemnify each of the Stockholders, as applicable, each of its officers, directors and partners, and each Person controlling each of the Stockholders, with respect to each Registration which has been effected pursuant to this Article III, and each underwriter for such Stockholders, if any, and each person who controls any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any of the following (each, a Violation ): (x) any untrue statement (or alleged untrue statement) of a material fact contained in any marketing materials, prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, (y) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (z) any violation by the Company of the Securities Act or the Exchange Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such Registration, qualification or compliance; and will reimburse each of the Stockholders, each of its officers, directors and partners, and each Person controlling each of the Stockholders, each such underwriter and each Person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action; provided that the Company will not be liable in any such case to any Stockholder, underwriter or controlling person to the extent that any such claim, loss, damage, liability or expense arises out of or is based upon a Violation which occurs in reliance upon information furnished to the Company by the Stockholder, underwriter or controlling person seeking to be indemnified, where such information is specifically provided in writing for use in such prospectus, offering circular or other document.
(b) Each of the Stockholders will, if Registrable Securities held by it are included in the securities as to which such Registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and each underwriter, if any, of the Companys securities covered by such a registration statement, each person who controls the Company or such underwriter, each other Stockholder and each of their officers, directors, and partners, and each person controlling such other Stockholder against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other offering document made in writing by such Stockholder for the express purpose of inclusion in such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Stockholder therein not misleading, and will reimburse the Company and such Other Stockholder, directors, officers, partners, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and
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in conformity with written information furnished to the Company by such Stockholder and stated to be specifically for use therein; provided , however , that the obligations of each of the Stockholders hereunder shall be limited to an amount equal to the net proceeds to such Stockholder of securities sold in such offering as contemplated herein.
(c) Each party entitled to indemnification under this Section 3.06 (the Indemnified Party ) shall give notice to the party required to provide indemnification (the Indemnifying Party ) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such partys expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of counsel shall be at the expense of the Indemnifying Party); provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article III except to the extent the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 3.06 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with any underwritten public offering contemplated by this Agreement are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall be controlling.
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Section 3.07 Information by the Stockholders . Each of the Stockholders holding securities included in any Registration shall furnish to the Company such information regarding such Stockholder and the distribution proposed by such Stockholder as the Company may reasonably request in writing and as shall be reasonably required in connection with any Registration, qualification or compliance referred to in this Article III.
Section 3.08 Market Stand-off Agreement .
(a) Each of the Stockholders agrees not to sell or otherwise Transfer or dispose of any Registrable Securities held by such Stockholder, if requested by the Company and an underwriter of Equity Securities of the Company, for a period not longer than the one hundred and eighty (180) day period following the consummation of a Registration; provided that if such offering includes a primary underwritten offering by the Company, all directors and substantially all officers of the Company enter into similar agreements; and provided further that if such offering does not include a primary underwritten offering by the Company, the Stockholders shall only be required to enter into such agreements if such Stockholder is selling shares in connection with such offering. Any waiver provided by the Company or an underwriter of Equity Securities of the Company with respect to the obligations set forth in the immediately preceding sentence shall apply to the other Stockholder on a pro rata basis (based on the number of Registrable Securities proposed to be sold by the Stockholders in such Registration).
(b) If requested by the underwriters, the Stockholders shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of said period. The provisions of this Section 3.08 shall be binding upon any Transferee who acquires Registrable Securities.
Section 3.09 Transfer of Registration Rights . The registration rights set forth in this Article III may be assigned, in whole or in part, to any Permitted Transferee (who shall be bound by all obligations of this Agreement), provided that such rights of assignment will in no event be deemed to enlarge, alter or otherwise expand the rights of any Stockholder set forth in Section 3.01 or Section 3.02.
Section 3.10 Termination. The registration rights set forth in this Article III shall not be available to any Stockholder if all of the Registrable Securities held by such Stockholder have been sold in a registration pursuant to the Securities Act or pursuant to Rule 144.
ARTICLE IV.
CVC CLASS B STOCK.
Section 4.01 Transfer to the Company.
(a) CVC hereby transfers to the Company, and the Company hereby accepts from CVC, all shares of Class B Stock held by CVC on the date hereof.
(b) If at any time after the date hereof, other than following a Buyback Event, CVC holds or acquires any shares of Class B Stock (the CVC Class B Stock ), including in
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accordance with Section 2.02, it shall transfer to the Company, and the Company shall accept from CVC, all such shares pursuant to subsection (c) below.
(c) The closing of each such transfer (other than the transfer effected pursuant to Section 4.01(a), which shall take place simultaneously with the execution of this Agreement) shall take place at the principal place of business of the Company on such date as may be mutually agreed by CVC and the Company, but in no event later than the 30th day (or if such 30th day is not a Business Day, then on the next succeeding Business Day) following CVCs receipt of the CVC Class B Stock (or, if the consent, approval or other action (or inaction) of any governmental authority is required to consummate such transfer, then in no event later than the 15th day following the date on which any such consent, approval or other action (or inaction) is obtained). At the closing, CVC shall deliver to the Company a certificate or certificates, if any, evidencing the shares of CVC Class B Stock to be transferred, duly endorsed for transfer to such party, along with an appropriate stock power or stock powers duly endorsed in blank and together with a certificate, in form and substance reasonably satisfactory to the Company, pursuant to which CVC shall represent and warrant to the Company that CVC is duly authorized and empowered to so transfer such shares of CVC Class B Stock and that the Company is receiving good and marketable title to such shares, free and clear of all Liens (other than restrictions contained herein or imposed by applicable securities laws).
(d) Except as provided in Section 4.02 below, the Company shall not Transfer any shares of the CVC Class B Stock.
Section 4.02 Sale to CVC .
(a) Upon the occurrence of a Buyback Event, CVC shall purchase from the Company, and the Company shall sell to CVC, all shares of CVC Class B Stock then held by the Company pursuant to subsection (c) below.
(b) The closing of such sale and purchase shall take place at the principal place of business of the Company on such date as may be mutually agreed by CVC and the Company, but in no event later than the time of the Buyback Event, as applicable, and no earlier than the 5th day before the date on which the Buyback Event is anticipated to occur. At the closing, (i) the Company shall deliver to CVC a certificate or certificates, if any, evidencing the shares of CVC Class B Stock to be purchased, duly endorsed for transfer to such party, along with an appropriate stock power or stock powers duly endorsed in blank and together with a certificate, in form and substance reasonably satisfactory to CVC, pursuant to which the Company shall represent and warrant to CVC that the Company is duly authorized and empowered to so sell such shares of CVC Class B Stock and that CVC is receiving good and marketable title to such shares, free and clear of all Liens (other than restrictions contained herein or imposed by applicable securities laws), and (ii) upon receipt thereof, CVC shall deliver the purchase price for such shares of CVC Class B Stock. The purchase price for the CVC Class B Stock shall be the aggregate amount of $1.00.
(c) If a purchase and sale occurs pursuant to this Section in anticipation of a Buyback Event, and the Buyback Event does not occur, the purchase and sale shall be immediately rescinded with effect from the date on which it occurred.
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ARTICLE V.
TERMINATION.
Section 5.01 Initial Public Offering . Section 1.02(a), Section 1.02(c), Section 1.02(d), Section 1.03, Section 1.06, Article II and, solely to the extent the Buyback Event and the closing of CVCs purchase of the CVC Class B Stock pursuant to Section 4.02 has occurred, Article IV of this Agreement, shall automatically terminate upon the consummation of an Initial Public Offering.
Section 5.02 Voluntary Termination . This Agreement shall terminate automatically upon the consummation of a Demand Sale or otherwise with the written consent of each Stockholder.
ARTICLE VI.
REPRESENTATIONS; WARRANTIES AND COVENANTS
Section 6.01 Representations and Warranties of the Stockholders. Each Stockholder hereby represents and warrants, severally and not jointly, and solely on its own behalf, to each other Stockholder and to the Company that on the date hereof:
(a) Existence; Authority; Enforceability . Such Stockholder has the necessary power and authority to enter into this Agreement and to carry out its obligations hereunder. Such Stockholder is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary corporate or other action, and no other act or proceeding, corporate or otherwise, on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed by such Stockholder and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.
(b) Absence of Conflicts . The execution and delivery by such Stockholder of this Agreement and the performance of its obligations hereunder do not and will not (i) conflict with, or result in the breach of any provision of the constitutive documents of such Stockholder; (ii) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any material contract, agreement or permit to which such Stockholder is a party or by which such Stockholders assets or operations are bound or affected; or (iii) violate, in any material respect, any law applicable to such Stockholder.
(c) Consents . Other than any consents that have already been obtained, no governmental consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such Stockholder in connection with (a) the
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execution, delivery or performance of this Agreement or (b) the consummation of any of the transactions contemplated herein.
Section 6.02 Representations and Warranties of the Company. The Company hereby represents and warrants to each Stockholder that on the date hereof:
(a) Existence; Authority; Enforceability . The Company has the necessary power and authority to enter into this Agreement and to carry out its obligations hereunder. The Company is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary corporate or other action, and no other act or proceeding on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed by the Company and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.
(b) Absence of Conflicts . The execution and delivery by the Company of this Agreement and the performance of its obligations hereunder do not and will not (i) conflict with, or result in the breach of any provision of the organizational documents of the Company or any of its Subsidiaries; (ii) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any material contract, agreement or permit to which the Company or any of its Subsidiaries is a party or by which the Companys or any of its Subsidiaries assets or operations are bound or affected; or (iii) violate, in any material respect, any law applicable to the Company or any of its Subsidiaries.
(c) Consents . Other than any consents that have already been obtained, no governmental consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by the Company or any of its Subsidiaries in connection with (a) the execution, delivery or performance of this Agreement and the issuance of the Shares issued on the date hereof or (b) the consummation of any of the transactions contemplated herein.
Section 6.03 Entitlement of the Company and the Stockholders to Rely on Representations and Warranties. The foregoing representations and warranties may be relied upon by the Company and by the Stockholders in connection with the entering into of this Agreement.
ARTICLE VII.
INTERPRETATION OF THIS AGREEMENT.
Section 7.01 Defined Terms . As used in this Agreement, the following terms have the respective meaning set forth below:
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(a) Affiliate shall mean any Person, directly or indirectly controlling, controlled by or under common control with such Person. For these purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.
(b) Affiliate Transactions shall mean any transaction or a series of related transactions on behalf of the Company or its Subsidiaries, on the one hand, and any Stockholder or any of its Affiliates, on the other hand (other than any management rights, management services or similar agreement entered into between the Stockholders and the Company on or prior to the Closing Date).
(c) Agreement shall have the meaning set forth in the preamble.
(d) Alcohol Business shall mean the business of purchasing, importing and selling alcoholic beverages by the Company and/or any Subsidiary, and any and all assets and liabilities allocated thereto pursuant to the Companys certificate of incorporation.
(e) Applicable Ownership Percentages shall have the meaning set forth in Section 9.16.
(f) BJs shall have the meaning set forth in the recitals.
(g) Board shall have the meaning set forth in Section 1.02.
(h) Business shall have the meaning set forth in Section 1.06(i).
(i) Business Day shall mean any day other than Saturday, Sunday or any other day on which banking institutions in New York are required or authorized to be closed for the transaction of normal banking business
(j) Buyback Event shall mean the occurrence of any of the following:
(i) One day following a determination by CVC that there is no longer any regulatory impediment to CVC owning shares of Class B Stock;
(ii) The effective date of a Demand Sale or any other sale of the Company or all or substantially all of the assets of the Company and its Subsidiaries taken as a whole;
(iii) The effective date of any dissolution or liquidation of the Company;
(iv) The effective date of any sale, disposition or discontinuance of the Alcohol Business;
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(v) The effective date of an Initial Public Offering, solely to the extent there is no legal impediment to CVC owning shares of Class B Stock and there is no Violation of Law therefrom; or
(vii) A determination by the Board that there has been a Change in Circumstances.
(k) By-Laws shall have the meaning set forth in Section 1.01.
(l) Change in Circumstances shall be the date that is the earlier of either:
(i) 30 days after the date on which the Company is found to be in Violation of Law provided that the Company continues to be in Violation of Law, and
(ii) the day the Company either is (i) assessed a fine in excess of $100,000 in the aggregate by any governmental entity for a final non-appealable Violation of Law, or (ii) is prohibited or is materially restricted from operating the Alcohol Business due to a final non-appealable Violation of Law.
(m) Closing shall have the meaning set forth in the recitals.
(n) Closing Date shall have the meaning set forth in the recitals
(o) Code means the U.S. Internal Revenue Code of 1986, as amended.
(p) Commission shall mean the U.S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(q) Company shall have the meaning set forth in the preamble.
(r) Confidential Infor m atio n shall have the meaning set forth in Section 1.05.
(s) Confidential Investor s shall have the meaning set forth in Section 1.05.
(t) CVC shall have the meaning set forth in the preamble.
(u) CVC Directors shall have the meaning set forth in Section 1.02(c).
(v) CVC Fund Indemnitors shall have the meaning set forth in Section 9.17(b).
(w) CVC Indemnitees shall have the meaning set forth in Section 9.17(b).
(x) CVC Class B Stock shall have the meaning set forth in Section 4.01(b).
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(y) Demand Sale shall have the meaning set forth in Section 2.03.
(z) Director shall have the meaning set forth in Section 1.02.
(aa) Equity Securities shall mean (a) any Shares, preferred stock or other capital stock of the Company or any Subsidiary, as the case may be, (b) any security convertible, or exchangeable, with or without consideration, into any Shares or other capital stock of the Company or any Subsidiary, as the case may be (including any option, warrant or other right to subscribe for or purchase such a convertible security), (c) any security carrying or linked to any option, warrant or other right to subscribe for or purchase any Shares or other capital stock of the Company or any Subsidiary or (d) any such option, warrant or other right. All references to Equity Securities held by any Stockholder includes Equity Securities now owned or hereafter acquired (whether or not now authorized, issued or outstanding).
(bb) Exit Notice shall have the meaning set forth in Section 2.03.
(cc) ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.
(dd) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(ee) Class A Stock shall mean the shares of the Companys common stock designated as Class A Common Stock, par value $.01 per share.
(ff) Holding Company shall have the meaning set forth in Section 7.1(ooo).
(gg) Indemnified Party shall have the meaning set forth in Section 3.06.
(hh) Indemnifying Party shall have the meaning set forth in Section 3.06.
(ii) Initial Board of Directors shall have the meaning set forth in Section 1.01.
(jj) Initial Public Offering shall mean an underwritten public offering of Shares in an amount equal to or greater than one hundred and twenty-five million ($125,000,000) pursuant to a registration statement on Form S-1 filed with the Securities Exchange Commission where such Shares will be listed on the New York Stock Exchange or the NASDAQ Global Market.
(kk) Initiating Investor shall mean CVC and LGP, in its capacity as an initiator of a Registration of Registrable Securities in accordance with Section 3.01(a) and 3.01(b).
(ll) LGP shall have the meaning set forth in the preamble.
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(mm) LGP Directors shall have the meaning set forth in Section 1.02(c).
(nn) LGP Fund Indemnitors shall have the meaning set forth in Section 9.17(a).
(oo) LGP Indemnitees shall have the meaning set forth in Section 9.17(a).
(pp) Class B Stock shall mean the shares of the Companys common stock designated as Class B Common Stock, par value $.01 per share.
(qq) Lien shall mean, with respect to any property (real or personal, tangible or intangible), any mortgage, lien, pledge, charge, conditional sales agreement, title retention agreement, lease, security interest, easement, right of way, title defect, restriction, encumbrance, or any claim of any kind with respect to such property.
(rr) Liquid Securities shall mean securities which are traded or quoted on one or more national securities exchanges (within the meaning of the Exchange Act) or the NASDAQ Global Market or on a comparable securities market or exchange existing now or in the future, together with such registration or other rights as may be necessary to permit the recipient thereof to freely Transfer such securities.
(ss) Merger shall have the meaning set forth in the recitals.
(tt) Non-Sponsor Director shall have the meaning set forth in Section 1.02(a).
(uu) Organizational Documents shall mean the certificate of incorporation and By-Laws.
(vv) Owns , Own or Owned shall mean beneficial ownership, assuming the conversion of all outstanding securities convertible into common stock and the exercise of all outstanding options and warrants to acquire common stock.
(ww) Permitted Transferee shall mean (a) any Affiliate of LGP or CVC, as the case may be or (b) any commercial bank, savings and loan institution or any other similar lending institution as security for any indebtedness owed to such lender by a Stockholder; provided that (i) any Permitted Transferee of LGP pursuant to clause (a) of this definition shall be treated as LGP for all purposes hereof, (ii) and any Permitted Transferee of CVC pursuant to clause (a) of this definition shall be treated as CVC for all purposes hereof and provided further that any Permitted Transferee pursuant to clause (b) of this definition (i) agrees, prior to such Transfer, not to limit by contract or otherwise CVCs or LGPs, as applicable, discretion to execute its rights under this Agreement; provided that in the event of a foreclosure in which such lender acquires beneficial ownership of Equity Securities, such lender shall further agree to grant an irrevocable proxy to the non-defaulting Stockholder with respect to any matter to be voted on by holders of Equity Securities pursuant to this Agreement or applicable law and (ii) as a condition precedent to being deemed a Permitted Transferee, agrees, prior to the event of a foreclosure, to (W) not have any rights as a Stockholder pursuant to this Agreement, (X) to be
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deemed to have assigned all of its rights to the other Stockholder, (Y) not Transfer any Shares and (Z) be entitled solely to the economic benefits of the Shares.
(xx) Person shall mean an individual, partnership, joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
(yy) Quorum shall have the meaning set forth in Section 1.04(a).
(zz) Register , Registered and Registration shall mean a registration effected by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement.
(aaa) Registrable Securities shall mean all Shares and all Shares issued or issuable upon conversion of any warrants or options held by any holder of Shares, provided, that, a Registrable Security shall cease to be a Registrable Security as such time as the holder thereof is entitled to sell such Registrable Security within six (6) months under Rule 144(k) or Regulation S of the Securities Act or otherwise without restriction under the Securities Act; provided that in the case of Class B Stock such Shares shall be Registrable Securities only if there is no legal impediment to any Stockholder owning or selling such Shares and there is no Violation of Law therefrom.
(bbb) Registration Expenses shall mean all expenses incurred by the Company in compliance with Section 3.01 and 3.02 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and expenses of counsel for the Stockholders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).
(ccc) Representatives shall have the meaning set forth in Section 1.05.
(ddd) Required Period shall mean one hundred and eighty (180) days following the first day of effectiveness of such Registration.
(eee) Security, Securities shall have the meaning set forth in Section 2(1) of the Securities Act.
(fff) Securities Act shall mean the U.S. Securities Act of 1933, as amended.
(ggg) Selling Expenses shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities.
(hhh) Selling Investor shall the meaning set forth in Section 3.02(a).
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(iii) Services Agreement shall mean the Management Services Agreement of even date hereof among BJs and affiliates of the Stockholders, as the same may be amended, supplemented or otherwise modified.
(jjj) Shares shall mean (i) initially, collectively the Class A Stock and the Class B Stock, (ii) following the effectiveness of the actions set forth in Section 9.01 below, the common stock of the Company, par value $.01 per share, (iii) any warrants or options to purchase shares set forth in clauses (i) and (ii), and (iv) any shares of capital stock that are issuable by way of a stock dividend or distribution payable thereon or stock split, reverse stock split, recapitalization, reclassification, reorganization, exchange, subdivision or combination thereof. For the avoidance of doubt, the only shares of capital stock that shall be deemed to be outstanding for purposes of this Agreement are those shares of capital stock that have been issued.
(kkk) Stockholders shall have the meaning set forth in the preamble.
(lll) Subject Investors shall have the meaning set forth in Section 2.03(b).
(mmm) Subscription Right shall have the meaning set forth in Section 2.02.
(nnn) Subsidiaries shall mean when used with respect to any Person, means any other Person of which (a) in the case of a corporation, at least (i) a majority of the equity and (ii) a majority of the voting interests are owned or controlled, directly or indirectly, by such first Person, by any one or more of such first Persons Subsidiaries, or by such first Person and one or more of such first Persons Subsidiaries or (b) in the case of any Person other than a corporation, such first Person, one or more of such first Persons Subsidiaries, or such first Person and one or more of such first Persons Subsidiaries (i) owns a majority of the equity interests thereof and (ii) has the power to elect or direct the election of a majority of the members of the governing body thereof.
(ooo) Transfer shall mean any sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition in one transaction or a series of related transactions (including by merger, consolidation, operation of law or otherwise); and Transferred , Transferee , Transferability , and Transferor shall each have a correlative meaning. For the avoidance of doubt, a sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of a controlling interest in any Stockholder, in each case directly or through the sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of a controlling interest, whether through a stock sale or otherwise, in any ultimate or intermediate parent entity of such Stockholder, shall constitute a Transfer for purposes of this Agreement, as if such interest was a direct interest in the Company; provided, however that with respect to any Stockholder organized for the business purpose of, or whose sole business purpose is, the holding of Equity Securities (a Holding Company ), any sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of any interest in any such Stockholder or any ultimate or intermediate parent entity of such Stockholder (solely to the extent that such entity is a is also a Holding Company), shall in each case constitute a Transfer for purposes of this Agreement.
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(ppp) Transaction shall have the meaning set forth in the recitals.
(qqq) Transitory Sub shall have the meaning set forth in the recitals.
(rrr) Violation shall have the meaning set forth in Section 3.06(a).
(sss) Violation of Law shall have the meaning set forth in Section 8.01.
Section 7.02 Directly or Indirectly . Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
Section 7.03 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State.
Section 7.04 Section Headings . The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.
ARTICLE VIII.
COMPLIANCE EFFORTS
Section 8.01 Violation of Law . If at any time the Company is found by any governmental entity to be in violation of law because of its equity capitalization structure (a Violation of Law), the Company shall determine how to bring the Company into compliance with such law without violating any law applicable to the Company or any Stockholder or its Affiliates; provided that (a) except as provided in clause (b)(ii) of this Section 8.01, (i) the Company shall not offer to any governmental entity, in order to comply with such law, to take any action that would disproportionately adversely affect any Stockholder or its Affiliates, without the prior written consent of such Stockholder and (ii) in the event that a governmental entity proposes that the Company take any action to comply with such law that would disproportionately adversely affect any Stockholder or its Affiliates, the Company shall not agree to take any such action without the prior written consent of such Stockholder and (b) if a governmental entity in a final non-appealable decision has determined that the Company is in Violation of Law to the extent that the Company (i) has alternatives to comply with such determination, the Company shall select an alternative that does not disproportionately adversely affect any Stockholder or its Affiliates without the prior written consent of such Stockholder and (ii) does not have any other alternative to comply with such determination other than an alternative which disproportionately adversely affects any Stockholder or its Affiliates, such Stockholder shall permit the Company to take such action.
ARTICLE IX.
MISCELLANEOUS
Section 9.01 Actions Following a Buyback Event or CVC Exit . If a Buyback Event occurs:
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(a) the Company shall, promptly following such Buyback Event, use its best efforts to cause the Board to approve and the Stockholders to adopt the Amended and Restated Certificate of Incorporation of the Company in the form attached hereto as Exhibit A and file such certificate with the Secretary of State of the State of Delaware, and reclassify all issued and outstanding shares of common stock as follows: each Unit shall be converted into one share of common stock, par value $.01 per share, of the Company, where a Unit is one share of Class A Stock and one share of Class B Stock,
(b) each Stockholder hereby agrees to vote all of his, her or its Equity Securities, whether now owned or hereafter acquired or which such Stockholder may be empowered to vote, in whatever manner the Board shall deem reasonably necessary to approve the foregoing, and
(c) the parties hereto shall amend this Agreement as is necessary to effect the actions contemplated by this Section 9.01
Section 9.02 Limitations on Dividends and Issuances . Until the actions specified in Section 9.01 have occurred, no shares of Class A Stock may be issued by the Company to any Person, including in accordance with Section 2.02, unless the issuance includes the same number of shares of Class B Stock, and vice versa.
Section 9.03 Notices.
(a) All communications under this Agreement shall be in writing and shall be delivered by hand or facsimile or mailed by overnight courier or by registered or certified mail, postage prepaid:
To the Company: |
Beacon Holding Inc. c/o Leonard Green & Partners, L.P. 11111 Santa Monica Blvd., #2000 Los Angeles, CA 90025 Attn: Jonathan A. Seiffer J. Kristofer Galashan |
|
Facsimile: (310) 954-0404 | ||
and | ||
c/o CVC Capital Partners Advisory (US), Inc. 712 Fifth Avenue, 43rd Floor New York, NY 10019 Attn: Cameron Breitner Kenneth Hammond |
||
Facsimile: (212) 265-6375 |
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To CVC: |
CVC Beacon LLC c/o CVC Capital Partners Advisory (US), Inc. 712 Fifth Avenue, 43rd Floor New York, NY 10019 Attn: Cameron Breitner Kenneth Hammond |
|
Facsimile: (212) 265-6375 | ||
with a copy to: |
Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Attn: Gary I. Horowitz |
|
Facsimile: (212) 455-2502 | ||
To LGP: |
c/o Leonard Green & Partners, L.P. 11111 Santa Monica Blvd., #2000 Los Angeles, CA 90025 Attn: Jonathan A. Seiffer J. Kristofer Galashan |
|
Facsimile: (310) 954-0404 | ||
with a copy to: |
Latham & Watkins LLP 885 Third Avenue New York, New York 10022 Attn: Howard A. Sobel John Giouroukakis |
|
Facsimile: (212) 751-4864 |
or at such other address and to the attention of such other person as the Stockholder may designate by written notice to the Company.
(b) Any notice so addressed shall be deemed to be received: if delivered by hand or facsimile, on the date of such delivery; if mailed by overnight courier, on the first Business Day following the date of such mailing; and if mailed by registered or certified mail, on the third Business Day after the date of such mailing.
Section 9.04 Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.
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Section 9.05 Entire Agreement . This Agreement and Section 2.1 of the Management Services Agreement of even date herewith (as the same may be amended, supplemented or modified from time to time) constitute the entire understanding of the parties hereto relating to the subject matter hereof and supersede all prior understandings among such parties.
Section 9.06 Amendment and Waiver . This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and each of the Stockholders, other than amendments to add or remove parties to this Agreement as a result of Transfers permitted herein. No waiver of any breach shall be deemed to be a further or continuing waiver of such breach or a waiver of any other or subsequent breach. Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.
Section 9.07 Business Opportunities; No Recourse .
(a) None of the Stockholders nor any of their respective Affiliates shall have any obligation to present any business opportunity to the Company or any of its subsidiaries, even if the opportunity is one that the Company or any of its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no such Person shall be liable to the Company or any of its subsidiaries or any Stockholder for breach of any fiduciary or other duty, as a Stockholder, by reason of the fact that such Person pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or any of its subsidiaries.
(b) Notwithstanding anything that may be expressed or implied in this Agreement, and notwithstanding the fact that certain of the parties may be partnerships or limited liability companies, each party hereto covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any former, current or future directors, officers, agents, Affiliates, employees, general or limited partners, members, managers or stockholders of any party hereto or any of their successors or permitted assignees or any former, current or future directors, officers, agents, Affiliates, employees, general or limited partners, members, managers or stockholders of any of the foregoing, as such, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law or otherwise, for any obligation of any party hereto under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.
Section 9.08 Severability . In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not affect the remaining provisions of this Agreement which shall remain in full force and effect.
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Section 9.09 Counterparts . This Agreement may be executed in two or more counterparts (including by facsimile or pdf format), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.
Section 9.10 Recapitalization, Exchange, Etc. Affecting the Companys Stock . Nothing in this Agreement shall prevent the Company (subject to Board approval) from effecting any recapitalization, corporate reorganization, corporate inversion involving the creation of one or more holding companies and/or holding company subsidiaries, or similar transaction. The provisions of this Agreement shall apply, to the full extent set forth herein, with respect to any and all Shares, and all of the other shares of capital stock of the Company or any successor or assignee of the Company (whether by merger, consolidation, sale of assets, business combination or otherwise) that may be issued in respect of, in exchange for, or in substitution of such shares of capital stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations, and the like occurring after the date hereof.
Section 9.11 Submission to Jurisdiction; Waiver of Jury Trial EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND OF ANY DELAWARE STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS STOCKHOLDERS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.12 Specific Performance . The Company and the Stockholders hereby acknowledge and agree that it is impossible to measure in money the damages which will accrue to the parties hereto by reason of the failure of any party hereto to perform any of its obligations set forth in this Agreement and that, in the event of any such failure, an aggrieved party will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
Section 9.13 Conflict with Organizational Documents . In the event of any conflict between the terms and conditions of this Agreement and the Organizational Documents, the terms and conditions of this Agreement shall control. The parties shall cooperate to take any actions necessary to ensure that the Organizational Documents conform to the terms and conditions of this Agreement.
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Section 9.14 No Third Party Liability. This Agreement may only be enforced against the named parties hereto. All claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), may be made only against the entities that are expressly identified as parties hereto.
Section 9.15 Stockholder Acting as Creditor . Nothing in this Agreement shall impair or otherwise affect any Stockholders rights as a creditor of the Company or any of its Subsidiaries or in any other relationship with the Company, any of its Subsidiaries or any other Stockholder.
Section 9.16 Costs Associated with Class B Stock . If Class B Costs (as defined below) exceed $400,000, CVC shall be responsible for reimbursing the Company for an amount equal to (a) one (1) minus the Applicable Ownership Percentage multiplied by (b) (i) the Companys reasonable attorney fees and attorneys out of pocket costs associated with the actions set forth in Article 8 and any fines assessed against the Company, in each case, due to a Violation of Law (provided such Violation of Law results solely from the capitalization of the Company and the Company is contesting, or has contested, such Violation of Law) (the Class B Costs) less (ii) $400,000. The Applicable Ownership Percentage shall be a fraction the numerator of which is the number of shares of Class A Stock held by CVC and the denominator of which is the number of Class A Stock held by the Stockholders.
Section 9.17 Indemnification .
(a) Any director, officer, employee or agent of the Company entitled to indemnification, advancement of expenses and/or insurance, pursuant to this Agreement or the Organizational Documents of the Company and that is an officer, employee, partner or advisor of LGP or any of their Affiliates (each such person, a LGP Indemnitee ), may have certain rights to indemnification, advancement of expenses and/or insurance provided by or on behalf of LGP and/or their Affiliates (collectively, the LGP Fund Indemnitors ). Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise: (i) the Company is the indemnitor of first resort (i.e., the Companys obligations to each LGP Indemnitee are primary and any obligation of the LGP Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by each LGP Indemnitee are secondary), (ii) the Company will be required to advance the full amount of expenses incurred by each LGP Indemnitee and will be liable for the full amount of all liabilities, expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and required by this Agreement, without regard to any rights each LGP Indemnitee may have against the LGP Fund Indemnitors, and (iii) the Company irrevocably waives, relinquishes and releases the LGP Fund Indemnitors from any and all claims against the LGP Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise, no advancement or payment by the LGP Fund Indemnitors on behalf of a LGP Indemnitee with respect to any claim for which such LGP Indemnitee has sought indemnification or advancement of expenses from the Company will affect the foregoing and the LGP Fund Indemnitors will have a right of
35
contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such LGP Indemnitee against the Company. The LGP Fund Indemnitors are express third-party beneficiaries of the terms of this Section 9.17(a).
(b) Any director, officer, employee or agent of the Company entitled to indemnification, advancement of expenses and/or insurance, pursuant to this Agreement or the Organizational Documents of the Company and that is an officer, employee, partner or advisor of CVC or any of their Affiliates (each such person, a CVC Indemnitee ), may have certain rights to indemnification, advancement of expenses and/or insurance provided by or on behalf of CVC and/or their Affiliates (collectively, the CVC Fund Indemnitors ). Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise: (i) the Company is the indemnitor of first resort (i.e., the Companys obligations to each CVC Indemnitee are primary and any obligation of the CVC Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by each CVC Indemnitee are secondary), (ii) the Company will be required to advance the full amount of expenses incurred by each CVC Indemnitee and will be liable for the full amount of all liabilities, expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and required by this Agreement, without regard to any rights each CVC Indemnitee may have against the CVC Fund Indemnitors, and (iii) the Company irrevocably waives, relinquishes and releases the CVC Fund Indemnitors from any and all claims against the CVC Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise, no advancement or payment by the CVC Fund Indemnitors on behalf of a LGP Indemnitee with respect to any claim for which such CVC Indemnitee has sought indemnification or advancement of expenses from the Company will affect the foregoing and the CVC Fund Indemnitors will have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such CVC Indemnitee against the Company. The CVC Fund Indemnitors are express third-party beneficiaries of the terms of this Section 9.17(b).
Section 9.18 Tax Treatment . Each of the Company and the Stockholders agree to treat the Class A Stock and the Class B Stock as stock of the Company for tax purposes unless otherwise required pursuant to a determination as defined in Section 1313(a) of the Code.
[ Remainder of page intentionally left blank ]
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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the date first above written.
BEACON HOLDING INC. | ||||
By: |
/s/ Jonathan A. Seiffer |
|||
Name: | Jonathan A. Seiffer | |||
Title: | President |
STOCKHOLDERS:
GREEN EQUITY INVESTORS V, L.P. | ||
By: | GEI Capital V, LLC, its General Partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Name: Jonathan A. Seiffer | ||
Title: | ||
GREEN EQUITY INVESTORS SIDE V, L.P. | ||
By: | GEI Capital V, LLC, its General Partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Name: Jonathan A. Seiffer | ||
Title: | ||
BEACON COINVEST LLC | ||
By: |
/s/ Jonathan A. Seiffer |
|
Name: Jonathan A. Seiffer | ||
Title: |
STOCKHOLDERS:
CVC BEACON LLC | ||||
By: |
/s/ Cameron Breitner |
|||
Name: | Cameron Breitner | |||
Title: | President and Assistant Secretary |
Exhibit 4.1(a)
First Amendment to Stockholders Agreement
This First Amendment to Stockholders Agreement (this Agreement ) of Beacon Holding Inc., a Delaware corporation (the Company ), dated as of September 30, 2011 (such agreement, the Stockholders Agreement ), is made by and among Beacon Holding Inc., a Delware corporation, Green Equity Investors V, L.P., a Delaware limited partnership, Green Equity Investors Side V, L.P., a Delaware limited partnership, Beacon Coinvest LLC, a Delaware limited liability company, and CVC Beacon LP, a Delaware limited partnership (f/k/a CVC Beacon LLC). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Stockholders Agreement.
ARTICLE I.
AMENDMENTS
Section 1.1 Amendments . Section 1.02(a)(i)(2) of the Stockholders Agreement is hereby amended and replaced in its entirety with the following:
2) in all events, the Board may have up to two Directors that are executive officers of the Company (the Non Sponsor Directors) and one or more independent directors, in either case to be mutually agreed by unanimous vote of CVC, on the one hand, and GEI V and GEI Side V, on the other hand (the Independent Directors). Laura J. Sen, the Chief Executive Officer of BJs and the Company, shall continue to be a Non-Sponsor Director. Christopher Baldwin shall be nominated for election as the second Non-Sponsor Director, effective upon (and subject to) his commencment of employment as the Chief Operating Officer of BJs and the Company. Ken Parent shall continue to be an Independent Director. All Independent Directors and Non-Sponsor Directors may be removed at any time by mutual written agreement of CVC, on the one hand, and GEI V and GEI Side V, on the other hand.
ARTICLE II.
MISCELLANEOUS
Section 2.1 Full Force and Effect . Except as expressly provided by this Agreement, the Stockholders Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and reaffirmed. Except as expressly set forth in this Agreement, no other terms and conditions of the Stockholders Agreement are hereby waived, amended, altered or otherwise modified.
Section 2.2 Other Sections . Sections 9.03 through 9.06, Section 9.08, Section 9.09 and Sections 9.11 through 9.15 of the Stockholders Agreement shall apply to this Agreement mutatis mutandis.
GREEN EQUITY INVESTORS V, L.P. | ||
By: | GEI Capital V, LLC, its general partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Print: | Jonathan A. Seiffer | |
Title: | Director | |
GREEN EQUITY INVESTORS SIDE V, L.P. | ||
By: | GEI Capital V, LLC, its general partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Print: | Jonathan A. Seiffer | |
Title: | Director | |
BEACON COINVEST LLC | ||
By: |
/s/ Jonathan A. Seiffer |
|
Print: | Jonathan A. Seiffer | |
Title: | Director |
Signature Page to First Amendment to Stockhholders Agreement
CVC BEACON LP | ||
By: |
/s/ Cameron Breitner |
|
Print: | Cameron Breitner | |
Title: | Director |
Signature Page to First Amendment to Stockhholders Agreement
IN WITNESS HEREOF, the undersigned have executed this Agreement as of this 1st day of September, 2015.
BEACON HOLDING INC. | ||
By: |
/s/ Graham N. Luce |
|
Print: | Graham N. Luce | |
Title: | Secretary |
Signature Page to First Amendment to Stockhholders Agreement
Exhibit 4.1(b)
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
BY AND AMONG
BJS WHOLESALE CLUB HOLDINGS, INC.,
GREEN EQUITY INVESTORS V, L.P.,
GREEN EQUITY INVESTORS SIDE V, L.P.,
BEACON COINVEST LLC AND
CVC BEACON LP
JULY 2, 2018
TABLE OF CONTENTS
Page | ||||||
ARTICLE I. REGISTRATION RIGHTS. |
1 | |||||
Section 1.01 |
Requested Registration | 1 | ||||
Section 1.02 |
Company Registration. | 4 | ||||
Section 1.03 |
Company Control | 5 | ||||
Section 1.04 |
Expenses of Registration; Cooperation. | 6 | ||||
Section 1.05 |
Registration Procedures | 6 | ||||
Section 1.06 |
Indemnification. | 8 | ||||
Section 1.07 |
Information by the Stockholders | 10 | ||||
Section 1.08 |
Market Stand-off Agreement | 10 | ||||
Section 1.09 |
Transfer of Registration Rights | 10 | ||||
Section 1.10 |
Access | 10 | ||||
Section 1.11 |
Termination. | 11 | ||||
ARTICLE II. REPRESENTATIONS; WARRANTIES AND COVENANTS |
11 | |||||
Section 2.01 |
Representations and Warranties of the Stockholders. | 11 | ||||
Section 2.02 |
Representations and Warranties of the Company. | 12 | ||||
Section 2.03 |
Entitlement of the Company and the Stockholders to Rely on Representations and Warranties. | 12 | ||||
ARTICLE III. INTERPRETATION OF THIS AGREEMENT. |
13 | |||||
Section 3.01 |
Defined Terms | 13 | ||||
Section 3.02 |
Directly or Indirectly | 16 | ||||
Section 3.03 |
Governing Law | 16 | ||||
Section 3.04 |
Section Headings | 16 | ||||
ARTICLE IV. MISCELLANEOUS |
16 | |||||
Section 4.01 |
Notices. | 16 | ||||
Section 4.02 |
Successors and Assigns | 18 | ||||
Section 4.03 |
Entire Agreement | 18 |
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Section 4.04 |
Amendment and Waiver. | 18 | ||||
Section 4.05 |
Business Opportunities; No Recourse. | 18 | ||||
Section 4.06 |
Severability | 19 | ||||
Section 4.07 |
Counterparts | 19 | ||||
Section 4.08 |
Submission to Jurisdiction; Waiver of Jury Trial | 19 | ||||
Section 4.09 |
Specific Performance | 19 | ||||
Section 4.10 |
Conflict with Organizational Documents | 20 | ||||
Section 4.11 |
No Third Party Liability | 20 | ||||
Section 4.12 |
Stockholder Acting as Creditor | 20 | ||||
Section 4.13 |
Indemnification | 20 | ||||
Schedule A - LGP Investors |
||||||
Schedule B - CVC Investors |
ii
STOCKHOLDERS AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the Agreement ), dated as of July 2, 2018, by and among BJS WHOLESALE CLUB HOLDINGS, INC., a Delaware corporation (the Company ), the investment funds listed on Schedule A hereto (collectively, LGP ) and the entity listed on Schedule B hereto ( CVC and CVC, together with LGP, the Stockholders ).
RECITALS
WHEREAS, the Company (in the name of its predecessor company, Beacon Holding Inc.) entered into that certain Merger Agreement, dated as of June 28, 2011, by and among BJs Wholesale Club, Inc., a Delaware corporation ( BJs ), the Company and Beacon Merger Sub Inc., a Delaware corporation (the Transitory Subsidiary ), pursuant to which the Transitory Subsidiary merged with and into BJs (the Merger ), with BJs being the surviving entity of the Merger and a wholly-owned subsidiary of the Company;
WHEREAS, the closing of the Merger took place on September 30, 2011 and the original Stockholders Agreement of the Company (in the name of its predecessor company, Beacon Holding Inc.) was dated as of such date (the Original Agreement );
WHEREAS, on the date hereof immediately following the execution of this Agreement, the Company will price an initial public offering of shares of its common stock (such shares of common stock, the Common Stock , and such initial public offering, the IPO ) pursuant to an Underwriting Agreement dated as of the date hereof;
WHEREAS, in connection with the IPO, the parties hereto desire to provide for certain registration rights and other matters for the period on and after the date hereof and to amend and restate the Original Agreement in its entirety pursuant to this Agreement; and
WHEREAS, if the IPO is not promptly consummated, the parties hereto will amend and restate this Agreement to the form of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I.
REGISTRATION RIGHTS.
Section 1.01 Requested Registration ; Covered Sales; Access.
(a) Request for Registration.
(i) Following the occurrence of the IPO, subject to Section 1.08 , a Stockholder (in such capacity, an Initiating Investor ) may elect to cause the Company to effect a Registration with respect to all or a part of the Registrable Securities held by such Initiating Investor on Form S-1 (or any successor form) in an amount greater than $25 million dollars (an S-1 Demand ). In the event such Initiating Investor provides
notice to the Company of its election to cause an S-1 Demand, the Company will (A) promptly give written notice of the proposed Registration to the other Stockholder; and (B) as soon as practicable, use its commercially reasonable efforts to effect such Registration (including, without limitation, filing post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities of the Initiating Investor as are specified in such request, together with all or such portion of the Registrable Securities of the other Stockholder joining in such request as are specified in a written request of such other Stockholder received by the Company within fifteen (15) Business Days after written notice from the Company is given under Section 1.01(a)(i)(A) above.
(ii) If the Company shall receive from an Initiating Investor, at any time after the Company is eligible to register Registrable Securities on Form S-3, a written request that the Company effect a Registration with respect to all or a part of the Registrable Securities held by such Initiating Investor on Form S-3 in an amount greater than five million dollars ($5,000,000), the Company will (A) promptly give written notice of the proposed Registration to the other Stockholder, and (B) as soon as practicable, use its commercially reasonable efforts to effect such Registration (including, without limitation, filing post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities of the Initiating Investor as are specified in such request, together with all or such portion of the Registrable Securities of the other Stockholder joining in such request as are specified in a written request of the other Stockholder received by the Company within fifteen (15) Business Days after written notice from the Company is given under Section 1.01(a)(ii)(A) above; provided that the Company shall not be obligated to effect, or take any action to effect, any such Registration pursuant to this Section 1.01(a)(ii) after the Company has effected three (3) such Registrations requested by such Initiating Investor pursuant to this Section 1.01(a)(ii) during the previous twelve (12) month period.
(iii) If the Registration pursuant to Section 1.01(a)(ii) is for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or any successor provisions) (a Shelf Registration ), the Company shall use reasonable best efforts to maintain continuously in effect, supplement and amend, if necessary, the Shelf Registration, as required by the instructions applicable to such registration form or by the Securities Act, until there are no remaining Registrable Securities.
(iv) If at any time, the Shelf Registration ceases to be effective, the Company shall file, not later than 30 days after such prior Shelf Registration ceased to be effective, and use its reasonable best efforts to cause to become effective a new Shelf Registration as soon as practicable. If, after any Shelf Registration has become effective, it is interfered with by any stop order, injunction or other order or requirement
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of the SEC or other governmental agency or authority, the Company shall use its reasonable best efforts to prevent the issuance of any stop order suspending the effectiveness of the Shelf Registration or of any order preventing or suspending the use of any prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment.
(b) Underwriting.
(i) If an Initiating Investor intends to distribute the Registrable Securities covered by its request by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to Section 1.01(a) or prior to the takedown of any Registrable Securities registered pursuant to Section 1.01(a)(ii) and in each case the Initiating Investor shall have the right to select the managing underwriter or underwriters to administer the Registration; provided that such managing underwriter or underwriters shall be acceptable to each Stockholder participating in such Registration (in each such Stockholders sole discretion) if both Stockholders are participating in such Registration, or solely to the Initiating Investor if the other Stockholder is not participating in such Registration.
(ii) If the Stockholder that is not an Initiating Investor requests inclusion of Registrable Securities in any Registration or underwriting contemplated by Section 1.01(a) , the Initiating Investor may condition such offer on such other Stockholders acceptance of the further applicable provisions of this Article I . The Initiating Investor whose Registrable Securities are to be included in such Registration shall (together with the other Stockholder proposing to distribute its Registrable Securities through such underwriting) complete and execute all questionnaires, indemnities, powers of attorney and other documents required for such underwriting and enter into an underwriting agreement in customary form, with the representative of the underwriter or underwriters selected for such underwriting.
(iii) Notwithstanding any other provision of this Section 1.01 , if, in any Registration contemplated by Section 1.01(a) , the managing underwriter advises the Company and the Stockholders in writing that marketing factors require a limitation on the number of Registrable Securities to be underwritten, the number of Registrable Securities included in the Registration by the Initiating Investor and the other Stockholder shall in each case be reduced on a pro rata basis (based on the number of Registrable Securities proposed to be included in such Registration), by such minimum number of Registrable Securities as is necessary to comply with such request. No Registrable Securities or any other securities excluded from the underwriting by reason of the underwriters marketing limitation shall be included in such Registration. If the other Stockholder who has requested inclusion in such Registration as provided above disapproves of the terms of the underwriting (including the terms of any indemnification required of such other Stockholder in the underwriting agreement related to such Registration), such Person may elect to withdraw therefrom by written notice to the Company, the underwriter and the Initiating Investor. The securities so withdrawn shall also be withdrawn from Registration.
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(c) Coordination of Covered Sales . Following the IPO, the Stockholders will use commercially reasonable efforts to coordinate any Covered Sales (any such transfer, a Coordination Transfer ) of Registrable Securities held by them in accordance with this Section 1.01(c) . Prior to any such Coordination Transfer, the applicable Stockholder (the Notifying Investor ) shall provide the other Stockholder with at least five (5) days prior written notice (a Coordination Notice ) of the Notifying Investors intention to Transfer Registrable Securities held by it in a Covered Sale. The Coordination Notice is intended to permit all Stockholders electing to Transfer Registrable Securities held by them at such time to coordinate the timing and process for Transferring such Registrable Securities in an orderly fashion. Subject to the foregoing provisions of this Section 1.01(c) , the Stockholder receiving a Coordination Notice shall be entitled to effect Coordination Transfers of a number of Registrable Securities held by it equal to such Stockholders Pro Rata Portion. Each Coordination Notice shall specify (i) the earliest time at which such Stockholder intends to commence a Covered Sale pursuant to this Section 1.01(c) , and (ii) to the extent the Covered Sale is a Rule 144 Transfer, (A) whether such a Covered Sale will commence a new measurement period for purposes of the Rule 144 group volume limit or is part of a continuing measurement period previously commenced by another Coordination Notice related to a Rule 144 Transfer, and (B) the volume limit for each Stockholder for that measurement period, determined as of its commencement. In the event that the Stockholder receiving a Coordination Notice agrees to forego its full Pro Rata Portion of any Covered Sale by written notice to the applicable Initiating Investor, the remainder shall be reallocated to the Notifying Investor in like manner. The obligations with respect to Covered Sales set forth in this Section 1.01(c) shall no longer be applicable at such time as either CVC (and its Permitted Transferees) or LGP (and its Permitted Transferees) ceases to own at least ten percent (10%) of the outstanding Shares.
Section 1.02 Company Registration .
(a) Following the consummation of the IPO, if the Company shall determine to Register any of its Equity Securities either for its own account (other than a Registration (x) relating solely to employee stock or benefit plans, (y) relating solely to a Commission Rule 145 transaction, or (z) on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities) or for the account of other holders of Equity Securities of the Company or to sell registered securities from a Shelf Registration in an underwritten offering, the Company will:
(i) promptly give to each Stockholder a written notice thereof;
(ii) promptly give to each Stockholder a written notice of any underwriting of a shelf takedown; and
(iii) include in such Registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by the Stockholders within fifteen (15) days after receipt of the last written notice from the Company described in clause (i) above; provided that in the case of a shelf takedown
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such request shall be made in time to be included in the shelf takedown. Such written request may specify all or a part of the Stockholders Registrable Securities.
(b) Underwriting.
(i) If the Registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Stockholders as a part of the written notice given pursuant to Section 1.02(a)(i) . In such event, the right of each Stockholder to include its Registrable Securities in such Registration pursuant to this Section 1.02 shall be conditioned upon such Stockholders participation in such underwriting and the inclusion of such Stockholders Registrable Securities in the underwriting to the extent provided herein. Each Stockholder whose Registrable Securities are to be included in such Registration shall (together with the Company) agree to sell such Stockholders Registrable Securities on the basis provided in any customary underwriting arrangements approved by the Company and complete and execute all customary questionnaires, power of attorney, indemnities and other documents, in each case in customary form, required for such underwriting arrangements and enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for underwriting by the Company.
(ii) Notwithstanding any other provision of this Section 1.02 , if the representative of the underwriter or underwriters determines that marketing factors require a limitation on the number of Registrable Securities to be underwritten, the representative may (subject to the allocation priority set forth below) exclude from such Registration and underwriting some or all of the Registrable Securities which would otherwise be underwritten pursuant hereto. The Company shall so advise all Stockholders requesting Registration, and the number of Registrable Securities that may be included in the Registration and underwriting by each of the Stockholders shall be reduced, on a pro rata basis (based on the number of Registrable Securities proposed to be in included in such Registration), by such minimum number of shares as is necessary to comply with such limitation. For the avoidance of doubt, none of the Equity Securities being Registered by the Company for its own account shall be excluded. If any of the Stockholders disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.
Section 1.03 Company Control . The Stockholders shall not be permitted to sell any securities pursuant to Section 1.01 or Section 1.02 at any time that the board of directors of the Company determines in good faith that it would be materially detrimental to the Company or its stockholders for sales of securities to be made; provided that all Stockholders shall be treated consistently in connection with each such determination; and provided further , that the Company shall promptly notify each Stockholder in writing of any such action and provided further , that any such delay may not last more than sixty (60) days and such delays may not be in effect more than one hundred and twenty (120) days during any three hundred and sixty-five (365) day period.
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Section 1.04 Expenses of Registration; Cooperation.
(a) All Registration Expenses incurred in connection with any Registration, qualification or compliance pursuant to this Article I shall be borne by the Company, except that the costs and expenses of more than one special counsel to any Stockholder shall be borne by such Stockholder.
(b) The Company and its Subsidiaries and their respective directors and officers shall cooperate with the Stockholders (including, but not limited to, participation in any road-show or similar equity marketing meetings and the preparation of the materials related thereto) and use their commercially reasonable efforts to consummate such Registration in a timely manner.
Section 1.05 Registration Procedures . In the case of each Registration effected by the Company pursuant to this Article I , the Company will keep the Stockholders, as applicable, advised in writing as to the initiation of each Registration and as to the completion thereof. At its expense, the Company will, subject to the terms of this Article I :
(a) keep such Registration that has become effective continuously current and effective, and not subject to any stop order, injunction or other similar order or requirement of the Commission, until the earlier of (x) the expiration of the Required Period and (y) the date on which all Registrable Securities covered by such Registration (i) have been disposed of pursuant to such Registration or (ii) cease to be Registrable Securities; provided that, notwithstanding the foregoing provisions of this Section 1.05(a) , with respect to a Shelf Registration that has become effective, the Company shall comply with Section 1.01(a)(iv) with respect to such Shelf Registration. In the event of any stop order, injunction or other similar order or requirement of the Commission or any other governmental or regulatory authority relating to any Registration, the Required Period for such Registration will be extended by the number of days during which such stop order, injunction or similar order or requirement is in effect. No request for Registration for purposes of Section 1.01(a) shall be deemed to have been effected while (x) such Registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory authority or (y) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of such applicable underwriting agreement by the Initiating Investor;
(b) furnish such number of prospectuses, offer documents and other documents incident thereto as each of the Stockholders, as applicable, from time to time may reasonably request;
(c) notify each Stockholder of Registrable Securities covered by such Registration at any time when a prospectus relating thereto is required to be delivered under the Securities Act or other applicable law of the happening of any event as a result of which the
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prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(d) furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion and negative assurance letter, dated as of such date, of the counsel representing the Company for the purposes of such Registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Stockholders participating in such Registration, addressed to the underwriters, if any, and to the Stockholders participating in such Registration and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Stockholders participating in such Registration, addressed to the underwriters, if any, and if permitted by applicable accounting standards, to the Stockholders participating in such Registration;
(e) before filing any registration statement, prospectus, offer document and other documents incident or any amendments or supplements thereto, the Company shall furnish to and afford each Stockholder covered by such document, and its advisors, and the managing underwriters, if any, a reasonable opportunity to review and comment on copies of all such documents (including copies of all exhibits thereto) proposed to be filed;
(f) make available upon reasonable advance notice for inspection by any Stockholder of such Registrable Securities, any underwriter participating in any such distribution and any attorney, accountant or other professional retained by any such Stockholder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to conduct a reasonable investigation for purposes of Section 11(a) of the Securities Act and other applicable antifraud and securities laws and cause the Companys officers, directors and employees to make available for inspection all information reasonably requested by such Stockholders in connection with such Offer Document;
(g) use its commercially reasonable efforts to cause all Registrable Securities covered by a Registration to be listed or qualified for trading on any stock exchange or quotation service on which the Companys outstanding Shares are listed or qualified for trading;
(h) cooperate with each Stockholder and the managing underwriter, if any, participating in the disposition of such Registrable Securities in connection with any filings required to be made with the Financial Industry Regulatory Authority or any other analogous regulation; and
(i) use its commercially reasonable efforts to take all other steps reasonably necessary to effect the Registration, qualification, offering and sale of the Registrable
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Securities covered by a Registration contemplated hereby and enter into any other customary agreements and take such other actions, including participation in roadshows, as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.
Section 1.06 Indemnification.
(a) To the extent permitted by law, the Company will indemnify each of the Stockholders, as applicable, each of its officers, directors and partners, and each Person controlling each of the Stockholders, with respect to each Registration which has been effected pursuant to this Article I , and each underwriter for such Stockholders, if any, and each person who controls any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any of the following (each, a Violation ): (x) any untrue statement (or alleged untrue statement) of a material fact contained in any marketing materials, prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, (y) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (z) any violation by the Company of the Securities Act or the Exchange Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such Registration, qualification or compliance; and will reimburse each of the Stockholders, each of its officers, directors and partners, and each Person controlling each of the Stockholders, each such underwriter and each Person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action; provided that the Company will not be liable in any such case to any Stockholder, underwriter or controlling person to the extent that any such claim, loss, damage, liability or expense arises out of or is based upon a Violation which occurs in reliance upon information furnished to the Company by the Stockholder, underwriter or controlling person seeking to be indemnified, where such information is specifically provided in writing for use in such prospectus, offering circular or other document.
(b) Each of the Stockholders will, if Registrable Securities held by it are included in the securities as to which such Registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and each underwriter, if any, of the Companys securities covered by such a registration statement, each person who controls the Company or such underwriter, each other Stockholder and each of their officers, directors, and partners, and each person controlling such other Stockholder against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other offering document made in writing by such Stockholder for the express purpose of inclusion in such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Stockholder therein not misleading, and will reimburse the Company and such other Stockholder, directors, officers, partners, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any
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such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Stockholder and stated to be specifically for use therein; provided , however , that the obligations of each of the Stockholders hereunder shall be limited to an amount equal to the net proceeds to such Stockholder of securities sold in such offering as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.06 (the Indemnified Party ) shall give notice to the party required to provide indemnification (the Indemnifying Party ) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such partys expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of counsel shall be at the expense of the Indemnifying Party); provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article I except to the extent the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.06 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
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(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with any underwritten public offering contemplated by this Agreement are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall be controlling.
Section 1.07 Information by the Stockholders . Each of the Stockholders holding securities included in any Registration shall furnish to the Company such information regarding such Stockholder and the distribution proposed by such Stockholder as the Company may reasonably request in writing and as shall be reasonably required in connection with any Registration, qualification or compliance referred to in this Article I .
Section 1.08 Market Stand-off Agreement .
(a) Each of the Stockholders agrees not to sell or otherwise Transfer or dispose of any Registrable Securities held by such Stockholder, if requested by the Company and an underwriter of Equity Securities of the Company, for a period not longer than, (i) with respect to the IPO, the one hundred and eighty (180) day period following the consummation of the IPO or (ii) following the IPO, the longer of (x) the ninety (90) day period following the consummation of the applicable Registration and (y) the period requested by an underwriter with respect to the applicable Registration (which period shall in no event exceed one hundred and eighty (180) days following the consummation of such Registration); provided that if such offering includes a primary underwritten offering by the Company, all directors and substantially all officers of the Company enter into similar agreements; and provided further that if such offering does not include a primary underwritten offering by the Company, the Stockholders shall only be required to enter into such agreements if such Stockholder is selling shares in connection with such offering. Any waiver provided by the Company or an underwriter of Equity Securities of the Company with respect to the obligations set forth in the immediately preceding sentence shall apply to the other Stockholder on a pro rata basis (based on the number of Registrable Securities proposed to be sold by the Stockholders in such Registration).
(b) If requested by the underwriters, the Stockholders shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of said period. The provisions of this Section 1.08 shall be binding upon any Transferee who acquires Registrable Securities.
Section 1.09 Transfer of Registration Rights . The registration rights set forth in this Article I may be assigned, in whole or in part, to any Permitted Transferee (who shall be bound by all obligations of this Agreement), provided that such rights of assignment will in no event be deemed to enlarge, alter or otherwise expand the rights of any Stockholder set forth in Section 1.01 or Section 1.02 .
Section 1.10 Access . Upon the request of a Stockholder, so long as such Stockholder holds Registrable Securities, such Stockholder and any representatives of such Stockholder shall have (i) reasonable access (at reasonable times and upon reasonable notice) to
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all executive officers and accountants of the Company and its Subsidiaries and (ii) reasonable access (at reasonable times and upon reasonable notice) to all premises, properties, books, records (including tax records), contracts, financial and operating data and information and documents pertaining to the Company and its Subsidiaries and shall be entitled to make copies of such books, records, contracts, data, information and documents as such Stockholder or its representatives may reasonably request.
Section 1.11 Termination . The registration rights set forth in this Article I shall not be available to any Stockholder if all of the Registrable Securities held by such Stockholder have been sold in a registration pursuant to the Securities Act or pursuant to Rule 144.
ARTICLE II.
REPRESENTATIONS; WARRANTIES AND COVENANTS
Section 2.01 Representations and Warranties of the Stockholders . Each Stockholder hereby represents and warrants, severally and not jointly, and solely on its own behalf, to each other Stockholder and to the Company that on the date hereof:
(a) Existence; Authority; Enforceability . Such Stockholder has the necessary power and authority to enter into this Agreement and to carry out its obligations hereunder. Such Stockholder is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary corporate or other action, and no other act or proceeding, corporate or otherwise, on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed by such Stockholder and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.
(b) Absence of Conflicts . The execution and delivery by such Stockholder of this Agreement and the performance of its obligations hereunder do not and will not (i) conflict with, or result in the breach of any provision of the constitutive documents of such Stockholder; (ii) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any material contract, agreement or permit to which such Stockholder is a party or by which such Stockholders assets or operations are bound or affected; or (iii) violate, in any material respect, any law applicable to such Stockholder.
(c) Consents . Other than any consents that have already been obtained, no governmental consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such Stockholder in connection with (a) the execution, delivery or performance of this Agreement or (b) the consummation of any of the transactions contemplated herein.
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Section 2.02 Representations and Warranties of the Company . The Company hereby represents and warrants to each Stockholder that on the date hereof:
(a) Existence; Authority; Enforceability . The Company has the necessary power and authority to enter into this Agreement and to carry out its obligations hereunder. The Company is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary corporate or other action, and no other act or proceeding on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed by the Company and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.
(b) Absence of Conflicts . The execution and delivery by the Company of this Agreement and the performance of its obligations hereunder do not and will not (i) conflict with, or result in the breach of any provision of the organizational documents of the Company or any of its Subsidiaries; (ii) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any material contract, agreement or permit to which the Company or any of its Subsidiaries is a party or by which the Companys or any of its Subsidiaries assets or operations are bound or affected; or (iii) violate, in any material respect, any law applicable to the Company or any of its Subsidiaries.
(c) Consents . Other than any consents that have already been obtained, no governmental consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by the Company or any of its Subsidiaries in connection with (a) the execution, delivery or performance of this Agreement and the issuance of the Shares issued on the date hereof or (b) the consummation of any of the transactions contemplated herein.
Section 2.03 Entitlement of the Company and the Stockholders to Rely on Representations and Warranties . The foregoing representations and warranties may be relied upon by the Company and by the Stockholders in connection with the entering into of this Agreement.
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ARTICLE III.
INTERPRETATION OF THIS AGREEMENT.
Section 3.01 Defined Terms . As used in this Agreement, the following terms have the respective meaning set forth below:
(a) Affiliate shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such first Person. For these purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.
(b) Agreement shall have the meaning set forth in the preamble.
(c) BJs shall have the meaning set forth in the recitals.
(d) Business Day shall mean any day other than Saturday, Sunday or any other day on which banking institutions in New York are required or authorized to be closed for the transaction of normal banking business
(e) Commission shall mean the U.S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(f) Common Stock shall have the meaning set forth in the recitals.
(g) Company shall have the meaning set forth in the preamble.
(h) Coordination Notice shall have the meaning set forth in Section 1.01(c) .
(i) Covered Sale means any Transfer of Registrable Securities, other than pursuant to Section 1.01(a) , Section 1.01(b) or Section 1.02 of this Agreement or to a Permitted Transferee.
(j) CVC shall have the meaning set forth in the preamble.
(k) CVC Fund Indemnitors shall have the meaning set forth in Section 4.13(b) .
(l) CVC Indemnitees shall have the meaning set forth in Section 4.13(b) .
(m) Equity Securities shall mean (a) any Shares, preferred stock or other capital stock of the Company or any Subsidiary, as the case may be, (b) any security convertible, or exchangeable, with or without consideration, into any Shares or other capital stock of the Company or any Subsidiary, as the case may be (including any option, warrant or other right to subscribe for or purchase such a convertible security), (c) any security carrying or linked to any
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option, warrant or other right to subscribe for or purchase any Shares or other capital stock of the Company or any Subsidiary or (d) any such option, warrant or other right. All references to Equity Securities held by any Stockholder includes Equity Securities now owned or hereafter acquired (whether or not now authorized, issued or outstanding).
(n) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(o) Indemnified Party shall have the meaning set forth in Section 1.06 .
(p) Indemnifying Party shall have the meaning set forth in Section 1.06 .
(q) Initiating Investor shall mean CVC or LGP, in its capacity as an initiator of a Registration of Registrable Securities in accordance with Section 1.01(a) .
(r) IPO shall have the meaning set forth in the recitals.
(s) LGP shall have the meaning set forth in the preamble.
(t) LGP Fund Indemnitors shall have the meaning set forth in Section 4.13(a) .
(u) LGP Indemnitees shall have the meaning set forth in Section 4.13(a) .
(v) Merger shall have the meaning set forth in the recitals.
(w) Notifying Investor shall have the meaning set forth in Section 1.01(c) .
(x) Organizational Documents shall mean the certificate of incorporation and by-laws of the Company.
(y) Original Agreement shall have the meaning set forth in the recitals.
(z) Permitted Transferee shall mean any Affiliate of LGP or CVC, as the case may be; provided that (i) any Permitted Transferee of LGP shall be treated as LGP for all purposes hereof, and (ii) any Permitted Transferee of CVC shall be treated as CVC for all purposes hereof
(aa) Person shall mean an individual, partnership, joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
(bb) Pro Rata Portion means, with respect to any Stockholder, the aggregate number of Registrable Securities to be transferred, multiplied by such Stockholders
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percentage ownership of Registrable Securities held by all Stockholders; provided, however, that in any Rule 144 Transfer the Registrable Securities to be transferred shall be deemed to be the maximum aggregate number of Registrable Securities held by the Stockholders that are then permitted to be sold by the Stockholders as a group in accordance with Rule 144.
(cc) Register , Registered and Registration shall mean a registration effected by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement.
(dd) Registrable Securities shall mean all Shares and all Shares issued or issuable upon conversion of any warrants or options held by any holder of Shares, provided, that, a Registrable Security shall cease to be a Registrable Security as such time as the holder thereof is entitled to sell such Registrable Security within six (6) months under Rule 144(k) or Regulation S of the Securities Act or otherwise without restriction under the Securities Act.
(ee) Registration Expenses shall mean all expenses incurred by the Company in compliance with Section 1.01 and Section 1.02 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and expenses of counsel for the Stockholders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).
(ff) Required Period shall mean one hundred and eighty (180) days following the first day of effectiveness of such Registration.
(gg) Rule 144 means Rule 144 under the Securities Act.
(hh) Rule 144 Transfer means any transfer conducted in accordance with Rule 144.
(ii) S-1 Demand shall have the meaning set forth in Section 1.01(a) .
(jj) Securities Act shall mean the U.S. Securities Act of 1933, as amended.
(kk) Shares shall mean all shares of Common Stock.
(ll) Stockholders shall have the meaning set forth in the preamble.
(mm) Subsidiaries shall mean when used with respect to any Person, means any other Person of which (a) in the case of a corporation, at least (i) a majority of the equity and (ii) a majority of the voting interests are owned or controlled, directly or indirectly, by such first Person, by any one or more of such first Persons Subsidiaries, or by such first Person and one or more of such first Persons Subsidiaries or (b) in the case of any Person other than a corporation, such first Person, one or more of such first Persons Subsidiaries, or such first
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Person and one or more of such first Persons Subsidiaries (i) owns a majority of the equity interests thereof and (ii) has the power to elect or direct the election of a majority of the members of the governing body thereof.
(nn) Transfer shall mean any sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition in one transaction or a series of related transactions (including by merger, consolidation, operation of law or otherwise); and Transferred , Transferee , Transferability , and Transferor shall each have a correlative meaning. For the avoidance of doubt, a sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of a controlling interest in any Stockholder, in each case directly or through the sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of a controlling interest, whether through a stock sale or otherwise, in any ultimate or intermediate parent entity of such Stockholder, shall constitute a Transfer for purposes of this Agreement, as if such interest was a direct interest in the Company; provided, however that with respect to any Stockholder organized for the business purpose of, or whose sole business purpose is, the holding of Equity Securities (a Holding Company ), any sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of any interest in any such Stockholder or any ultimate or intermediate parent entity of such Stockholder (solely to the extent that such entity is a is also a Holding Company), shall in each case constitute a Transfer for purposes of this Agreement.
(oo) Transitory Subsidiary shall have the meaning set forth in the recitals.
(pp) Violation shall have the meaning set forth in Section 1.06(a) .
(qq) Voting Agreement shall mean the Voting Agreement of even date hereof between CVC and LGP, as the same may be amended, supplemented or otherwise modified.
Section 3.02 Directly or Indirectly . Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
Section 3.03 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State.
Section 3.04 Section Headings . The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.
ARTICLE IV.
MISCELLANEOUS
Section 4.01 Notices .
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(a) All communications under this Agreement shall be in writing and shall be delivered by hand or sent by electronic mail or facsimile, or mailed by overnight courier or by registered or certified mail, postage prepaid:
To the Company: |
BJs Wholesale Club Holdings, Inc. c/o Leonard Green & Partners, L.P. 11111 Santa Monica Blvd., #2000 Los Angeles, CA 90025 Attn: Jonathan A. Seiffer (seiffer@leonardgreen.com) J. Kristofer Galashan (galashan@leonardgreen.com) Facsimile: (310) 954-0404
and
c/o CVC Capital Partners Advisory (US), Inc. One Maritime Plaza, Suite 1610 San Francisco, CA 94111 Attn: Cameron Breitner (CBreitner@cvc.com) Nishad Chande (nchande@cvc.com) Facsimile: (415) 520-2312 |
|
To CVC: |
CVC Beacon LLC c/o CVC Capital Partners Advisory (US), Inc. One Maritime Plaza, Suite 1610 San Francisco, CA 94111 Attn: Cameron Breitner (CBreitner@cvc.com) Nishad Chande (nchande@cvc.com) Facsimile: (212) 265-6375 |
|
with a copy to: |
Latham & Watkins LLP 885 Third Avenue New York, New York 10022 Attn: Howard A. Sobel (Howard.Sobel@lw.com) Paul Kukish (Paul.Kukish@lw.com) Facsimile: (212) 751-4864 |
|
To LGP: |
c/o Leonard Green & Partners, L.P. 11111 Santa Monica Blvd., #2000 Los Angeles, CA 90025 Attn: Jonathan A. Seiffer (seiffer@leonardgreen.com) J. Kristofer Galashan (galashan@leonardgreen.com) Facsimile: (310) 954-0404 |
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with a copy to: |
Latham & Watkins LLP 885 Third Avenue New York, New York 10022 Attn: Howard A. Sobel (Howard.Sobel@lw.com) Paul Kukish (Paul.Kukish@lw.com) Facsimile: (212) 751-4864 |
or at such other address and to the attention of such other person as the Stockholder may designate by written notice to the Company.
(b) Any notice so addressed shall be deemed to be received: if delivered by hand or facsimile, on the date of such delivery; if mailed by overnight courier, on the first Business Day following the date of such mailing; and if mailed by registered or certified mail, on the third Business Day after the date of such mailing.
Section 4.02 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.
Section 4.03 Entire Agreement . This Agreement and the Voting Agreement constitute the entire understanding of the parties hereto relating to the subject matter hereof and supersede all prior understandings among such parties.
Section 4.04 Amendment and Waiver . This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and each of the Stockholders. No waiver of any breach shall be deemed to be a further or continuing waiver of such breach or a waiver of any other or subsequent breach. Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.
Section 4.05 Business Opportunities; No Recourse .
(a) None of the Stockholders nor any of their respective Affiliates shall have any obligation to present any business opportunity to the Company or any of its subsidiaries, even if the opportunity is one that the Company or any of its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no such Person shall be liable to the Company or any of its subsidiaries or any Stockholder for breach of any fiduciary or other duty, as a Stockholder, by reason of the fact that such Person pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or any of its subsidiaries.
(b) Notwithstanding anything that may be expressed or implied in this Agreement, and notwithstanding the fact that certain of the parties may be partnerships or limited
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liability companies, each party hereto covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any former, current or future directors, officers, agents, Affiliates, employees, general or limited partners, members, managers or stockholders of any party hereto or any of their successors or permitted assignees or any former, current or future directors, officers, agents, Affiliates, employees, general or limited partners, members, managers or stockholders of any of the foregoing, as such, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law or otherwise, for any obligation of any party hereto under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.
Section 4.06 Severability . In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not affect the remaining provisions of this Agreement which shall remain in full force and effect.
Section 4.07 Counterparts . This Agreement may be executed in two or more counterparts (including by facsimile or pdf format), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.
Section 4.08 Submission to Jurisdiction; Waiver of Jury Trial EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND OF ANY DELAWARE STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS STOCKHOLDERS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 4.09 Specific Performance . The Company and the Stockholders hereby acknowledge and agree that it is impossible to measure in money the damages which will accrue to the parties hereto by reason of the failure of any party hereto to perform any of its obligations set forth in this Agreement and that, in the event of any such failure, an aggrieved party will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
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Section 4.10 Conflict with Organizational Documents . In the event of any conflict between the terms and conditions of this Agreement and the Organizational Documents, the terms and conditions of this Agreement shall control. The parties shall cooperate to take any actions necessary to ensure that the Organizational Documents conform to the terms and conditions of this Agreement.
Section 4.11 No Third Party Liability . This Agreement may only be enforced against the named parties hereto. All claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), may be made only against the entities that are expressly identified as parties hereto.
Section 4.12 Stockholder Acting as Creditor . Nothing in this Agreement shall impair or otherwise affect any Stockholders rights as a creditor of the Company or any of its Subsidiaries or in any other relationship with the Company, any of its Subsidiaries or any other Stockholder.
Section 4.13 Indemnification .
(a) Any director, officer, employee or agent of the Company entitled to indemnification, advancement of expenses and/or insurance, pursuant to this Agreement or the Organizational Documents of the Company and that is an officer, employee, partner or advisor of LGP or any of their Affiliates (each such person, a LGP Indemnitee ), may have certain rights to indemnification, advancement of expenses and/or insurance provided by or on behalf of LGP and/or their Affiliates (collectively, the LGP Fund Indemnitors ). Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise: (i) the Company is the indemnitor of first resort (i.e., the Companys obligations to each LGP Indemnitee are primary and any obligation of the LGP Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by each LGP Indemnitee are secondary), (ii) the Company will be required to advance the full amount of expenses incurred by each LGP Indemnitee and will be liable for the full amount of all liabilities, expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and required by this Agreement, without regard to any rights each LGP Indemnitee may have against the LGP Fund Indemnitors, and (iii) the Company irrevocably waives, relinquishes and releases the LGP Fund Indemnitors from any and all claims against the LGP Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise, no advancement or payment by the LGP Fund Indemnitors on behalf of a LGP Indemnitee with respect to any claim for which such LGP Indemnitee has sought indemnification or advancement of expenses from the Company will affect the foregoing and the LGP Fund Indemnitors will have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such LGP Indemnitee against the Company. The LGP Fund Indemnitors are express third-party beneficiaries of the terms of this Section 4.13(a) .
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(b) Any director, officer, employee or agent of the Company entitled to indemnification, advancement of expenses and/or insurance, pursuant to this Agreement or the Organizational Documents of the Company and that is an officer, employee, partner or advisor of CVC or any of their Affiliates (each such person, a CVC Indemnitee ), may have certain rights to indemnification, advancement of expenses and/or insurance provided by or on behalf of CVC and/or their Affiliates (collectively, the CVC Fund Indemnitors ). Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise: (i) the Company is the indemnitor of first resort (i.e., the Companys obligations to each CVC Indemnitee are primary and any obligation of the CVC Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by each CVC Indemnitee are secondary), (ii) the Company will be required to advance the full amount of expenses incurred by each CVC Indemnitee and will be liable for the full amount of all liabilities, expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and required by this Agreement, without regard to any rights each CVC Indemnitee may have against the CVC Fund Indemnitors, and (iii) the Company irrevocably waives, relinquishes and releases the CVC Fund Indemnitors from any and all claims against the CVC Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. Notwithstanding anything to the contrary in this Agreement, the Organizational Documents of the Company or otherwise, no advancement or payment by the CVC Fund Indemnitors on behalf of a CVC Indemnitee with respect to any claim for which such CVC Indemnitee has sought indemnification or advancement of expenses from the Company will affect the foregoing and the CVC Fund Indemnitors will have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such CVC Indemnitee against the Company. The CVC Fund Indemnitors are express third-party beneficiaries of the terms of this Section 4.13(b) .
[ Remainder of page intentionally left blank ]
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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the date first above written.
BJS WHOLESALE CLUB HOLDINGS, INC. | ||
By: |
/s/ Graham N. Luce |
|
Name: Graham N. Luce | ||
Title: Senior Vice President, Secretary | ||
STOCKHOLDERS: | ||
GREEN EQUITY INVESTORS V, L.P. | ||
By: | GEI Capital V, LLC, its General Partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Name: Jonathan A. Seiffer | ||
Title: | ||
GREEN EQUITY INVESTORS SIDE V, L.P. | ||
By: | GEI Capital V, LLC, its General Partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Name: Jonathan A. Seiffer | ||
Title: | ||
BEACON COINVEST LLC | ||
By: |
/s/ Jonathan A. Seiffer |
|
Name: Jonathan A. Seiffer | ||
Title: |
[BJs Wholesale Club Holdings, Inc. Signature Page to the Amended and Restated Stockholders Agreement]
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CVC BEACON LP
By: | CVC Beacon GP LLC, its general partner | |
By: |
/s/ Cameron Breitner |
|
Name: Cameron Breitner | ||
Title: President and Assistant Secretary |
[BJs Wholesale Club Holdings, Inc. Signature Page to the Amended and Restated Stockholders Agreement]
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Exhibit 4.2
MANAGEMENT STOCKHOLDERS AGREEMENT
OF
BEACON HOLDING INC.
This Management Stockholders Agreement ( Agreement ) is entered into as of September 30, 2011, by and among Beacon Holding Inc., a Delaware corporation (the Company ), Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., and Beacon Coinvest LLC (collectively, LGP ), CVC Beacon LLC (CVC and, together with LGP, the Principal Stockholders ), and each of the individual stockholders who are set forth on the signature pages hereto or who otherwise become parties hereto from time to time in accordance with the terms hereof (each individually, a Management Stockholder, and collectively, the Management Stockholders ). These parties are sometimes referred to herein individually by name or as a Party , and collectively as the Parties .
RECITALS :
The Company has entered into that certain Merger Agreement, dated as of June 28, 2011, by and among BJs Wholesale Club, Inc., a Delaware corporation (BJs), the Company and Beacon Merger Sub Inc., a Delaware corporation (the Transitory Subsidiary ), pursuant to which the Transitory Subsidiary will be merged with and into BJs (the Merger ), with BJs being the surviving entity of the Merger and a wholly-owned subsidiary of the Company;
Each of the Management Stockholders is or will be (after giving effect to the Merger) an employee, consultant or director of the Company or one or more subsidiaries of the Company;
The Company, pursuant to that certain Option Rollover Agreement, dated as of September 30, 2011 (the Rollover Agreement ), between the Company and each of the investors party thereto, has agreed, subject to the terms and conditions set forth therein, to issue upon the effective time of the Merger (but subject to the consummation thereof) to certain Management Stockholders, in substitution for certain options to purchase shares of common stock of BJs, options to purchases shares of the Companys Common Stock (as defined below), as designated therein (the Rollover Options ), and as a result of the exercise by such Management Stockholder of any Rollover Options, has agreed to issue shares of the Common Stock subject thereto (such shares, Rollover Shares ). For purposes of this Agreement, one share of Common Stock shall consist of, (a) prior to the effectiveness of the actions set forth in Section 9.01 of that certain Stockholders Agreement by and among the Company, LGP and CVC, dated as of September 30,2011, as may be amended from time to time (the Stockholders Agreement ), (i) one share of the Companys common stock designated as Class A Common Stock, par value $0.01 per share ( Class A Stock ), and (ii) one share of the Companys common stock designated as Class B Common Stock, par value $0.01 per share ( Class B Stock ) and (b) following the effectiveness of the actions set forth in Section 9.01 of the Stockholders Agreement (the Conversion ), one share of the common stock of the Company, par value $0.01 per share;
The Company, pursuant to those certain Subscription Agreements, dated as of September 30, 2011 (the Subscription Agreements ), between the Company and each of the Management Stockholders a party thereto, and any other similar agreements with Management Stockholders after the date hereof, has agreed (or will agree), subject to the terms and conditions set forth in the Subscription Agreements (or such similar agreements), to sell, and each applicable Management Stockholder has agreed to subscribe for, shares of Common Stock ( Subscribed Shares );
The Company has agreed to issue (or may hereafter agree to issue) to each Management Stockholder shares of the Companys Common Stock as a result of the exercise by such Management Stockholder of vested options (other than Rollover Options) to purchase Common Stock ( Vested Options ), which Vested Options were issued (or may hereafter be issued) to such Management Stockholder pursuant to the 2011 Stock Option Plan of Beacon Holding Inc. (the Stock Option Plan ) or any other employee benefit plan hereafter adopted by the board of directors of the Company (the Board ) (such shares, Option Shares ); and
The Parties now desire to enter into this Agreement to provide for certain matters with respect to the ownership and transfer by the Management Stockholders of all shares of Common Stock (including Rollover Shares, Subscribed Shares and Option Shares) now or hereafter issued to or purchased or acquired by the Management Stockholders as a result of the sale of Subscribed Shares, the exercise of Rollover Options or Vested Options, or otherwise (collectively, the Restricted Shares ).
AGREEMENT :
In consideration of the foregoing and the mutual agreements set forth herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows, effective as of the effective time of the Merger:
Section 1. Sales to Third Parties .
(a) Except as otherwise provided herein, each Management Stockholder hereby agrees that he or she shall not sell, assign, transfer, convey, pledge or otherwise dispose of (collectively, Transfer ) any Restricted Shares without the prior written consent of each of the Principal Stockholders, which consent may be (A) withheld in the sole discretion of each of the Principal Stockholders, or (B) given subject to reasonable terms and conditions determined by the Principal Stockholders in their sole discretion. Each Management Stockholder further agrees that in connection with any Transfer consented to by the Principal Stockholders, the Management Stockholder shall, if requested by the Company, deliver to the Company an opinion of counsel in form and substance reasonably satisfactory to the Company and counsel for the Company, to the effect that the Transfer is not in violation of this Agreement, the Securities Act of 1933, as amended (the Securities Act ), or the securities laws of any state. Any purported Transfer in violation of the provisions of this Section 1 shall be null and void and shall have no force or effect.
(b) Notwithstanding the foregoing, nothing in this Section 1 shall prevent the
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Transfer of any Restricted Shares by any Management Stockholder to (i) a wholly-owned affiliate (as defined in Rule 405 of the Securities Act) of such Management Stockholder; (ii) in the case of a Transfer contemplated by Section 2, the Company or the Principal Stockholders; (iii) any member of a Management Stockholders immediate family or trusts or other entity for the benefit of such immediate family member; provided that the Management Stockholder retains the sole and exclusive right to vote or dispose of any Restricted Shares transferred to the family member or trust or other entity; and (iv) upon a Management Stockholders death, the Management Stockholders executors, administrators, testamentary trustees, legatees and beneficiaries (the transferee of Restricted Shares transferred pursuant to clause (i), (iii) or (iv) being referred to as a Permitted Transferee ).
(c) If the Company proposes to register Registrable Securities under the Securities Act pursuant to an initial Underwritten Offering (an Initial Public Offering ), each of the Management Stockholders agrees not to sell or otherwise Transfer or dispose of any Registrable Securities held by such Management Stockholder, if requested by the Company and any representative of the underwriters (the Managing Underwriter ), for a period not longer than the one hundred and eighty (180) day period following the consummation of such Initial Public Offering; provided that the Management Stockholders shall only be bound by such restrictions to the extent that the Principal Stockholders are so bound. If requested by the Managing Underwriter, the Managing Stockholders shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of said period.
(d) Each Management Stockholder agrees that, as a condition precedent to any Transfer described in this Section 1, each transferee described in this Section 1 (other than the Company or the Principal Stockholders) shall deliver to the Company a copy of this Agreement signed by such transferee and acknowledging that such transferee agrees to be bound by the terms and conditions hereof as if such transferee was a Management Stockholder for all purposes of this Agreement, including the Drag-Along Rights set forth in Section 3.
Section 2. Rights to Repurchase Shares .
(a) Subject to Section 2(e), with respect to all Restricted Shares held by any Management Stockholder, during the period beginning on the date of the Management Stockholders Termination of Employment (as defined below) and ending on the later of the nine-month anniversary of such Termination of Employment or the nine-month anniversary of the date of the exercise of any Rollover Options or Vested Options held by any Management Stockholder as of the time of the Management Stockholders Termination of Employment, the Company shall have the option to repurchase Restricted Shares held by the Management Stockholder; provided that such Restricted Shares have been held by the Management Stockholder for more than six months at the time of such repurchase ( Call Right ). The Call Right may be exercised more than once, but must be exercised with respect to all (but not less than all) of a Management Stockholders Restricted Shares outstanding on the date of any Call Notice (as defined below), other than as contemplated by Section 2(e). The repurchase price payable by the Company upon exercise of the Call Right ( Call Repurchase Price ) shall be: (i) with respect to Rollover Shares and Subscribed Shares (A) in the event the Termination of Employment is for Cause (as defined below), the lesser of Fair Market Value (as defined below)
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of such Rollover Shares or Subscribed Shares, as applicable, on the date of repurchase or Fair Market Value of such Rollover Shares or Subscribed Shares, as applicable, immediately following the closing of the Merger and (B) in the case of a Termination of Employment for any other reason, the Fair Market Value of such Rollover Shares or Subscribed Shares, as applicable, on the date of repurchase; and (ii) with respect to Option Shares (A) in the event the Termination of Employment is for Cause, the lesser of Fair Market Value of such Option Shares on the date of repurchase or the exercise price paid by the Management Stockholder in connection with the exercise of the underlying Vested Option and (B) in the case of a Termination of Employment for any other reason, the Fair Market Value of such Option Shares on the date of repurchase. The Call Right shall be exercised by written notice ( Call Notice ) to the Management Stockholder given in accordance with Section 11(e) of this Agreement on or prior to the last date on which the Call Right may be exercised by the Company. For purposes of this Agreement: (x) Termination of Employment shall mean the time when the relationship between a Management Stockholder (in its capacity as an employee, consultant or director of the Company or one of its subsidiaries) and the Company or its applicable subsidiary is terminated for any reason, with or without Cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement, but excluding a termination where there is a simultaneous reemployment by the Company or one of its subsidiaries; and (y) Cause shall have the meaning provided in such Management Stockholders Change in Control Severance Agreement as in effect on the date hereof with the Company or a subsidiary of the Company, as applicable, or if such Management Stockholder does not have such a Change in Control Severance Agreement, but is a participant in the Change of Control Severance Benefit Plan for Key Employees in effect as of the date hereof (the Severance Plan ), Cause shall have the meaning provided in the Severance Plan, or if Cause is not defined therein or the Management Stockholder is not a participant in the Severance Plan, then Cause shall mean the Management Stockholders failure to substantially perform the Management Stockholders duties as reasonably determined by the Board (other than as a result of the Management Stockholders permanent disability or incapacity as determined in accordance with the Companys disability insurance policy or, if no such policy is then in effect, as determined by the Board in its good faith judgment); materially dishonest statements or acts of the Management Stockholder with respect to the Company or any of its subsidiaries or affiliates; the commission by the Management Stockholder of an act constituting a felony under the laws of the United States or any state thereof; gross negligence, willful misconduct or insubordination of the Management Stockholder with respect to the Company or any of its subsidiaries or affiliates; or any other act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. The Board shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, all questions of whether a particular leave of absence constitutes a Termination of Employment.
(b) For purposes of this Agreement, the Fair Market Value of each share of Common Stock as of a given date shall mean the fair market value of such share as of such date (without regard to any minority or lack of marketability discount) as reasonably determined by the Board in the exercise of its good faith discretion. For the avoidance of doubt, the Fair Market Value as of the Closing Date (as defined in the Merger Agreement) equals $100.00 (subject to adjustments to reflect stock splits etc. after the Closing Date). The Company shall deliver a notice setting forth the determination of the Board as to Fair Market Value per share of
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Common Stock to the terminated Management Stockholder no later than the fifteenth (15) business day prior to the exercise of the Call Right. Upon delivery of notice of such Fair Market Value, the Management Stockholder shall have ten (10) business days in which to notify the Company in writing of any disagreement, which notice shall state in reasonable detail the reasons for such disagreement. During such ten (10) business day period, the Company shall provide the Management Stockholder with such financial data and information as the Management Stockholder shall reasonably request in order to evaluate the determination by the Board as to the Fair Market Value per share of Common Stock; provided , however , that any such Management Stockholder shall agree to hold in confidence and trust all information so provided; and, provided , further , that the Company may withhold any such financial data and information as may be reasonably necessary (in the Companys sole discretion) to preserve the attorney-client privilege between the Company and its counsel or to protect confidential proprietary information in respect of which such Management Stockholder is not otherwise aware. If no written notice of disagreement is given by the Management Stockholder, the Fair Market Value as determined by the Board shall be conclusive and binding on the Management Stockholder and the Company. If written notice is given by the Management Stockholder of a disagreement, then, within ten (10) business days following receipt of such notice, the Company and the Management Stockholder shall engage an investment banking firm or independent appraiser mutually acceptable to the Company and the Management Stockholder (such acceptance not unreasonably withheld by either Person) to determine the Fair Market Value of the Common Stock (which may be higher than, lower than or equal to the Fair Market Value of the Common Stock as determined by the Board). The Company and the Management Stockholder shall instruct the firm or appraiser to complete the valuation within 30 days following such engagement. The determination of such firm or appraiser shall be final and binding upon the Management Stockholder and the Company, and shall not be subject to appeal or arbitration. The costs and expenses incurred in connection with the determination made by the investment banking firm or independent appraiser shall be borne by (i) the Company, in the event the Fair Market Value determined by the investment banking firm or independent appraiser is at least 110% of the Fair Market Value determined by the Board and (ii) the Management Stockholder in the event the Fair Market Value determined by the investment banking firm or independent appraiser is less than 110% of the Fair Market Value determined by the Board. In the case of the application of clause (ii) of the preceding sentence, in the event that the Company is the purchaser of shares of Common Stock pursuant to this Section 2, the Company shall be entitled to deduct and withhold the portion of such costs to be borne by the Management Stockholder.
(c) If the Company does not elect to exercise its Call Right set forth in Section 2(a), the Company shall give written notice that it is not so electing to each of the Principal Stockholders within the time periods specified in Section 2(a) for the giving of a Call Notice. Upon receipt of such notice from the Company (the Company Notice ), each Principal Stockholder shall have the option, exercisable by written notice ( Principal Stockholder Call Notice ) delivered to the Management Stockholder within thirty days after receipt of the Company Notice, to purchase the Restricted Shares held by the Management Stockholder; provided that, if such Restricted Shares have not been held by the Management Stockholder for more than six months at the time that the Principal Stockholders receive the Company Notice, each Principal Stockholder may exercise its option to purchase the Restricted Shares pursuant to this Section 2(c) by providing the Principal Stockholder Call Notice at any time during the 30-
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day period immediately following the six-month anniversary of the date the Management Stockholder first purchased Restricted Shares, and, upon the giving of the Principal Stockholder Call Notice, such Principal Stockholder shall be obligated to purchase and each Management Stockholder shall be obligated to sell all (but not less than all) of the Restricted Shares held by such Management Stockholder that are outstanding on the date of such Principal Stockholder Call Notice at the Call Repurchase Price set forth in Section 2(a); provided that, to the extent two or more of the Principal Stockholders elect to purchase the Restricted Shares covered by the Company Notice, each electing Principal Stockholder shall be entitled to purchase a prorated portion of such Restricted Shares based on the number of shares of the Class A Stock held by such Principal Stockholder over the number of shares of Class A Stock held by all electing Principal Stockholders.
(d) Subject to Section 2(h) below, the repurchase of Restricted Shares pursuant to the exercise of a Call Right shall take place on a date specified by the Company or the Principal Stockholder(s), as applicable (the Call Date ), which in no event shall be following the 60 th day following the date of the Call Notice or the Principal Stockholder Call Notice, as applicable (or such later date on which the Company or the Principal Stockholder(s), as applicable, has received all necessary governmental approvals). On the Call Date, the Management Stockholder shall transfer the Restricted Shares subject to the Call Notice to the Company or the Principal Stockholder(s), as applicable, free and clear of all liens and encumbrances, by delivering to the Company or the Principal Stockholder(s), as applicable, the certificates representing the Restricted Shares to be purchased, duly endorsed for transfer to the Company or the Principal Stockholder(s), as applicable, or accompanied by a stock power duly executed in blank, and the Company or the Principal Stockholder(s), as applicable, shall pay to the Management Stockholder the Call Repurchase Price in cash (subject to Section 2(h) below). The Company or the Principal Stockholder(s), as applicable, on the one hand, and the Management Stockholder, on the other hand, each shall use his, her or its reasonable efforts to expedite all proceedings contemplated hereunder to obtain a determination of the Call Repurchase Price of the Restricted Shares at the earliest practicable date.
(e) Notwithstanding Section 2(a), subject to the Management Stockholders continued employment with the Company or any subsidiary of the Company, the Call Right shall cease to be applicable with respect to 20% of the Management Stockholders Rollover Shares and Subscribed Shares on each of the first five anniversaries of the effective time of the Merger. Except as otherwise set forth in this Section 2(e), the Call Right shall apply with respect to all Restricted Shares in accordance with Section 2(a).
(f) Notwithstanding the foregoing, if, during the period commencing on a Call Date (other than a Call Date following a Management Stockholders Termination of Employment for Cause) occurring after the fifth anniversary of the Closing Date and ending on the six-month anniversary of such Call Date (the True-Up Period ), either an Initial Public Offering or a Change in Control occurs, then upon the consummation of such Initial Public Offering or Change in Control, as the case may be, the Company shall pay to the Management Stockholder whose Restricted Shares are repurchased on such Call Date, within thirty (30) days after the consummation of such Change in Control or Initial Public Offering, a payment in an amount equal to the excess, if any, of (i) the Fair Market Value of the Restricted Shares repurchased on such Call Date, as of the date of the Change in Control or the Initial Public
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Offering, as applicable, over (y) the aggregate Call Repurchase Price paid to such Management Stockholder for such Restricted Shares (such payment, the True-Up Payment ); provided , however , that, in no event shall such a True-Up Payment be made if, in connection with the Companys exercise of the Call Right, the Management Stockholder provided notice of disagreement with the Boards determination of Fair Market Value in order to obtain an independent appraisal of Fair Market Value, as described in Section 2(b) hereof. For the avoidance of doubt, no Management Stockholder shall be entitled to a True-Up Payment in connection with the repurchase of Restricted Shares pursuant to the Call Right on a Call Date occurring on or prior to the fifth anniversary of the Closing Date or following such Management Stockholders Termination of Employment for Cause.
(g) (i) In the case of any transfer of title or beneficial ownership of Restricted Shares upon default, foreclosure, forfeit, divorce, court order or otherwise, other than by a voluntary decision on the part of a Management Stockholder (each, an Involuntary Transfer ), the Management Stockholder shall promptly (but in no event later than two days after the Involuntary Transfer) furnish written notice (the Involuntary Transfer Notice ) to the Company and each of the Principal Stockholders indicating that the Involuntary Transfer has occurred, specifying the name of the person to whom the shares were transferred (the Involuntary Transferee ), giving a detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer.
(ii) Upon the receipt of the Involuntary Transfer Notice, and for 60 days thereafter, the Company (or the Principal Stockholders if the Company does not accept the offer) shall have the right to repurchase, and the Involuntary Transferee shall have the obligation to sell, all (but not less than all) of the Restricted Shares acquired by the Involuntary Transferee for a repurchase price equal to the Fair Market Value of such Restricted Shares as of the date of the Involuntary Transfer (the Involuntary Transfer Repurchase Price and such right, the Involuntary Transfer Repurchase Right ). The Involuntary Transfer Repurchase Right shall be exercised by written notice (the Involuntary Transfer Repurchase Notice ) to the Involuntary Transferee given in accordance with Section 11(e) of this Agreement on or prior to the last date on which the Involuntary Transfer Repurchase Right may be exercised by the Company.
(iii) Subject to Section 2(h) below, the repurchase of Restricted Shares pursuant to the exercise of the Involuntary Transfer Repurchase Right shall take place on a date specified by the Company or the Principal Stockholder(s), as applicable, but in no event following the 60 th day following the date of the date of the Involuntary Transfer Repurchase Notice (or such later date on which the Company or the Principal Stockholder(s), as applicable, has received all necessary governmental approvals). On such date, the Involuntary Transferee shall transfer the Restricted Shares subject to the Involuntary Transfer Repurchase Notice to the Company or the Principal Stockholder(s), as applicable, free and clear of all liens and encumbrances, by delivering to the Company or the Principal Stockholder(s), as applicable, the certificates representing the Restricted Shares to be purchased, duly endorsed for transfer to the Company or the Principal Stockholder(s), as applicable, or accompanied by a stock power duly executed in blank, and the Company or the Principal Stockholder(s), as applicable, shall pay to the Involuntary Transferee the Involuntary Transfer Repurchase Price. The Company or the Principal Stockholder(s), as applicable, on the one hand, and the Involuntary Transferee, on the other hand, each shall use his, her or its reasonable efforts to expedite all proceedings
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contemplated hereunder to obtain a determination of the Involuntary Transfer Repurchase Price of the Restricted Shares at the earliest practicable date. If the Involuntary Transferee does not transfer the Restricted Shares to the Company or the Principal Stockholder(s), as applicable, as required, the Company will cancel such Restricted Shares and deposit the funds in a non-interest bearing account and make payment of such funds to the Involuntary Transferee upon delivery of the Restricted Shares.
(h) Notwithstanding anything to the contrary herein,
(i) The Company shall not be permitted to purchase any Restricted Shares held by any Management Stockholder or Involuntary Transferee upon exercise by the Company of the Call Right or the Involuntary Transfer Repurchase Right if the Board determines that (A) the Company is prohibited from purchasing the Restricted Shares by applicable law restricting the purchase by a corporation of its own shares; or (B) the purchase of Restricted Shares would constitute a breach of, default, or event of default under, or is otherwise prohibited by, the terms of any loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party (the Financing Documents ) or the Company is not able to obtain the requisite consent of any of its lenders to the purchase of the Restricted Shares. The events described in (A) and (B) above each constitute a Call Repurchase Disability .
(ii) In the event of a Call Repurchase Disability, the Company shall notify in writing the Management Stockholder or Involuntary Transferee with respect to whom the Call Right or the Involuntary Transfer Repurchase Right has been exercised (a Call Disability Notice ). The Call Disability Notice shall specify the nature of the Call Repurchase Disability. The Company shall thereafter repurchase the Restricted Shares described in the Call Notice or Inyoluntary Transfer Repurchase Notice as soon as reasonably practicable after all Call Repurchase Disabilities cease to exist (or the Company may elect, but shall have no obligation, to cause its nominee to repurchase the Restricted Shares while any Call Repurchase Disabilities continue to exist). In the event the Company suspends its obligations to repurchase the Restricted Shares pursuant to a Call Repurchase Disability, (A) the Company shall provide written notice to each applicable Management Stockholder or Involuntary Transferee as soon as practicable after all Call Repurchase Disabilities cease to exist (the Call Reinstatement Notice ); and (B) the Fair Market Value of the Restricted Shares subject to the Call Notice or Involuntary Transfer Repurchase Notice shall be determined as of the date of repurchase following the date the Call Reinstatement Notice is delivered to the Management Stockholder or Involuntary Transferee, which Fair Market Value shall be used to determine the Call Repurchase Price or Involuntary Transfer Repurchase Price in the manner described above.
Section 3. Drag-Along Rights .
(a) If one or more of the Principal Stockholders at any time, or from time to time, in one transaction or a series of related transactions, propose to Transfer shares of Common Stock (or rights to acquire Common Stock) in connection with any Change in Control (as defined below) to one or more Persons (as defined below) other than a Principal Stockholder (a Third Party Purchaser ), then such Principal Stockholders shall have the right (a Drag-Along Right ), but not the obligation, to require each Management Stockholder to tender for purchase to the Third Party Purchaser, on the same terms and conditions as apply to Such
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Principal Stockholders, a number of Restricted Shares of Common Stock and Rollover Options and Vested Options to purchase Common Stock (including any options that vest as a result of the consummation of the Transfer to the Third Party Purchaser) that, in the aggregate, equal the number derived by multiplying (1) the total number of Restricted Shares of Common Stock owned by the Management Stockholder (including Restricted Shares of Common Stock issuable in respect of all Rollover Options and Vested Options to purchase Common Stock held by the Management Stockholder whether or not exercised and including any options that vest as a result of the consummation of the Transfer to the Third Party Purchaser) by (2) a fraction, the numerator of which is the total number of shares of Common Stock to be sold by such Principal Stockholders in connection with the transaction or series of related transactions and the denominator of which is the total number of the then outstanding shares of Common Stock and shares of Common Stock issuable in respect of Rollover Options and Vested Options to purchase Common Stock held by the Principal Stockholders or the Company; provided that, (i) the terms of such transaction are the same for all Management Stockholders (other than any Management Stockholder who elects to contribute its Restricted Shares to the acquiring or surviving company in such transaction) and (ii) no Management Stockholder shall be required to agree to a non-compete or similar restriction that is more restrictive (in either scope or duration) than that contained in any agreement to which such Management Stockholder is a party as of the date of such transaction. Subject to the foregoing conditions, each Management Stockholder shall vote all of his or her shares of Class A Stock in favor of, and waive all dissenters and appraisal rights in connection with, such Change in Control transaction. In connection with the exercise of any Drag-Along Right, no Management Stockholder, without such Management Stockholders consent, shall be required to (x) make representations and warranties, except as to title and related matters; which shall in no way relate to operational matters of the Company or its subsidiaries or (y) provide any indemnity in excess of the net proceeds received by such Management Stockholder from such sale, or that applies on a non-prorata basis, or that applies on any basis other than a several and not joint basis. Notwithstanding the foregoing in this Section 3(a), if the Principal Stockholders do not invoke their Drag-Along Right in connection with any Change in Control involving a sale of securities by the Principal Stockholders, then the Tag-Along Right described in Section 4 below shall apply to such Change in Control.
(b) If one or more of the Principal Stockholders elect to exercise their Drag-Along Right under this Section 3 with respect to the Restricted Shares of Common Stock held by the Management Stockholders, such Principal Stockholders shall notify each Management Stockholder in writing (collectively, the Drag-Along Notices ). Each Drag-Along Notice shall set forth: (i) the proposed amount and form of consideration and terms and conditions of payment offered by the Third Party Purchaser(s) and a summary of any other material terms pertaining to the Transfer ( Third Party Terms ); and (ii) the number of Restricted Shares of Common Stock and Rollover Options and Vested Options to purchase Common Stock that such Principal Stockholders elects each Management Stockholder to sell in the Transfer. The Drag-Along Notices shall be given at least five days before the closing of the proposed Transfer.
(c) Upon the giving of a Drag-Along Notice, each Management Stockholder shall be obligated to sell the number of Restricted Shares of Common Stock and Rollover Options and Vested Options to purchase Common Stock set forth in such Management
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Stockholders Drag-Along Notice on the Third Party Terms.
(d) At the closing of the Transfer to any Third Party Purchaser(s) pursuant to this Section 3, the Third Party Purchaser(s) shall remit to the Management Stockholder the consideration for the total sales price of the Common Stock and Rollover Options and Vested Options to purchase Common Stock held by the Management Stockholder sold pursuant hereto minus any consideration to be escrowed or otherwise held back in accordance with the Third Party Terms, and minus the aggregate exercise price of any Rollover Options and Vested Options to purchase Common Stock being Transferred by the Management Stockholder to the Third Party Purchaser(s), against delivery by the Management Stockholder of certificates for Common Stock, duly endorsed for Transfer or with duly executed stock powers and an instrument evidencing the transfer or the cancellation of the Rollover Options and Vested Options to purchase Common Stock subject to the Drag-Along Right reasonably acceptable to the Company, and the compliance by the Management Stockholder with any other conditions to closing generally applicable to the selling Principal Stockholder(s) and all other holders of Common Stock selling shares in the transaction.
(e) For purposes of this Agreement, Change in Control shall mean (i) the sale of all or substantially all of the assets of the Company, BJs or any wholly-owned subsidiary interposed between the Company and BJs (an Intermediate Subsidiary ) to any other Person (other than the Company, any of its subsidiaries, the Principal Stockholders or any of their affiliates, or any employee benefit plan maintained by the Company or any of its subsidiaries), or (ii) a change in beneficial ownership or control of the Company, BJs or any Intermediate Subsidiary effected through a transaction or series of transactions (other than an offering of Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby (A) any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act )) (other than the Company, any of its subsidiaries, the Principal Stockholders or any of their affiliates, or any employee benefit plan maintained by the Company or any of its subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company, BJs or any Intermediate Subsidiary possessing more than 50% of the total combined voting power of such entitys securities outstanding immediately after such acquisition or (B) following an Initial Public Offering, the Principal Stockholders and their respective affiliates directly or indirectly hold beneficial ownership of securities of each of the Company, BJs and any Intermediate Subsidiary possessing less than 10% of the total combined voting power of such entitys voting securities outstanding immediately after such transaction or series of transactions.
Section 4. Tag-Along Rights .
(a) Subject to the prior exercise of the Companys or the Principal Stockholders Call Right pursuant to Sections 2(a) and 2(c), if one or more of the Principal Stockholders at any time propose to Transfer shares of Common Stock (or rights to acquire Common Stock) to a Third Party Purchaser, in a single Transfer or a series of related Transfers (other than any Transfer which, when aggregated with all prior sales, does not exceed 5% of the aggregate number of shares of Common Stock held by the Principal Stockholders as of the date
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of this Agreement), then each Management Stockholder shall have the right (the Tag-Along Right ) to require that the proposed Third Party Purchaser purchase from such Management Stockholder up to the number of whole Restricted Shares of Common Stock (including any Restricted Shares of Common Stock issuable upon the exercise of Rollover Options and Vested Options, including any options that vest as a result of the consummation of the Transfer to the Third Party Purchaser) equal to the number derived by multiplying (x) the total number of shares of Common Stock that the proposed Third Party Purchaser has agreed or committed to purchase, by (y) a fraction, the numerator of which is the total number of Restricted Shares of Common Stock (including any Restricted Shares of Common Stock issuable upon the exercise of Rollover Options and Vested Options (including options that vest as a result of the consummation of the Transfer to the Third Party Purchaser)) owned by the Management Stockholder as of the date of the proposed Transfer, and the denominator of which is the aggregate number of shares of Common Stock owned, as of the date of the proposed Transfer, by the Principal Stockholders, the Company, the Management Stockholder and all other holders of Common Stock who have exercised a Tag-Along Right substantially similar to the rights granted to the Management Stockholder in this Section 4 or any other form of tag-along right, whether granted pursuant to this Agreement or any other agreement to which the Company is a party, (including any Restricted Shares of Common Stock issuable upon the exercise of all Rollover Options and Vested Options (including options that vest as a result of the consummation of the Transfer to the Third Party Purchaser)). The intent of this computation is to accord to the Management Stockholder the right to sell the same percentage of its holdings of Common Stock as the Principal Stockholders is entitled to sell in such transaction. Any Restricted Shares purchased from the Management Stockholder pursuant to this Section 4(a) shall be purchased upon the same terms and conditions (including without limitation for the same form and amount of consideration per share of Common Stock) as such proposed Transfer by the selling Principal Stockholder(s). In connection with the exercise of any Tag-Along Right, no Management Stockholder, without such Management Stockholders consent, shall be required to (x) make representations and warranties, except as to title and related matters, which shall in no way relate to operational matters of the Company or its subsidiaries, (y) provide any indemnity in excess of the net proceeds received by such Management Stockholder from such sale, or that applies on a non-prorata basis, or that applies on any basis other than a several and not joint basis or (z) be required to agree to a non-compete or similar restriction that is more restrictive (in either scope or duration) than that contained in any agreement to which such Management Stockholder is party, provided that, notwithstanding the foregoing, in connection with the exercise of any Tag Along Right, the Management Stockholder may be required to agree to a non-compete or similar restriction for a period of not longer than two years following the date of closing of the Transfer pursuant to this Section 4.
(b) Each Principal Stockholder shall notify each Management Stockholder in writing in the event it proposes to make a Transfer or series of Transfers giving rise to a Tag-Along Right at least fourteen (14) business days prior to the date on which such Principal Stockholder expects to consummate such Transfer (the Sale Notice ) which notice shall specify the price, number of shares of Common Stock and other material terms on which the Third Party Purchaser intends to purchase in such Transfer. The Tag-Along Right may be exercised by any Management Stockholder by delivery of a written notice to the Principal Stockholder proposing to sell Restricted Shares of Common Stock (the Tag-Along Notice ) within five (5) business days following receipt of the Sale Notice from the selling Principal
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Stockholder(s). The Tag-Along Notice shall state the number of Restricted Shares of Common Stock (including shares subject to Rollover Options and Vested Options (including options that vest as a result of the consummation of the Transfer to the Third Party Purchaser)) that the Management Stockholder proposes to include in such Transfer to the proposed Third Party Purchaser (not to exceed the number as determined above). In the event that the proposed Third Party Purchaser does not purchase the specified number of Restricted Shares of Common Stock from the Management Stockholder on the same terms and conditions as specified in the Sale Notice, then the selling Principal Stockholder(s) shall not be permitted to sell any shares of Common Stock to the proposed Third Party Purchaser unless such Principal Stockholder(s) purchase from the Management Stockholder such specified number of Restricted Shares of Common Stock on the same terms and conditions as specified in such Sale Notice.
(c) At the closing of the Transfer to any Third Party Purchaser pursuant to this Section 4, the Third Party Purchaser shall remit to each Management Stockholder who exercised its Tag-Along Right the consideration for the total sales price of the Common Stock held by such Management Stockholder sold pursuant hereto minus any such consideration to be escrowed or otherwise held back in accordance with the Third Party Terms, which such escrow or hold back shall apply to the Principal Stockholders and all other Management Stockholders participating in such Transfer on a pro rata basis and minus the aggregate exercise price of any Rollover Options and Vested Options to purchase Common Stock being Transferred by the Management Stockholder to the Third Party Purchaser, against delivery by the Management Stockholder of certificates for Common Stock duly endorsed for Transfer or with duly executed stock powers and an instrument evidencing the transfer or the cancellation of the Rollover Options and Vested Options to purchase Common Stock subject to the Tag-Along Right reasonably acceptable to the Company, add the compliance by the Management Stockholder with any other conditions to closing generally applicable to the selling Principal Stockholders and all other holders of Common Stock selling shares in the transaction.
Section 5. Piggy-Back Registration Rights .
(a) Participation . If in connection with or at any time after the Initial Public Offering the Company files a registration statement (a Registration Statement ) pursuant to the Securities Act (other than a registration on Form S-4 or S-8 or any successor form to such Forms or any registration of securities as it relates to an offering and sale to management of the Company pursuant to any employee stock plan or other employee benefit plan arrangement) with respect to an offering that includes Common Stock owned by a Principal Stockholder, then, subject to Section 5(b), each Management Stockholder shall be provided with an opportunity to include in such Registration Statement a number of shares of Common Stock equal to the product of (x) the aggregate number of shares of Common Stock owned by such Management Stockholder as of the date such Registration Statement is filed (which, for the avoidance of doubt, excludes Restricted Shares of Common Stock issuable in respect of unexercised Rollover Options and Vested Options held by the Management Stockholder) and (y) the ratio of (i) the number of shares of Common Stock proposed to be included in such Registration Statement which are owned by the Principal Stockholders or the Company to (ii) the aggregate number of shares of Common Stock owned by the Principal Stockholders or the Company which are outstanding as of the date such Registration Statement is filed. The Company shall notify each Management Stockholder in writing of any opportunity to register
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shares pursuant to this Section 5, and the Companys written offer notice may contain such other reasonable terms and conditions as the Company may determine in good faith are necessary or appropriate to effectuate this Section 5. Subject to the limitations of this Section 5(a) and Section 5(b), the Company shall include in such registration statement all of a Management Stockholders Registrable Securities specified in a written request received by the Company within fifteen days after the distribution of the written notice from the Company described in this Section 5(a).
(b) Underwriters Cutback . Notwithstanding the foregoing, if a registration pursuant to this Section 5 involves an Underwritten Offering (as defined in Section 5(f)) of Common Stock and the Managing Underwriter (or Managing Underwriters) of such proposed Underwritten Offering determines that marketing factors require a limitation on the number or kind of Registrable Securities to be underwritten, the Managing Underwriter (or Managing Underwriters) may (subject to the allocation priority set forth below) exclude from such registration and underwriting some or all of the Registrable Securities which would otherwise be underwritten pursuant hereto. The Company shall so advise all Management Stockholders requesting registration, and, notwithstanding anything to the contrary in the Stockholders Agreement, the number of Registrable Securities that may be included in the registration and underwriting by each of the holders of Common Stock shall be (i) first, 100% of the securities the Company proposes to sell, and (ii) second, the amount of securities which all other holders of Common Stock (including LGP, CVC and the Management Stockholders) have requested to be included in such registration that the Managing Underwriter (or Managing Underwriters) believes can be sold without such adverse effect referred to above, such amount to, except as provided in the proviso below, be allocated pro rata among all such holders of Common Stock that have requested to have Common Stock included in such Underwritten Offering based upon the number of issued and outstanding shares of Common Stock to be underwritten that are owned by each applicable holder; provided that if the Managing Underwriter (or Managing Underwriters) in its good faith discretion is of the view that such pro rata portion Management Stockholders securities would be reasonably likely to adversely affect the price, timing or distribution of the securities offered in such offering, then the number of shares of Common Stock held by the Management Stockholders to be included in such Underwritten Offering may be reduced (on a non-pro rata basis) to the amount, if any, that the Managing Underwriter (or Managing Underwriters) believes can be sold without such adverse effect; provided , however , that the Company and the Principal Stockholders shall use commercially reasonable efforts to cause the Managing Underwriter (or Managing Underwriters) to eliminate any non pro-rata reduction described in the preceding proviso.
(c) Company Control . Notwithstanding any provision of this Section 5, the Company may decline to file a Registration Statement at any time, or withdraw a Registration Statement after filing but prior to the effectiveness of the Registration Statement; provided that the Company shall promptly notify each Management Stockholder in writing of any such action; and provided , further , that the Company shall bear all reasonable, documented, out of pocket expenses incurred by such Management Stockholder or otherwise in connection with such withdrawn registration statement. Notwithstanding any other provision herein, the Company shall have sole discretion to select any and all underwriters that may participate in any Underwritten Offering.
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(d) Participation in Underwritten Offerings . Notwithstanding anything to the contrary in this Section 5, no Management Stockholder shall have the right to participate in an Underwritten Offering of securities from a shelf registration statement. No Management Stockholder may participate in any Underwritten Offering hereunder unless such Management Stockholder (i) agrees to sell such Management Stockholders securities pursuant to customary underwriting arrangements reasonably requested by the underwriters participating in such Underwritten Offering, and which contain terms and conditions materially consistent with those applicable to the Principal Stockholders and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, underwriting agreements, lock-ups and other documents related thereto. Nothing in this Section 5(d) shall be construed to create any additional rights regarding the piggyback registration of Registrable Securities in any Management Stockholder otherwise than as set forth herein.
(e) Expenses . The Company or the Principal Stockholders will pay all registration expenses in connection with each registration of Registrable Securities requested pursuant to this Section 5; provided , that each holder of Common Stock shall pay all applicable underwriting fees, discounts and similar charges with respect to the Common Stock sold by such holder in pursuant to such Registration Statement.
(f) Certain Definitions . For purposes of Section 1(c) and this Section 5:
(i) Registrable Securities shall mean all shares of Common Stock and all shares of Common Stock issued or issuable upon conversion of any warrants or options held by any holder of shares of Common Stock; provided that a Registrable Security shall cease to be a Registrable Security as such time as the holder thereof is entitled to sell such Registrable Security within six (6) months under Rule 144(k) or Regulation S of the Securities Act or otherwise without restriction under the Securities Act; provided , further , that any securities that have ceased to be Registrable Securities shall not thereafter become Registrable Securities and any security that is issued or distributed in respect of securities that have ceased to be Registrable Securities is not a Registrable Security.
(ii) Underwritten Offering means a sale of shares of Common Stock to an underwriter for reoffering to the public.
Section 6. Cooperation .
(a) In the event that one or more of the Principal Stockholders exercise their rights pursuant to Section 3, each Management Stockholder shall consent to and raise no objections against the transaction, and if the transaction is structured as a sale of stock, each Management Stockholder shall take all actions that the Board reasonably deems necessary or desirable in connection with the consummation of the transaction. Without limiting the generality of the foregoing, each Management Stockholder agrees to (i) consent to and raise no objections against any such transaction; (ii) execute any stock purchase agreement, merger agreement or other agreement entered into with any Third Party Purchaser with respect to any such transaction setting forth the Third Party Terms and any ancillary agreement with respect thereto which shall be materially consistent with those executed by the Principal Stockholders; (iii) shall vote the Common Stock held by the Management Stockholder in favor of the
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transaction; and (iv) shall refrain from the exercise of dissenters appraisal rights (or any similar such rights) with respect to the transaction.
(b) In connection with a Transfer that results in a Change in Control, each Management Stockholder shall be deemed to have granted the Company a proxy to vote such Management Stockholders Restricted Shares in favor of the Change in Control. Each Management Stockholder acknowledges that each such proxy granted hereby, including any successive proxy, if necessary, is being given to secure the performance of an obligation hereunder, is coupled with an interest, and shall be irrevocable until such obligation is performed.
(c) If the Company or the holders of the Companys securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated under the Securities Act, may be available with respect to the negotiation or transaction (including a merger, consolidation, or other reorganization), each Management Stockholder shall, if requested by the Company, appoint a purchaser representative (as defined in Rule 501 of the Securities Act) reasonably acceptable to the Company. If the purchaser representative is designated by the Company, the Company shall pay the fees of the purchaser representative, but if any Management Stockholder appoints another purchaser representative, the Management Stockholder shall be responsible for the fees of the purchaser representative so appointed.
(d) Each Management Stockholder shall bear its pro-rata share of the costs of any transaction in which it sells Restricted Shares, Rollover Options or Vested Options (based upon the number of Restricted Shares, Rollover Options and Vested Options held by the Management Stockholder that are sold in such transaction), which shall only be paid out of the proceeds to be received by each such Management Stockholder in any such transaction, to the extent such costs are incurred for the benefit of all holders of Common Stock, Rollover Options or Vested Options, as applicable, and are not otherwise paid by the Company or the acquiring party.
Section 7. Preemptive Rights .
(a) Prior to the Initial Public Offering, and subject to the terms and conditions specified in this Section 7, the Company hereby grants to each Management Stockholder a right to participate in future sales by the Company of its Offered Securities (as defined below) in accordance with this Section 7.
(b) Except for Excluded Issuances, prior to the Initial Public Offering, each time the Company proposes to offer for sale (i) any shares of, or securities convertible into or exercisable for, its Common Stock or any other class of equity to any Person ( Offered Shares ), or (ii) any debt securities, to one or more of the Principal Stockholders and their respective affiliates, partners or subsidiaries (together with the Principal Stockholders, the Principal Stockholder Group ) (such debt securities, together with the Offered Shares, the Offered Securities ), the Company shall first make an offering of a pro-rata portion of such Offered Securities to each Management Stockholder in accordance with the following provisions:
(i) The Company shall deliver a notice ( First Offer Notice ) to the
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Management Stockholder stating (A) its bona fide intention to offer such Offered Securities, (B) the number of such Offered Securities to be offered, and (C) the price and terms, if any, upon which it proposes to offer such Offered Securities.
(ii) Within 10 business days after receipt of the First Offer Notice, the Management Stockholder may elect to purchase or obtain, at the price and on the terms specified in the First Offer Notice, up to that portion of such Offered Securities (such portion, the Management Stockholder Offeree Securities ) which equals the proportion that (A) the total number of Restricted Shares of Class A Stock, or vested and exercisable options to purchase Restricted Shares of Class A Stock with an exercise price less than the Fair Market Value per share of Common Stock, issued and held by the Management Stockholder (as of immediately prior to the contemplated offer for sale) bears to (B) the total number of shares of Class A Stock outstanding (as of immediately prior to the contemplated offer for sale and as determined on a fully-diluted basis). The Management Stockholders shall be entitled to purchase the Management Stockholder Offeree Securities on the same terms and conditions as are applicable to other participants in the issuance of Offered Securities, and shall not, as a condition to participation, be obligated to agree to any terms, conditions or restrictions not applicable to all other purchasers of such Offered Securities.
(iii) The Company may, during the 90-day period following the expiration of the period provided in Section 7(b)(ii) hereof, offer the remaining unsubscribed portion of the Management Stockholder Offeree Securities to the Principal Stockholders Group at a price not less than that, and upon terms no more favorable to the Principal Stockholders Group than those, specified in the First Offer Notice.
(iv) Notwithstanding the foregoing, the Company may issue and sell Offered Securities to the Principal Stockholders Group without first complying with the terms of Section 7(b); provided that within ten business days following such sale the purchasers of such Offered Securities shall offer to sell the portion of such securities that would have constituted Management Stockholder Offeree Securities had the Company complied with Section 7(b) to each Management Stockholder on terms no less favorable to the Management Stockholder than those applicable to the Principal Stockholders Group, using a process substantially similar to that set forth in Section 7(b).
(v) Excluded Issuances means any issuance of Offered Shares (i) to an employee, officer, director, consultant, agent, customer or vendor of the Company or any of its subsidiaries pursuant to a stock option plan, employee benefit plan or other compensation arrangement approved by the Board, (ii) pursuant to a stock split, subdivision or similar transaction or dividend applicable to all of the Company common stock or preferred stock, as applicable, (iii) as payment-in-kind interest; (iv) pursuant to a public offering of securities, (v) pursuant to a reclassification, (vi) pursuant to the conversion of preferred stock, debt securities or any other convertible instruments approved by the Board, (vii) pursuant to exercise of any option, warrant or other derivative securities outstanding on the date hereof or issued pursuant to clause (i) above, (Viii) as consideration for an acquisition, merger or reorganization approved by the Board or (ix) to any lender on terms approved by the Board in connection with any debt financing by the Company or its subsidiaries; provided that any issuance included in this clause (ix) shall not be permitted to exceed more than ten percent (10%) of the Common Stock of the
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Company calculated on a fully diluted basis; and provided further that any issuance contemplated by clauses (i), (viii) and (ix) to the Principal Stockholders or their respective affiliates shall not be deemed an Excluded Issuance unless such issuance has been negotiated on arms length terms and approved by all members of the Board unaffiliated with the Principal Stockholders.
Section 8. Put Rights .
(a) Upon Termination of Employment of a Management Stockholder (other than by the Company for Cause or due to death or Disability) within the two-year period immediately following the Closing Date, such Management Stockholder shall be entitled to sell, and the Company shall be obligated to purchase from such Management Stockholder, during the thirty-day period beginning on the later of (i) the date of Termination of Employment and (ii) the six month anniversary of the Closing Date (or, if later, the six month anniversary of the latest date of sale of the Subscribed Shares or potential issuance of Rollover Shares (i.e., the last day of the exercise period of any Rollover Options not exercised on or prior to the date of Termination of Employment or the date following the date of Termination of Employment on which the last such Rollover Option is exercised and no shares remain subject to any Rollover Options) to such Management Stockholder), all or a portion of the Subscribed Shares and/or Rollover Shares held by such Management Stockholder with an aggregate Fair Market Value as of the date of repurchase equal to or less than 150% of the aggregate Fair Market Value of all such Subscribed Shares and/or all Rollover Shares subject to Rollover Options held by such Management Stockholder as of the Closing Date (or, with respect to the Subscribed Shares, the date of sale thereof to such Management Stockholder, if different) (such repurchase, the Investor Put Right ). The repurchase price payable by the Company to repurchase Subscribed Shares and/or Rollover Shares upon exercise of the Investor Put Right ( Investor Put Repurchase Price ) shall be (A) upon Termination of Employment (x) by the Company without Cause or (y) by such Management Stockholder for Good Reason or due to Retirement, the Fair Market Value of such shares as of the repurchase date and (B) upon Termination of Employment for any other reason (other than by the Company for Cause or due to death or Disability), the lesser of (x) the Fair Market Value of such shares as of the repurchase date and (y) the Fair Market Value of such shares as of the Closing Date (or, with respect to the Subscribed Shares, the date of sale thereof to the Management Stockholder, if different). Each Management Stockholder shall only be entitled to exercise the Investor Put Right once and exercise of the Investor Put Right shall be by written notice ( Investor Put Notice ) to the Company on or prior to the last date on which the Investor Put Right may be exercised by such Management Stockholder. For the avoidance of doubt, the Investor Put Right shall not apply (x) in connection with Termination of Employment of a Management Stockholder by the Company for Cause or due to death or Disability or (y) in any event with respect to Option Shares.
(b) Notwithstanding anything to the contrary in this Section 8, in the event a Management Stockholder exercises the Investor Put Right following Termination of Employment by such Management Stockholder due to Retirement and, thereafter, commences employment (or other service relationship) with any Person (as defined below) within the two-year period immediately following such Termination of Employment, (a) the Management Stockholder shall pay the Company an amount equal to any excess of the Investor Put
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Repurchase Price paid upon exercise of the Investor Put Right over the Fair Market Value, as of the Closing Date (or, with respect to the Subscribed Shares, the date of sale thereof to the Management Stockholder, if different), of the Subscribed Shares and/or Rollover Shares sold in connection with the exercise of the Investor Put Right and (b) to the maximum extent permitted by applicable law, the Company shall be entitled to offset such payment against any other payments to which the Management Stockholder is entitled from the Company or any of its affiliates. Each Management Stockholder who exercises the Investor Put Right following Termination of Employment by such Management Stockholder due to Retirement shall notify the Company as soon as practicable following his or her employment by any other Person within the two-year period immediately following such Termination of Employment.
(c) Upon Termination of Employment of a Management Stockholder due to death or Disability following the Closing Date, such Management Stockholder shall be entitled to sell, and the Company shall be obligated to purchase from such Management Stockholder, during the 365-day period beginning on the later of (i) the date of Termination of Employment and (ii) the six month anniversary of the Closing Date (or, if later, the latest date of sale of the Subscribed Shares or potential issuance of Rollover Shares or Vested Shares (i.e., the last day of the exercise period of any Rollover Options or Vested Options not exercised on or prior to the date of Termination of Employment or the date following the date of Termination of Employment on which the last such Rollover Option or Vested Option is exercised and no shares remain subject to any Rollover Options or Vested Options) to such Management Stockholder), all or a portion of the Restricted Shares held by such Management Stockholder (such repurchase, the Disability Put Right and each of the Investor Put Right and the Disability Put Right, a Put Right ); provided that such Management Stockholder cannot exercise the Disability Put Right at anytime before the later of (A) the six month anniversary of the Closing Date and (B) the six month anniversary of the latest date of sale of the Subscribed Shares or potential issuance of Rollover Shares or Vested Shares (i.e., the last day of the exercise period of any Rollover Options or Vested Options not exercised on or prior to the date of Termination of Employment or the date following the date of Termination of Employment on which the last such Rollover Option or Vested Option is exercised and no shares remain subject to any Rollover Options or Vested Options) to such Management Stockholder. The repurchase price payable by the Company to repurchase Restricted Shares upon exercise of the Disability Put Right ( Disability Put Repurchase Price ) shall be the Fair Market Value of such shares as of the repurchase date. Each Management Stockholder shall only be entitled to exercise the Disability Put Right once and exercise of the Disability Put Right shall be by written notice ( Disability Put Notice and, any Investor Put Notice or Disability Put Notice, a Put Notice ) to the Company on or prior to the last date on which the Disability Put Right may be exercised by such Management Stockholder.
(d) Subject to Section 8(f), the repurchase of Restricted Shares pursuant to the exercise of a Investor Put Right or the Disability Put Right shall take place on a date specified by the Company, but in no event following the later of the 60 th day following the date of the applicable Put Notice or the 10 th day following the receipt by the Company of all necessary governmental approvals. On such date, the applicable Management Stockholder shall transfer the applicable Restricted Shares subject to the applicable Put Notice to the Company, free and clear of all liens and encumbrances, by delivering to the Company the certificates representing such shares, if any, duly endorsed for transfer to the Company or accompanied by
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a stock power duly executed in blank, and the Company shall pay to such Management Stockholder the Investor Put Repurchase Price or Disability Put Repurchase Price, as applicable, in cash. Such Management Stockholder shall use all commercially reasonable efforts to assist the Company in order to expedite all proceedings described in this Section 8.
(e) Subject to compliance with Section 1(d), each Permitted Transferee shall be bound by the terms and conditions of this Section 8 as if such Permitted Transferee was a Management Stockholder.
(f) Notwithstanding anything to the contrary herein,
(i) The Company shall not be permitted to purchase any Restricted Shares held by any Management Stockholder upon exercise by such Management Stockholder of a Put Right if the Board determines that (A) the Company is prohibited from purchasing the Subscribed Shares and/or Rollover Shares by applicable law restricting the purchase by a corporation of its own shares; (B) the purchase of the Subscribed Shares and/or Rollover Shares would constitute a breach of, default, or event of default under, or is otherwise prohibited by, the terms of the Financing Documents or the Company is not able to obtain the requisite consent of any of its lenders to the purchase of the Subscribed and/or Rollover Shares or (C) with respect solely to repurchase pursuant to the Disability Put Right of (x) Option Shares or (y) Restricted Shares (other than Option Shares) after the two-year period immediately following the Closing Date, the purchase of the Restricted Shares would render the Company or its subsidiaries unable to meet their obligations in the ordinary course of business taking into account any pending or proposed transactions, capital expenditures or other budgeted cash outlays by the Company, including, without limitation, any proposed acquisition of any other entity by the Company or any of its subsidiaries. The events described in (A) and (B) above each constitute a Put Repurchase Disability with respect to the Investor Put Right and the events described in (A) through (C) above each constitute a Put Repurchase Disability with respect to an applicable Disability Put Right.
(ii) In the event of a Put Repurchase Disability, the Company shall notify in writing the Management Stockholder who exercised the applicable Put Right (a Put Disability Notice ). The Put Disability Notice shall specify the nature of the Put Repurchase Disability. The Company shall thereafter repurchase the Restricted Shares described in the applicable Put Notice as soon as reasonably practicable after all Put Repurchase Disabilities cease to exist (or the Company may elect, but shall have no obligation, to cause its nominee to repurchase the Restricted Shares while any Put Repurchase Disabilities continue to exist); provided that, to the extent the repurchases of Restricted Shares subject to a Call Notice and a Put Notice are both delayed pursuant to a Call Repurchase Disability and a Put Repurchase Disability, respectively, and such Call Repurchase Disability and Put Repurchase Disability both cease prior to repurchase of any Restricted Shares subject to such Call Notice or Put Notice, the Company shall first repurchase Restricted Shares subject to the Put Notice and, thereafter, repurchase Restricted Shares subject to the Call Notice, in each case, to the extent such repurchases do not trigger a Put Repurchase Disability or Call Repurchase Disability, as applicable. In the event the Company suspends its obligations to repurchase Restricted Shares pursuant to a Put Repurchase Disability, (A) the Company shall provide written notice to each applicable Management Stockholder as soon as practicable after all Put Repurchase Disabilities
19
cease to exist (the Put Reinstatement Notice ); and (B) the Fair Market Value of the Restricted Shares subject to the applicable Put Notice shall be determined as of the date of repurchase following the date the Put Reinstatement Notice is delivered to the Management Stockholder, which Fair Market Value shall be used to determine the Investor Put Repurchase Price or Disability Put Repurchase Price, as applicable, in the manner described above.
(g) For the purposes of this Section 8:
(i) Disability shall mean permanent disability or incapacity as determined in accordance with the Companys or any subsidiarys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of the Management Stockholders position, with reasonable accommodation by the Company and/or any subsidiary thereof, for a period in excess of 180 days during any period of 365 calendar days.
(ii) Good Reason shall have the meaning provided in such Management Stockholders Change in Control Severance Agreement as in effect on the date hereof with the Company or a subsidiary of the Company, as applicable, or if such Management Stockholder does not have such a Change in Control Severance Agreement, but is a participant in the Severance Plan, Good Reason shall have the meaning provided in the Severance Plan, or if Good Reason is not defined therein or the Management Stockholder is not a participant in the Severance Plan, then Good Reason shall mean any material adverse change by the Company in the Management Stockholders job title, duties, responsibility or authority; failure by the Company to pay to the Management Stockholder any material amount of base salary or bonus when due; any material diminution of the Management Stockholders base salary (other than such a material diminution that is applied on a substantially comparable basis to similarly-situated employees of the Company or a subsidiary of the Company); the termination or denial of the Management Stockholders right to participate in employment related benefits that are offered similarly-situated employees of the Company or a subsidiary of the Company; the movement of the Management Stockholders principal location of work to a new location that is in excess of thirty-five (35) miles from the Management Stockholders principal location of work as of the date that the Management Stockholder becomes a party to this Agreement without the Management Stockholders consent; provided that none of the events described in this definition of Good Reason shall constitute Good Reason unless the Management Stockholder notifies the Company in writing of the event that is purported to constitute Good Reason (which notice is provided not later than the 30th day following the occurrence of the event purported to constitute Good Reason) and then only if the Company fails to cure such event within 30 days after the Companys receipt of such written notice.
(iii) Retirement shall mean a Termination of Employment of a Management Stockholder on or after his or her sixty (60th) birthday (A) at a time in which such Management Stockholder has no intention to seek or obtain future employment in which he or she either (x) directly or indirectly owns, manages, controls,
20
participates in, consults with, or in any manner engages in any business that is engaged in, or plans to be engaged in any business that is competitive with the Company and its subsidiaries or (y) is required or reasonably expects to work in excess of 16 hours per week on average, (B) in connection with which such Management Stockholder has provided written notice and agreement, in a form acceptable to the Company, that he or she has no intention to seek or obtain future employment described in subsection (A) above, and will be remain subject to Section 8(c), and (C) that is deemed by the Board, in its sole discretion, as a Retirement for purposes of this Agreement.
Section 9. Termination .
(a) This Agreement shall terminate on the first to occur of:
(i) A Change in Control; provided that Sections 4 and 8 shall survive termination of this Agreement pursuant to this Section 9(a)(i); or
(ii) The date established by a resolution of the Board terminating this Agreement; provided that Sections 2,4, 5, 6, 7, 8 and 10 shall survive the termination of this Agreement pursuant to this Section 9(a)(ii) and shall remain in effect until an event occurs which would constitute a termination of this Agreement pursuant to Section 9(a)(i).
(b) Sections 1,2, 3,4, 6, 7 and 8 hereof shall terminate upon the consummation of the Initial Public Offering.
Section 10. Affiliate Transactions . Any purchase or sale of goods or services (other than the investment of capital) between the Company or any of its subsidiaries on the one hand and any of the Principal Stockholders or their affiliates (other the Company and its subsidiaries) on the other hand in the ordinary course of business shall be done on an arms length basis. For the avoidance of doubt, no actions or events contemplated by (1) this Agreement, (2) any agreement related to management or directors fees or compensation, (3) any other agreement between the Company or any of its subsidiaries on the one hand and any of the Principal Stockholders or their affiliates (other the Company and its subsidiaries) on the other hand existing as of the date hereof, as may be amended from time to time or (4) any issuance after the date hereof of equity or debt instruments of the Company or its affiliates to any of the Principal Stockholders or their affiliates, shall constitute a purchase or sale of goods or services for purposes of the preceding sentence, subject to, for purposes of subsection (4), compliance with any pre-emptive rights included in this Agreement.
Section 11. Miscellaneous .
(a) Legends . Each certificate representing the Restricted Shares shall bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED
21
OTHER THAN IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 30, 2011, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND THE STOCKHOLDERS PARTY THERETO, A COPY OF WHICH SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER UPON WRITTEN REQUEST, AND ANY TRANSFER IN VIOLATION OF SUCH MANAGEMENT STOCKHOLDERS AGREEMENT SHALL BE NULL AND VOID.
(b) Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective legal representatives, heirs, legatees, successors and assigns and shall also apply to any Restricted Shares acquired by any Management Stockholder after the date hereof.
(c) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
(d) Interpretation . The headings of the Sections contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not affect the meaning or interpretation of this Agreement.
(e) Notices . All notices and other communications provided for or permitted hereunder shall be in writing and shall be deemed to have been duly given and received when delivered by overnight courier or hand delivery, when sent by telecopy, or five days after mailing if sent by registered or certified mail (return receipt requested) postage prepaid, to the Parties at the following addresses (or at such other address for any Party as shall be specified by like notices, provided that notices of a change of address shall be effective only upon receipt thereof).
(i) If to the Company at:
Beacon Holding Inc.
c/o BJs Wholesale Club, Inc.
25 Research Drive
Westborough, MA 01581
Attention: General Counsel
22
Facsimile: (774) 512-5552
with copies to LGP and CVC at the addresses set forth below and:
Latham & Watkins LLP
885 Third Avenue
New York, New York
Attention: Howard A. Sobel
John Giouroukakis
Bradd Williamson
Facsimile: (212) 751-4864
(ii) If to CVC at:
CVC Beacon LLC
c/o CVC Capital Partners Advisory (US), Inc.
712 Fifth Avenue, 43rd Floor
New York, NY 10019
Attention: Cameron Breitner
Kenneth Hammond
Facsimile: (212) 265-6375
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz
Facsimile: (212) 455-2502
(iii) If to LGP at:
Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Attention: Jonathan A. Seiffer
J. Kristofer Galashan
Facsimile: (310) 954-0404
and
with a copy to Latham & Watkins LLP, at the address set forth above.
(iv) If to a Management Stockholder, to the address set forth on the Management Stockholders signature page hereto.
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(f) Recapitalization, Exchange, Etc. Affecting the Companys Stock . Nothing in this Agreement shall prevent the Company (subject to Board approval) from effecting the Conversion, any recapitalization, corporate reorganization, corporate inversion involving the creation of one or more holding companies and/or holding company subsidiaries, or similar transaction. The provisions of this Agreement shall apply, to the full extent set forth herein, with respect to any and all shares of Common Stock, and all of the other shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets, business combination or otherwise) that may be issued in respect of, in exchange for, or in substitution of such Common Stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations, and the like occurring after the date hereof.
(g) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to constitute one and the same agreement.
(h) Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby.
(i) Amendment . This Agreement may be amended, modified or waived by resolution of the Board provided the amendment, modification or waiver has been approved by the Principal Stockholders, and, if such amendment, modification or waiver disproportionately and materially adversely affects the Management Stockholders, has been approved by Restricted Shares representing a majority of the Restricted Shares on a fully diluted basis; provided that, notwithstanding the foregoing, such approval shall be required if the amendment, modification or waiver (i) adversely affects the economic rights or interests of the Management Stockholders, or (ii) disproportionately adversely affects the non-economic rights or interests of the Management Stockholders other than in a de minimis manner. At any time hereafter, additional Management Stockholders may be made parties hereto, subject to approval by the Board, by executing a signature page in the form attached as Exhibit A hereto, which signature page shall be countersigned by the Company and shall be attached to this Agreement and become a part hereof without any further action of any other Party hereto.
(j ) Tax Withholding . The Company shall be entitled to require payment in cash or deduction from other compensation payable to any Management Stockholder of any sums required by federal, state, or local tax law to be withheld with respect to the issuance, vesting, exercise, repurchase, or cancellation of any Restricted Share or any option to purchase Restricted Shares.
(k) No Employment Rights . Nothing contained in this Agreement (i) obligates the Company or any affiliate of the Company to employ any Management Stockholder in any capacity whatsoever; or (ii) prohibits or restricts the Company or any affiliate of the Company from terminating the employment, if any, of any Management Stockholder at any time or for any reason whatsoever and each Management Stockholder hereby acknowledges and
24
agrees that, except as may otherwise be set forth in any written agreement between the Company and such Management Stockholder, neither the Company nor any other Person has made any representations or promises whatsoever to such Management Stockholder concerning his or her employment or continued employment by the Company or any affiliate of the Company.
(l) Offsets . The Company shall be permitted to offset and reduce from any amounts payable to a Management Stockholder the amount of any indebtedness or other obligation or payment owing to the Company by the Management Stockholder.
(m) Submission of Jurisdiction; Waiver of Jury Trial . EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND OF ANY DELAWARE STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS STOCKHOLDERS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(n) Specific Performance . The Parties hereby acknowledge and agree that it is impossible to measure in money the damages which will accrue to the Parties by reason of the failure of any Party to perform any of its obligations set forth in this Agreement and that, in the event of any such failure, an aggrieved Party will be irreparably damaged and will not have an adequate remedy at law. Any such Party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the Parties shall raise the defense that there is an adequate remedy at law.
(o) Entire Agreement . This writing constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior understandings among the Parties.
(p) Business Opportunities; No Recourse .
(i) None of the Principal Stockholders nor any of their respective affiliates shall have any obligation to present any business opportunity to the Company or any of its subsidiaries, even if the opportunity is one that the Company or any of its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no Principal Stockholder shall be liable to the Company or any of its subsidiaries or any other Person for breach of any fiduciary or other duty, as a holder of shares of
25
Common Stock, by reason of the fact that such Principal Stockholder pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or any of its subsidiaries. For the purposes of this Agreement, Person shall mean an individual, partnership, joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
(ii) Notwithstanding anything that may be expressed or implied in this Agreement, and notwithstanding the fact that certain of the Principal Stockholders may be partnerships or limited liability companies, each party hereto covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any former, current or future directors, officers, agents, affiliates, employees, general or limited partners, members, managers or stockholders of any Principal Stockholder or any of their successors or permitted assignees or any former, current or future directors, officers, agents, affiliates, employees, general or limited partners, members, managers or stockholders of any of the foregoing, as such, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law or otherwise, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future directors, officers, agents, affiliates, employees, general or limited partners, members, managers or stockholders of any Principal Stockholder or any of its successors or permitted assignees or any former, current or future directors, officers, agents, affiliates, employees, general or limited partners, members, managers or stockholders of any of the foregoing, as such, for any obligation of any party hereto under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.
[signature pages follow]
26
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first written above.
BEACON HOLDING INC. | ||
By: |
/s/ Jonathan A. Seiffer |
|
Name: | Jonathan A. Seiffer | |
Its: | President | |
GREEN EQUITY INVESTORS V, L.P. | ||
By: | GEI Capital V, LLC, its General Partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Name: | Jonathan A. Seiffer | |
Title: | ||
GREEN EQUITY INVESTORS SIDE V, L.P. | ||
By: | GEI Capital V, LLC, its General Partner | |
By: |
/s/ Jonathan A. Seiffer |
|
Name: | Jonathan A. Seiffer | |
Title: | ||
BEACON COINVEST LLC | ||
By: |
/s/ Jonathan A. Seiffer |
|
Name: | Jonathan A. Seiffer | |
Title: |
Each Management Stockholder has agreed to be bound by the terms of this Agreement by execution and delivery of the signature page set forth as Exhibit A hereto.
CVC BEACON LLC | ||
By: |
/s/ Cameron Breitner |
|
Name: | Cameron Breitner | |
Title: | President and Assistant Secretary |
Each Management Stockholder has agreed to be bound by the terms of this Agreement by execution and delivery of the signature page set forth as Exhibit A hereto.
EXHIBIT A
SIGNATURE PAGE
TO THE MANAGEMENT STOCKHOLDERS AGREEMENT
OF BEACON HOLDING INC.
By execution of this signature page, [ ] hereby agrees to become a party to, be bound by the obligations of, and receive the benefits of, that certain Management Stockholders Agreement of Beacon Holding Inc. dated as of September 30, 2011 by and among Beacon Holding Inc., a Delaware company (the Company ), the stockholders of the Company signatory thereto and certain other parties named therein, as amended from time to time thereafter.
|
[Name of Management Stockholder] |
Residence Address: |
|
|
Accepted:
BEACON HOLDING INC. | ||
By: |
|
|
Name: |
||
Title: |
Exhibit 4.3
VOTING AGREEMENT
THIS VOTING AGREEMENT, effective as of the Effective Time and dated as of the day that the Effective Time occurs, is entered into by and among (i) BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), (ii) CVC Beacon LP, a Delaware limited partnership (the CVC Stockholder ), (iii) Green Equity Investors V, L.P., a Delaware limited partnership ( LGP V ), (iv) Green Equity Investors Side V, L.P., a Delaware limited partnership ( LGP Side V ) and (v) Beacon Coinvest LLC, a Delaware limited liability company (together with LGP V and LGP Side V, collectively, the LGP Stockholders and, together with the CVC Stockholder, the Principal Stockholders and each a Principal Stockholder ). Capitalized terms used herein without definition shall have the meanings set forth in Section 1.1 .
WITNESSETH:
WHEREAS, the Company will price an initial public offering of shares of its common stock (such shares of common stock, the Common Stock , and such initial public offering, the IPO ) pursuant to an Underwriting Agreement dated as of June 27, 2018 (the Underwriting Agreement );
WHEREAS, the parties hereto desire to provide for certain governance rights and other matters for the period on and after the Effective Time.
NOW, THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 Definitions As used in this Agreement, the following terms shall have the following respective meanings:
Affiliate shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such first Person. For these purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.
Agreement shall mean this Voting Agreement as in effect on the date hereof and as hereafter from time to time amended, modified or supplemented in accordance with the terms hereof.
Board of Directors shall mean the Board of Directors of the Company.
Board Designees shall mean the Directors designated by the Principal Stockholders pursuant to Section 2.1 .
Closing means the closing of the IPO.
Code shall have the meaning set forth in Section 2.5(b) .
Common Stock shall have the meaning set forth in the recitals.
Company shall have the meaning set forth in the preamble.
Company Shares means (i) all shares of Common Stock that are not then subject to vesting (including shares that were at one time subject to vesting to the extent they have vested), (ii) all shares of Common Stock issuable upon exercise, conversion or exchange of any option, warrant or convertible security that are not then subject to vesting (including shares that were at one time subject to vesting to the extent they have vested) and (iii) all shares of Common Stock directly or indirectly issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of unit or stock dividend or unit or stock split, or in connection with a combination of units or shares, recapitalization, merger, consolidation or other reorganization.
CVC Director shall have the meaning set forth in Section 2.1(a) .
CVC Stockholder shall have the meaning set forth in the preamble.
CVC Stockholder Designee shall have the meaning set forth in Section 2.1(b) .
Director shall mean a member of the Board of Directors.
Effective Time shall have the meaning set forth in Section 4.12 .
IPO shall have the meaning set forth in the recitals.
LGP Director shall have the meaning set forth in Section 2.1(a) .
LGP Stockholders shall have the meaning set forth in the preamble.
LGP Stockholders Designee shall have the meaning set forth in Section 2.1(c) .
Necessary Action means, with respect to a specified result, all commercially reasonable actions required to cause such result that are within the power of a specified Person, including (i) voting or providing a written consent or proxy with respect to the Company Shares, (ii) causing the adoption of stockholders resolutions and amendments to the organizational documents of the Company, (iii) executing agreements and instruments, (iv) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result and (v) causing members of the Board of Directors, subject to any fiduciary duties that such members may have as directors of the Company (including pursuant to Section 2.1(e) ), to act in a certain manner, including causing members of the Board of Directors or any nominating or similar committee of the Board of Directors to recommend the appointment of any Board Designees as provided by this Agreement.
Person shall mean an individual, corporation, company, limited liability company, association, partnership, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof.
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Principal Stockholders shall have the meaning set forth in the preamble.
Underwriting Agreement shall have the meaning set forth in the recitals.
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1 Board of Directors.
(a) Composition of Initial Board . As of the Closing, the Board of Directors shall be comprised of ten (10) directors, (i) the following three (3) of whom shall be deemed to have been designated by the CVC Stockholder (each, a CVC Director ): Christopher J. Stadler, Cameron Breitner and Lars Haegg; and (ii) the following three (3) of whom shall be deemed to have been designated by the LGP Stockholders (each, a LGP Director ): Jonathan A. Seiffer, J. Kristofer Galashan and Tommy Yin. The foregoing directors shall be divided into three classes of directors, each of whose members shall serve for staggered three-year terms as follows:
(i) the class I directors shall initially include one (1) CVC Director and one (1) LGP Director;
(ii) the class II directors shall initially include two (2) CVC Directors and two (2) LGP Directors; and
(iii) the class III directors shall initially include no CVC Directors and no LGP Directors.
The initial term of the class I directors shall expire immediately following the Companys 2019 annual meeting of stockholders at which directors are elected. The initial term of the class II directors shall expire immediately following the Companys 2020 annual meeting of stockholders at which directors are elected. The initial term of the class III directors shall expire immediately following the Companys 2021 annual meeting at which directors are elected.
(b) CVC Stockholder Representation . For so long as the CVC Stockholder holds, in the aggregate, a number of shares of Common Stock representing at least the percentages shown below of shares of Common Stock held in the aggregate by the CVC Stockholder as of the Closing of the IPO, the Company and the Principal Stockholders shall take Necessary Action to include in the slate of nominees recommended by the Board for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected that number of individuals designated by the CVC Stockholder (each, a CVC Stockholder Designee ) that, if elected, will result in the number of CVC Directors serving on the Board of Directors that is shown below.
Percentage |
Number of
Directors |
|||
70% or greater |
3 | |||
Less than 70% but greater than or equal to 40% |
2 | |||
Less than 40% but greater than or equal to 10% |
1 | |||
Less than 10% |
0 |
3
Upon any decrease in the number of directors that the CVC Stockholder is entitled to designate for election to the Board of Directors, the CVC Stockholder shall use its reasonable best efforts to cause the appropriate number of CVC Stockholder Designees to offer to tender his or her resignation. If such resignation is then accepted by the Board of Directors, the Company and the Principal Stockholders shall cause the size of the Board of Directors to be reduced accordingly unless the Company, with the approval of a majority of the remaining Directors, determines not to reduce the authorized size of the Board of Directors, in which case the Board of Directors shall act in accordance with the bylaws of the Company then in effect to appoint or nominate a new director to the Board of Directors.
(c) LGP Stockholders Representation . For so long as the LGP Stockholders hold, in the aggregate, a number of shares of Common Stock representing at least the percentages shown below of shares of Common Stock held in the aggregate by the LGP Stockholders as of the Closing of the IPO, the Company and the Principal Stockholders shall take Necessary Action to include in the slate of nominees recommended by the Board for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected that number of individuals designated by the LGP Stockholders (each, a LGP Stockholder Designee ) that, if elected, will result in the number of LGP Directors serving on the Board of Directors that is shown below.
Percentage |
Number of
Directors |
|||
70% or greater |
3 | |||
Less than 70% but greater than or equal to 40% |
2 | |||
Less than 40% but greater than or equal to 10% |
1 | |||
Less than 10% |
0 |
Upon any decrease in the number of directors that the LGP Stockholders are entitled to designate for election to the Board of Directors, the LGP Stockholders shall use their reasonable best efforts to cause the appropriate number of LGP Stockholder Designees to offer to tender his or her resignation. If such resignation is then accepted by the Board of Directors, the Company and the Principal Stockholders shall cause the size of the Board of Directors to be reduced accordingly unless the Company, with the approval of a majority of the remaining Directors, determines not to reduce the authorized size of the Board of Directors, in which case the Board of Directors shall act in accordance with the bylaws of the Company then in effect to appoint or nominate a new director to the Board of Directors.
4
(d) Additional Obligations . An individual designated by a Principal Stockholder for election (including pursuant to Sections 2.1(b) or 2.1(c)) as a Director shall comply with the requirements of the charter for, and related guidelines of, the Nominating and Corporate Governance Committee. Notwithstanding anything to the contrary in this Article II, in the event that the Board of Directors determines in good faith, after consultation with outside legal counsel, that its nomination, appointment or election of a particular Board Designee pursuant to this Section 2.1 or Section 2.2 would constitute a breach of its fiduciary duties to the Companys stockholders or does not otherwise comply with any requirements of the charter for, or related guidelines of, the Nominating and Corporate Governance Committee, then the Board of Directors shall inform such Principal Stockholder of such determination in writing and explain in reasonable detail the basis for such determination and shall designate another individual designated for nomination, election or appointment to the Board of Directors by such Principal Stockholder (subject in each case to this Section 2.1(d)), and the Board of Directors and the Company shall take all of the actions required by this Article II with respect to the election of such substitute Board Designee. It is hereby acknowledged and agreed that the fact that a particular Board Designee is an Affiliate, director, professional, partner, member, manager, employee or agent of a Principal Stockholder or is not an independent director shall not in and of itself constitute an acceptable basis for such determination by the Board of Directors.
(e) Vacancies . Except as provided in Sections 2.1(b) and 2.1(c) , as applicable, with respect to decreases in ownership of the Principal Stockholders, (i) each Principal Stockholder shall have the exclusive right to request the removal of its Board Designees from the Board of Directors in accordance with the bylaws of the Company then in effect, and the Company and the Principal Stockholders shall take all Necessary Action to cause the removal (whether for our without cause) of any such Board Designee at the request of the designating Principal Stockholder and (ii) each Principal Stockholder shall have the exclusive right to designate directors for election to the Board of Directors to fill vacancies (for the remainder of the then current term) created by reason of death, disability, removal or resignation of its Board Designees to the Board of Directors, and the Company and the Principal Stockholders shall take all Necessary Action to cause any such vacancies to be filled by replacement directors designated by such designating Principal Stockholder as promptly as reasonably practicable.
SECTION 2.2 Voting Agreement . Each Principal Stockholder agrees, in person or by proxy, to cast all votes to which such Principal Stockholder is entitled in respect of its Company Shares, whether at any annual or special meeting, by written consent or otherwise, so as to cause to be elected to the Board of Directors those individuals designated in accordance with Section 2.1 and to otherwise effect the intent of this Article II .
SECTION 2.3 Agreement of Company . The Company hereby agrees that it will take all Necessary Actions to cause the matters addressed by this Article II to be carried out in accordance with the provisions thereof. Without limiting the foregoing, the Secretary of the Company or such other officer or employee of the Company who may be fulfilling the duties of the Secretary, shall not record any vote or consent or other action contrary to the terms of this Article II .
5
SECTION 2.4 Restrictions on Other Agreements . No Principal Stockholder shall grant any proxy or enter into or agree to be bound by any voting trust, agreement or arrangement of any kind with any Person with respect to its Company Shares if and to the extent the terms thereof conflict with the provisions of this Agreement (whether or not such proxy, voting trust, agreements or arrangements are with other Principal Stockholders, holders of Company Shares that are not parties to this Agreement or otherwise).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the parties to this Agreement hereby represents and warrants to each other party to this Agreement, severally on behalf of itself and not jointly, that as of the date such party executes this Agreement:
SECTION 3.1 Existence; Authority; Enforceability . Such party has the power and authority to enter into this Agreement and to carry out its obligations hereunder. If such party is an entity, it is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary action, and no other act or proceeding on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. If such party is a natural person, such person has full capacity to contract. This Agreement has been duly executed by each of the parties hereto and constitutes his or its legal, valid and binding obligation, enforceable against him or it in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws relating to or affecting creditors rights generally, or by the general principles of equity. No representation is made by any party with respect to the regulatory effect of this Agreement, and each of the parties has had an opportunity to consult with counsel as to his or its rights and responsibilities under this Agreement. No party makes any representation to any other party as to future law or regulation or the future interpretation of existing laws or regulations by any governmental authority or self-regulatory organization.
SECTION 3.2 Absence of Conflicts . The execution and delivery by such party of this Agreement and the performance of its obligations hereunder does not and will not (i) conflict with, or result in the breach of, any provision of the constitutive documents of such party, if any; (ii) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any contract, agreement or permit to which such party is a party or by which such partys assets or operations are bound or affected; or (iii) violate any law applicable to such party.
SECTION 3.3 Consents . Other than any consents which have already been obtained, no consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such party in connection with the execution, delivery or performance of this Agreement.
6
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Termination . This Agreement shall terminate and be of no further force and effect upon (a) either of the LGP Stockholders, on the one hand, or the CVC Stockholder, on the other hand, ceasing to own any shares of Common Stock, (b) the written agreement of the LGP Stockholders and the CVC Stockholder to terminate this Agreement or (c) subject to the final sentence of Section 4.7 of this Agreement, its provisions become illegal or are interpreted by any governmental authority to be illegal, or any exchange on which the Companys Common Shares are traded asserts in writing that its existence will threaten the continued listing of the Companys Common Shares on such exchange
SECTION 4.2 Successors and Assigns; Beneficiaries . Except as otherwise provided herein, all of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and permitted assigns of the parties hereto. This Agreement may not be assigned without the express prior written consent of the other parties hereto, and any attempted assignment, without such consents, will be null and void; provided that each Principal Stockholder (from time to time party hereto) shall be entitled to assign (solely in connection with a transfer of Common Stock) to any of its Affiliates, without such prior written consent, any of its rights and obligations hereunder; provided , further , that any such Affiliate agrees be bound by the obligations hereunder.
SECTION 4.3 Amendment and Modification; Waiver of Compliance . (a) This Agreement may be amended only by a written instrument duly executed by the Company, the LGP Stockholders and the CVC Stockholder.
(b) Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
SECTION 4.4 Notices . Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by electronic mail, facsimile, or first class mail, or by Federal Express, United Parcel Service or other similar courier or other similar means of communication, as follows:
(i) If to the LGP Stockholders, addressed to Green Equity Investors V, L.P., 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, CA 90025, Attention: Jonathan Seiffer (seiffer@leonardgreen.com) and J. Kristofer Galashan (galashan@leonardgreen.com); and
(ii) If to the CVC Stockholder, addressed to CVC Capital Partners Advisory (US), Inc., One Maritime Plaza, Suite 1610, San Francisco, CA 94111, Attention: Cameron Breitner (CBreitner@cvc.com) and Nishad Chande (nchande@cvc.com);
7
or, in each case, to such other address or electronic mail address as such party may designate in writing to each Principal Stockholder by written notice given in the manner specified herein.
All such communications shall be deemed to have been given, delivered or made when so delivered by hand or sent by electronic mail or facsimile (with confirmed receipt or transmission), on the next business day if sent by overnight courier service (with confirmed delivery) or when received if sent by first class mail.
SECTION 4.5 Specific Performance . Each party hereto acknowledges and agrees that in the event of any breach of this Agreement by any of them, the other parties hereto would be irreparably harmed and could not be made whole by monetary damages. Each party accordingly agrees to waive the defense in any action for specific performance that a remedy at law would be adequate and agrees that the parties, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to specific performance of this Agreement without the posting of bond.
SECTION 4.6 Entire Agreement . The provisions of this Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior oral and written agreements and memoranda and undertakings among the parties hereto with regard to such subject matter.
SECTION 4.7 Severability . If any provision of this Agreement, or the application of such provision to any Person or circumstance or in any jurisdiction, shall be held to be invalid or unenforceable to any extent, (i) the remainder of this Agreement shall not be affected thereby, and each other provision hereof shall be valid and enforceable to the fullest extent permitted by law, (ii) as to such Person or circumstance or in such jurisdiction such provision shall be reformed to be valid and enforceable to the fullest extent permitted by law and (iii) the application of such provision to other Persons or circumstances or in other jurisdictions shall not be affected thereby. If this Agreement would be required to be terminated pursuant to clause (c) of Section 4.1 of this Agreement, the parties to this Agreement shall use their respective reasonable best efforts to cause the provisions of this Agreement to be reformed, prior to any such termination, to the fullest extent possible to both effectuate the intent of the parties to this Agreement (as of the date of this Agreement) and not cause the termination of this Agreement pursuant to Section 4.1 of this Agreement.
SECTION 4.8 CHOICE OF LAW AND VENUE; WAIVER OF RIGHT TO JURY TRIAL . THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE.
IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (1) AGREE UNDER ALL CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION, PROCEEDING OR OTHER LEGAL
8
ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE STATE OF DELAWARE, WHETHER A STATE OR FEDERAL COURT; (2) AGREE THAT IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL CONSENT AND SUBMIT TO THE PERSONAL JURISDICTION OF ANY SUCH COURT DESCRIBED IN CLAUSE (1) OF THIS SECTION AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING TO REMOVE ANY ACTION TO A FEDERAL COURT IN THE STATE OF DELAWARE); (3) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT IN ANY INCONVENIENT FORUM; (4) AGREE, AFTER CONSULTATION WITH COUNSEL, TO WAIVE ANY RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT; (5) AGREE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES THEREOF TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN FOR COMMUNICATIONS TO SUCH PARTY; (6) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (7) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 4.9 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
SECTION 4.10 Further Assurances . At any time or from time to time after the date hereof, the parties hereto agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as any other party may reasonably request in order to evidence or effectuate the provisions of this Agreement and to otherwise carry out the intent of the parties hereunder.
SECTION 4.12 Effectiveness of Agreement . Immediately prior to the effectiveness of the Companys registration statement on Form S-1 (Registration No. 333-224994), the Agreement shall thereupon be deemed to be effective (such time, the Effective Time ). However, to the extent the Closing does not occur, the provisions of this Agreement shall be without any force or effect.
9
IN WITNESS WHEREOF, each of the undersigned has signed this Voting Agreement as of the date first above written.
COMPANY:
BJS WHOLESALE CLUB HOLDINGS, INC. |
||
By: | /s/ Graham N. Luce | |
Name: | Graham N. Luce | |
Title: | Senior Vice President, Secretary | |
LGP STOCKHOLDERS:
GREEN EQUITY INVESTORS V, L.P. |
||
By: | GEI Capital V, LLC, its general partner | |
By: | /s/ Jonathan A. Seiffer | |
Name: | Jonathan A. Seiffer | |
Title: | ||
GREEN EQUITY INVESTORS SIDE V, L.P. | ||
By: | GEI Capital V, LLC, its general partner | |
By: | /s/ Jonathan A. Seiffer | |
Name: | Jonathan A. Seiffer | |
Title: | ||
BEACON COINVEST LLC | ||
By: | /s/ Jonathan A. Seiffer | |
Name: | Jonathan A. Seiffer | |
Title: |
[BJs Wholesale Club Holdings, Inc. Signature Page to the 2018 Voting Agreement]
CVC STOCKHOLDER:
CVC BEACON LP |
||
By: | CVC Beacon GP LLC, its general partner | |
By: | /s/ Cameron Breitner | |
Name: | Cameron Breitner | |
Title: | President and Assistant Secretary |
[BJs Wholesale Club Holdings, Inc. Signature Page to the 2018 Voting Agreement]
Exhibit 4.4
First Amendment to Voting Agreement
This First Amendment to Voting Agreement (this Agreement ) is effective as of October 30, 2018 and shall amend, subject to the terms and conditions contained herein, the Voting Agreement (the Voting Agreement ) which was effective as of June 27, 2018 and was made by and among (i) BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), (ii) CVC Beacon LP, a Delaware limited partnership (the CVC Stockholder ), (iii) Green Equity Investors V, L.P., a Delaware limited partnership ( LGP V ), (iv) Green Equity Investors Side V, L.P., a Delaware limited partnership ( LGP Side V ) and (v) Beacon Coinvest LLC, a Delaware limited liability company (together with LGP V and LGP Side V, collectively, the LGP Stockholders and, together with the CVC Stockholder, the Principal Stockholders and each a Principal Stockholder ).
ARTICLE I.
AMENDMENTS
Section 1.1 Amendments . Each Principal Stockholder and the Company hereby acknowledge and agree, in accordance with Section 4.3(a) of the Voting Agreement, that Section 2.1(a)(i) of the Voting Agreement is hereby amended such that the name Christopher J. Stadler shall be replaced and deleted from the Voting Agreement in the place in which it appears in such Section and shall be replaced with the name Nishad Chande in such place.
ARTICLE II.
MISCELLANEOUS
Section 2.1 Full Force and Effect . Except as expressly provided by this Agreement, the Voting Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and reaffirmed. Except as expressly set forth in this Agreement, no other terms and conditions of the Voting Agreement are hereby waived, amended, altered or otherwise modified and this Amendment shall for all purposes be deemed to constitute part of the Voting Agreement as such Voting Agreement existed on its date of effectiveness (including for purposes of Section 4.6 of the Voting Agreement).
Section 2.2 Other Sections . Sections 4.2, 4.4, 4.8, 4.9 and 4.10 of the Voting Agreement shall apply to this Agreement mutatis mutandis .
IN WITNESS HEREOF, the undersigned have executed this Agreement as of this 30th day of October, 2018.
BJS WHOLESALE CLUB HOLDINGS, INC. | ||
By: |
/s/ Graham N. Luce |
|
Print: |
Graham N. Luce |
|
Title: |
Senior Vice President, Secretary |
Signature Page to First Amendment to Stockhholders Agreement
GREEN EQUITY INVESTORS V, L.P. | ||
By: GEI Capital V, LLC, its general partner |
||
By: |
/s/ Andrew Goldberg |
|
Print: |
Andrew Goldberg |
|
Title: |
Vice President, General Counsel |
|
GREEN EQUITY INVESTORS SIDE V, L.P. | ||
By: GEI Capital V, LLC, its general partner |
||
By: |
/s/ Andrew Goldberg |
|
Print: |
Andrew Goldberg |
|
Title: |
Vice President, General Counsel |
|
BEACON COINVEST LLC | ||
By: |
/s/ Andrew Goldberg |
|
Print: |
Andrew Goldberg |
|
Title: |
Vice President, General Counsel |
Signature Page to First Amendment to Stockhholders Agreement
CVC BEACON LP | ||
By: CVC Beacon GP LLC, its general partner |
||
By: |
/s/ Cameron Breitner |
|
Print: |
Cameron Breitner |
|
Title: |
President |
Signature Page to First Amendment to Stockhholders Agreement
Exhibit 5.1
February 8, 2019 |
|
BJs Wholesale Club Holdings, Inc.
25 Research Drive
Westborough, Massachusetts 01581
Re: |
BJs Wholesale Club Holdings, Inc. Registration Statement on Form S-1; 58,345,145 shares of Common Stock, par value $0.01 per share |
Ladies and Gentlemen:
We have acted as counsel to BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), in connection with the registration of the offer and sale of 58,345,145 shares (the Shares ) of common stock, $0.01 par value per share (the Common Stock ), by certain selling stockholders named therein. The Shares are included in a registration statement on Form S1 under the Securities Act of 1933, as amended (the Act ), filed with the Securities and Exchange Commission (the Commission ) on February 8, 2019 (as amended, the Registration Statement ). This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related Prospectus, other than as expressly stated herein with respect to the issue of the Shares.
As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to General Corporation Law of the State of Delaware, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws, or as to any matters of municipal law or the laws of any local agencies within any state.
February 8, 2019
Page 2
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, the Shares have been duly authorized by all necessary corporate action of the Company and are validly issued, fully paid and nonassessable.
Our opinions are subject to: (i) the effect of bankruptcy, insolvency, reorganization, preference, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights and remedies of creditors; and (ii) the effect of general principles of equity, whether considered in a proceeding in equity or at law (including the possible unavailability of specific performance or injunctive relief), concepts of materiality, reasonableness, good faith and fair dealing, and the discretion of the court before which a proceeding is brought.
This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading Legal Matters. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
Very truly yours, |
/s/ Latham & Watkins LLP |
Exhibit 10.1
[EXECUTION VERSION]
$1,000,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 3, 2017
among
BJS WHOLESALE CLUB, INC.,
as the Borrower,
BEACON HOLDING INC.,
as Holdings,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent,
and
THE OTHER LENDERS AND ISSUERS PARTY HERETO
BANK OF AMERICA, NATIONAL ASSOCIATION and DEUTSCHE BANK SECURITIES INC.,
as Co-Syndication Agents,
BMO HARRIS BANK N.A.,
CAPITAL ONE, NATIONAL ASSOCIATION,
ING CAPITAL LLC,
TD BANK, N.A. and
U.S. BANK NATIONAL ASSOCIATION,
as Co-Documentation Agents,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and
DEUTSCHE BANK SECURITIES INC.,
as Arrangers,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and
DEUTSCHE BANK SECURITIES INC.,
as Joint Bookrunners
TABLE OF CONTENTS
Page | ||||||
ARTICLE I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS | 1 | |||||
SECTION 1.1 |
Defined Terms | 1 | ||||
SECTION 1.2 |
Other Interpretive Provisions | 69 | ||||
SECTION 1.3 |
Accounting Terms | 70 | ||||
SECTION 1.4 |
Rounding | 70 | ||||
SECTION 1.5 |
[Reserved] | 70 | ||||
SECTION 1.6 |
References to Agreements, Laws, Etc | 70 | ||||
SECTION 1.7 |
Times of Day | 70 | ||||
SECTION 1.8 |
Pro Forma Calculations | 70 | ||||
SECTION 1.9 |
Currency Equivalents Generally | 72 | ||||
ARTICLE II THE FACILITY | 72 | |||||
SECTION 2.1 |
The Commitments | 72 | ||||
SECTION 2.2 |
Borrowing Procedures | 74 | ||||
SECTION 2.3 |
Swing Loans | 75 | ||||
SECTION 2.4 |
Letters of Credit | 77 | ||||
SECTION 2.5 |
Reduction and Termination of the Revolving Credit Commitments | 83 | ||||
SECTION 2.6 |
Repayment of Loans | 83 | ||||
SECTION 2.7 |
Evidence of Indebtedness | 84 | ||||
SECTION 2.8 |
Optional Prepayments | 84 | ||||
SECTION 2.9 |
Mandatory Prepayments | 84 | ||||
SECTION 2.10 |
Interest | 86 | ||||
SECTION 2.11 |
Conversion/Continuation Option | 87 | ||||
SECTION 2.12 |
Fees | 87 | ||||
SECTION 2.13 |
Payments and Computations | 88 | ||||
SECTION 2.14 |
Special Provisions Governing Eurocurrency Rate Loans | 90 | ||||
SECTION 2.15 |
Revolving Commitment Increase | 91 | ||||
SECTION 2.16 |
Defaulting Lenders | 92 | ||||
SECTION 2.17 |
Extensions of Revolving Loans | 94 | ||||
SECTION 2.18 |
Extension of Term Loans | 98 |
-i-
ARTICLE III TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY | 101 | |||||
SECTION 3.1 |
Taxes | 101 | ||||
SECTION 3.2 |
Illegality | 106 | ||||
SECTION 3.3 |
Inability to Determine Rates | 107 | ||||
SECTION 3.4 |
Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans | 107 | ||||
SECTION 3.5 |
Funding Losses | 109 | ||||
SECTION 3.6 |
Matters Applicable to All Requests for Compensation | 110 | ||||
SECTION 3.7 |
Replacement of Lenders under Certain Circumstances | 110 | ||||
SECTION 3.8 |
Survival | 112 | ||||
ARTICLE IV CONDITIONS PRECEDENT | 112 | |||||
SECTION 4.1 |
Conditions Precedent to Restatement Effective Date | 112 | ||||
SECTION 4.2 |
Conditions Precedent to Each Loan and Letter of Credit | 115 | ||||
SECTION 4.3 |
Determinations of Restatement Effective Date Borrowing Conditions | 116 | ||||
ARTICLE V REPRESENTATIONS AND WARRANTIES | 116 | |||||
SECTION 5.1 |
Existence, Qualification and Power; Compliance with Laws | 116 | ||||
SECTION 5.2 |
Authorization; No Contravention | 116 | ||||
SECTION 5.3 |
Governmental Authorization | 117 | ||||
SECTION 5.4 |
Binding Effect | 117 | ||||
SECTION 5.5 |
Financial Statements; No Material Adverse Effect | 117 | ||||
SECTION 5.6 |
Litigation | 118 | ||||
SECTION 5.7 |
Labor Matters | 118 | ||||
SECTION 5.8 |
Ownership of Property; Liens | 118 | ||||
SECTION 5.9 |
Environmental Matters | 118 | ||||
SECTION 5.10 |
Taxes | 119 | ||||
SECTION 5.11 |
ERISA Compliance | 119 | ||||
SECTION 5.12 |
Subsidiaries | 120 | ||||
SECTION 5.13 |
Margin Regulations; Investment Company Act | 120 | ||||
SECTION 5.14 |
Disclosure | 120 | ||||
SECTION 5.15 |
Intellectual Property; Licenses, Etc | 121 | ||||
SECTION 5.16 |
Solvency | 121 | ||||
SECTION 5.17 |
Subordination of Junior Financing | 121 |
-ii-
SECTION 5.18 |
USA PATRIOT Act | 121 | ||||
SECTION 5.19 |
Collateral Documents | 122 | ||||
SECTION 5.20 |
Use of Proceeds | 122 | ||||
SECTION 5.21 |
EEA Financial Institutions | 122 | ||||
ARTICLE VI FINANCIAL COVENANT | 122 | |||||
SECTION 6.1 |
Minimum Fixed Charge Coverage Ratio | 122 | ||||
ARTICLE VII REPORTING COVENANTS | 123 | |||||
SECTION 7.1 |
Financial Statements, Etc | 123 | ||||
SECTION 7.2 |
Certificates; Other Information | 125 | ||||
SECTION 7.3 |
Notices | 127 | ||||
SECTION 7.4 |
Borrowing Base Certificate | 127 | ||||
ARTICLE VIII AFFIRMATIVE COVENANTS | 129 | |||||
SECTION 8.1 |
Preservation of Existence, Etc | 129 | ||||
SECTION 8.2 |
Compliance with Laws, Etc | 129 | ||||
SECTION 8.3 |
Designation of Subsidiaries | 130 | ||||
SECTION 8.4 |
Payment of Taxes, Etc | 130 | ||||
SECTION 8.5 |
Maintenance of Insurance | 130 | ||||
SECTION 8.6 |
Inspection Rights | 131 | ||||
SECTION 8.7 |
Books and Records | 132 | ||||
SECTION 8.8 |
Maintenance of Properties | 132 | ||||
SECTION 8.9 |
Use of Proceeds | 132 | ||||
SECTION 8.10 |
Compliance with Environmental Laws | 132 | ||||
SECTION 8.11 |
Covenant to Guarantee Obligations and Give Security | 132 | ||||
SECTION 8.12 |
Cash Receipts | 135 | ||||
SECTION 8.13 |
Further Assurances | 137 | ||||
SECTION 8.14 |
Physical Inventories | 138 | ||||
SECTION 8.15 |
Post-Closing Matters | 139 | ||||
ARTICLE IX NEGATIVE COVENANTS | 139 | |||||
SECTION 9.1 |
Liens | 139 | ||||
SECTION 9.2 |
Investments | 143 | ||||
SECTION 9.3 |
Indebtedness | 145 | ||||
SECTION 9.4 |
Fundamental Changes | 149 | ||||
SECTION 9.5 |
Dispositions | 152 |
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SECTION 9.6 |
Restricted Payments | 155 | ||||
SECTION 9.7 |
Change in Nature of Business | 158 | ||||
SECTION 9.8 |
Transactions with Affiliates | 158 | ||||
SECTION 9.9 |
Burdensome Agreements | 160 | ||||
SECTION 9.10 |
[Reserved] | 161 | ||||
SECTION 9.11 |
Fiscal Year | 161 | ||||
SECTION 9.12 |
Prepayments, Etc. of Indebtedness | 162 | ||||
SECTION 9.13 |
[Reserved] | 162 | ||||
SECTION 9.14 |
Modification of Debt Agreements | 162 | ||||
SECTION 9.15 |
Holdings | 162 | ||||
ARTICLE X EVENTS OF DEFAULT | 163 | |||||
SECTION 10.1 |
Events of Default | 163 | ||||
SECTION 10.2 |
Remedies upon Event of Default | 166 | ||||
SECTION 10.3 |
Application of Funds | 167 | ||||
SECTION 10.4 |
Borrowers Right to Cure | 169 | ||||
SECTION 10.5 |
Actions in Respect of Letters of Credit; Cash Collateral | 170 | ||||
ARTICLE XI THE ADMINISTRATIVE AGENT | 171 | |||||
SECTION 11.1 |
Appointment and Authorization | 171 | ||||
SECTION 11.2 |
Rights as a Lender | 172 | ||||
SECTION 11.3 |
Exculpatory Provisions | 172 | ||||
SECTION 11.4 |
Reliance by the Agents | 173 | ||||
SECTION 11.5 |
Delegation of Duties | 174 | ||||
SECTION 11.6 |
Resignation of Administrative Agent | 174 | ||||
SECTION 11.7 |
Non-Reliance on Agents and Other Lenders; Disclosure of Information by Agents | 175 | ||||
SECTION 11.8 |
No Other Duties; Other Agents, Arrangers, Managers, Etc | 176 | ||||
SECTION 11.9 |
Intercreditor Agreement | 176 | ||||
SECTION 11.10 |
Administrative Agent May File Proofs of Claim | 176 | ||||
SECTION 11.11 |
Collateral and Guaranty Matters | 177 | ||||
SECTION 11.12 |
[Reserved] | 179 | ||||
SECTION 11.13 |
Secured Cash Management Agreements and Secured Hedge Agreements | 179 | ||||
SECTION 11.14 |
Indemnification of Agents | 180 |
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SECTION 11.15 |
Notice of Transfer | 180 | ||||
SECTION 11.16 |
Reports and Financial Statements | 180 | ||||
SECTION 11.17 |
Agency for Perfection | 181 | ||||
ARTICLE XII MISCELLANEOUS | 182 | |||||
SECTION 12.1 |
Amendments, Etc | 182 | ||||
SECTION 12.2 |
Successors and Assigns | 185 | ||||
SECTION 12.3 |
Costs and Expenses | 190 | ||||
SECTION 12.4 |
Indemnities | 191 | ||||
SECTION 12.5 |
Limitation of Liability | 193 | ||||
SECTION 12.6 |
Right of Setoff | 193 | ||||
SECTION 12.7 |
Sharing of Payments | 194 | ||||
SECTION 12.8 |
Notices and Other Communications; Facsimile Copies | 194 | ||||
SECTION 12.9 |
No Waiver; Cumulative Remedies | 196 | ||||
SECTION 12.10 |
[Reserved] | 197 | ||||
SECTION 12.11 |
[Reserved] | 197 | ||||
SECTION 12.12 |
[Reserved] | 197 | ||||
SECTION 12.13 |
Governing Law; Submission to Jurisdiction; Service of Process | 197 | ||||
SECTION 12.14 |
Waiver of Jury Trial | 198 | ||||
SECTION 12.15 |
Marshaling; Payments Set Aside | 198 | ||||
SECTION 12.16 |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 198 | ||||
SECTION 12.17 |
Execution in Counterparts | 199 | ||||
SECTION 12.18 |
Electronic Execution of Assignments and Certain Other Documents | 199 | ||||
SECTION 12.19 |
Confidentiality | 199 | ||||
SECTION 12.20 |
Use of Name, Logo, etc | 201 | ||||
SECTION 12.21 |
USA PATRIOT Act Notice | 201 | ||||
SECTION 12.22 |
Outstanding Obligations | 201 | ||||
SECTION 12.23 |
No Advisory or Fiduciary Responsibility | 201 | ||||
SECTION 12.24 |
Severability | 202 | ||||
SECTION 12.25 |
Survival of Representations and Warranties | 202 | ||||
SECTION 12.26 |
Lender Action | 202 | ||||
SECTION 12.27 |
Interest Rate Limitation | 203 |
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SECTION 12.28 |
Amendment and Restatement of Existing Credit Agreement | 203 |
-vi-
Schedules
Schedule I | Commitment Schedule | |
Schedule II | Subsidiary Guarantors | |
Schedule 1.1A | Collateral Documents | |
Schedule 1.1D | Material Real Property | |
Schedule 1.1E | Credit Card Agreements | |
Schedule 1.1F | Existing Letters of Credit | |
Schedule 5.11(a) | ERISA Matters | |
Schedule 5.12 | Subsidiaries | |
Schedule 8.12 | Deposit Accounts | |
Schedule 9.1(b) | Existing Liens | |
Schedule 9.2(f) | Existing Investments | |
Schedule 9.3(b) | Existing Indebtedness | |
Schedule 9.8 | Existing Affiliate Transactions | |
Schedule 9.9 | Existing Burdensome Agreement | |
Schedule 12.8 | Notice Addresses |
Exhibits
Exhibit A | Form of Assignment and Assumption | |
Exhibit B-1 | Form of Revolving Credit Notes | |
Exhibit B-2 | Form of Term Notes | |
Exhibit C | Form of Notice of Borrowing | |
Exhibit D | Form of Swing Loan Request | |
Exhibit E | Form of Letter of Credit Request | |
Exhibit F | Form of Notice of Conversion or Continuation | |
Exhibit G | [ Reserved ] | |
Exhibit H | Form of Guaranty Agreement | |
Exhibit I | Form of Security Agreement | |
Exhibit J | Form of Borrowing Base Certificate | |
Exhibit K | Form of Intercreditor Agreement | |
Exhibit L | Form of Intercompany Subordination Agreement | |
Exhibit M | Form of Solvency Certificate | |
Exhibit N | [ Reserved ] | |
Exhibit O | Form of Non-Bank Certificate | |
Exhibit P | Form of Compliance Certificate |
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This AMENDED AND RESTATED CREDIT AGREEMENT ( Agreement ) is entered into as of February 3, 2017, among BJs WHOLESALE CLUB, INC., a Delaware corporation (the Company and the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents and each Lender (as such term is defined in Section 1.1 below) from time to time party hereto.
PRELIMINARY STATEMENTS
The Borrower has previously entered into that certain Credit Agreement, dated as of September 30, 2011, as amended by that certain First Amendment to Credit Agreement, dated as of September 26, 2012, as further amended by that certain Second Amendment to Credit Agreement and First Amendment to Security Agreement, Guaranty and Limited Recourse Guaranties, dated as of May 10, 2013, as further amended by that certain Third Amendment to Credit Agreement, dated as of November 18, 2013 (as otherwise modified and in effect immediately prior to the effectiveness of this Agreement, the Existing Credit Agreement ), by and among the Borrower, Holdings, the letter of credit issuers and lenders party thereto (the Existing Lenders ) and the Administrative Agent, pursuant to which the Existing Lenders have made loans and other extensions of credit available to the Borrower.
The Borrower has requested certain modifications to the terms of the Existing Credit Agreement and the Administrative Agent and the Lenders have agreed to the requested modifications and the Lenders have indicated their willingness to lend, and the Issuers have indicated their willingness to issue Letters of Credit, in each case, on the terms and subject to the conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS
SECTION 1.1 Defined Terms .
As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
Account has the meaning given to such term in Article 9 of the UCC.
Account Debtor has the meaning given to such term in Article 9 of the UCC.
ACH means automated clearing house transfers.
Additional Revolving Credit Lender has the meaning specified in Section 2.15 .
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Adjusted Eurocurrency Rate means, with respect to any Eurocurrency Rate Loan for any Interest Period, an interest rate per annum equal to the Eurocurrency Rate for such Interest Period multiplied by the Statutory Reserve Rate. The Adjusted Eurocurrency Rate will be adjusted automatically as to all Eurocurrency Rate Loans then outstanding as of the effective date of any change in the Statutory Reserve Rate.
Adjustment Date means the first day of each February, May, August and November, as applicable.
Administrative Agent has the meaning specified in the introductory paragraph to this Agreement.
Administrative Agents Office means the Administrative Agents address and, as appropriate, account as set forth on Schedule 12.8 , or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.
Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Administrative Agent.
Affiliate means, with respect to any Person, another Person that directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto. For the avoidance of doubt, none of the Arrangers, the Agents or their respective lending affiliates or any entity acting as an Issuer hereunder shall be deemed to be an Affiliate of Holdings, the Borrower or any of their respective Subsidiaries.
Agent Parties has the meaning specified in Section 12.8(d) .
Agent-Related Persons means the Agents, together with their respective Affiliates, and the officers, directors, employees, agents, attorney-in-fact, partners, trustees and advisors of such Persons and of such Persons Affiliates.
Agents means, collectively, the Administrative Agent and each co-agent or sub-agent (if any) appointed by the Administrative Agent from time to time pursuant to Section 11.5 .
Aggregate Borrowing Base means, at any time of calculation, an amount equal to the sum of the Borrowing Base and the Term Borrowing Base.
Aggregate Commitments means the Commitments of all the Lenders.
Aggregate Outstandings means, at any particular time, the sum of the Revolving Credit Outstandings at such time and the Term Outstandings at such time.
Aggregate Revolving Credit Commitments means the Revolving Credit Commitments of all the Lenders.
2
Agreement means this Amended and Restated Credit Agreement, as amended, restated, modified or supplemented from time to time in accordance with the terms hereof.
Annual Financial Statements means the audited consolidated balance sheets of the Company as of the Saturday closest to each of January 31, 2016, 2015 and 2014, and the related consolidated statements of operations, changes in stockholders equity and cash flows for the Company for the Fiscal Years then ended.
Applicable Indebtedness has the meaning specified in the definition of Weighted Average Life to Maturity.
Applicable Margin means for each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date, the following percentages per annum, as determined on each Adjustment Date based upon Average Historical Excess Availability for the immediately preceding three-month period:
Level |
Average Historical Excess Availability |
Eurocurrency Rate
Revolving Loans, and Letter of Credit Fees (Standby Letters of Credit) |
Base Rate
Revolving Loans |
Eurocurrency
Rate Term Loan |
Base Rate
Term Loan |
Letter of
Credit Fees (Documentary Letters of Credit) |
||||||
I |
Greater than $500,000,000 |
1.50% | 0.50% | 3.00% | 2.00% | 0.750% | ||||||
II |
Less than or equal to $500,000,000 but greater than $350,000,000 |
1.75% | 0.75% | 3.25% | 2.25% | 0.875% | ||||||
III |
Less than or equal to $350,000,000 |
2.00% | 1.00% | 3.50% | 2.50% | 1.000% |
The Applicable Margin shall be adjusted quarterly in accordance with the table above on each Adjustment Date for the period beginning on such Adjustment Date based upon the Average Historical Excess Availability for the immediately preceding three-month period as the Administrative Agent shall determine in good faith within ten (10) Business Days after such Adjustment Date and the Administrative Agent shall use reasonable efforts to notify the Borrower promptly after such determination. Any increase or decrease in the Applicable Margin resulting from a change in the Average Historical Excess Availability shall become effective as of the Adjustment Date.
Notwithstanding the foregoing, during the period commencing on the Restatement Effective Date through the first Adjustment Date occurring thereafter, the Applicable Margin shall be the Applicable Margin set forth in Level I in the table above.
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Applicable Percentage means (a) in respect of the Term Facility, with respect to any Term Lender at any time, the percentage (carried out to the ninth decimal place) of the Term Facility represented by (i) on or prior to the Restatement Effective Date, such Term Lenders Term Commitment at such time and (ii) thereafter, the principal amount of such Term Lenders Term Loan at such time, (b) in respect of the Revolving Credit Facility, with respect to any Revolving Credit Lender at any time, the percentage (carried out to the ninth decimal place) of the Revolving Credit Facility represented by such Revolving Credit Lenders Revolving Credit Commitment at such time, subject to adjustment as provided in Section 2.16 , and (c) in respect of the aggregate of the Term Facility and the Revolving Facility with respect to any Lender at such time, the percentage (carried out to the ninth decimal place) of the aggregate Term Commitment (or, after the Restatement Effective Date, the aggregate outstanding Term Loans) and the aggregate Revolving Credit Commitments (or, if the Revolving Credit Commitments have been terminated, the aggregate outstanding Revolving Loans, Swing Loans and Letters of Credit) represented by the sum of (i) such Lenders Term Commitment at such time and thereafter, the principal amount of such Lenders Term Loan at such time plus (ii) such Lenders Revolving Credit Commitment at such time or, if the Revolving Credit Commitments have been terminated, such Lenders share of the outstanding Revolving Loans, Swing Loans and Letters of Credit. If the commitment of each Revolving Credit Lender to make Revolving Loans and the obligation of the Issuers to Issue Letters of Credit have been terminated pursuant to Section 10.2 , or if the Aggregate Revolving Credit Commitments have expired, then the Applicable Percentage of each Revolving Credit Lender in respect of the Revolving Credit Facility shall be determined based on the Applicable Percentage of such Revolving Credit Lender in respect of the Revolving Credit Facility most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender in respect of each Facility is set forth opposite the name of such Lender on Schedule I or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
Applicable Revolving Credit Percentage means with respect to any Revolving Credit Lender at any time, such Revolving Credit Lenders Applicable Percentage in respect of the Revolving Credit Facility at such time.
Applicable Unused Commitment Fee Rate means a percentage per annum equal to 0.25%.
Appropriate Lender means, at any time, with respect to Loans of any Class, the Lenders of such Class.
Approved Account Bank means a financial institution at which the Borrower or a Subsidiary Guarantor maintains an Approved Deposit Account.
Approved Deposit Account means each Deposit Account in respect of which the Borrower or a Subsidiary Guarantor shall have entered into a Deposit Account Control Agreement.
Approved Fund means, with respect to any Lender, any Fund that is administered, advised or managed by (a) such Lender, (b) an Affiliate of such Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages such Lender.
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Approved Securities Account means each Securities Account in respect of which the Borrower or any Guarantor shall have entered into a Securities Account Control Agreement.
Approved Securities Intermediary means a securities intermediary at which the Borrower or a Guarantor maintains an Approved Securities Account.
Arrangers means Wells Fargo, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., each in its capacity as a joint lead arranger under this Agreement.
Asset Sale Proceeds Pledged Account means an account held at, and subject to the sole dominion and control of, the collateral agent under the First Lien Term Facility Credit Agreement, in which the proceeds from any Disposition of non-Current Asset Collateral is held pending reinvestment pursuant to the First Lien Term Facility Credit Agreement.
Assignee Group means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
Assignment and Assumption means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit A or any other form approved by the Administrative Agent.
Attorney Costs means all reasonable and documented (in reasonable detail) fees, expenses and disbursements of any law firm or other external legal counsel.
Attributable Indebtedness means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
Availability Reserves means, without duplication of any other reserves or items that are otherwise addressed or excluded through eligibility criteria, the sum of (a) the PACA Reserve, (b) the Term Loan Reserve, and (c) such other reserves as the Administrative Agent from time to time determines in its Permitted Discretion as being appropriate (i) to reflect the impediments to the Administrative Agents ability to realize upon the Collateral, (ii) to reflect claims and liabilities that the Administrative Agent reasonably determines will need to be satisfied in connection with the realization upon the Collateral or (iii) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base, the Term Borrowing Base, the Collateral or the validity or enforceability of this Agreement or the other Loan Documents or any material remedies of the Secured Parties hereunder or thereunder; provided that circumstances, conditions, events or contingencies existing or arising prior to the Effective Date and, in each case, disclosed in writing in any field examination or appraisal (including the Initial Inventory Appraisal) delivered to the Administrative Agent in connection herewith prior to the Effective Date shall not be the basis for any establishment of any such other reserves after the Effective Date (but, for the avoidance of doubt, shall be the basis for any establishment of any reserves on the Effective Date, which reserves may continue after the Effective Date), except (i) to the extent such circumstances, conditions, events or contingencies shall have changed in a material respect since the Effective Date, (ii) to reflect adjustments to such reserves as the result of the application of mathematical calculations with respect to an
5
underlying component of such reserves in accordance with the methodology of calculation utilized to establish such reserve as of the Effective Date or (iii) with respect to reserves set forth below in clauses (3), (4), (5), (7) , (8) and (11) ; and provided further , it is understood that certain of such reserves may be reflected as ineligible items in any Borrowing Base Certificate delivered in accordance herewith. Without limiting the generality of the foregoing, Availability Reserves may include reserves based on: (1) rent; provided that such Availability Reserves shall be limited to an amount not to exceed the sum of (x) past due rent for all of the Borrowers and the Subsidiary Guarantors leased locations plus (y) one (1) months rent for all of the Borrowers and the Subsidiary Guarantors leased locations (A) located in the states of Washington, Virginia, Pennsylvania and all other Landlord Lien States or (B) that are distribution centers or distribution warehouses, other than, in each case, such locations, distribution centers or distribution warehouses with respect to which the Administrative Agent has received a Collateral Access Agreement in form and substance reasonably satisfactory to the Administrative Agent; (2) outstanding taxes and other governmental charges, including real estate, personal property, and other taxes (other than sales taxes and ad valorem taxes which are referenced in clause (3)) which have, or with the passage of time or the taking of any action would have, priority over the interests of the Administrative Agent in the Current Asset Collateral; (3) sales tax, ad valorem tax and other similar taxes; (4) salaries, wages and benefits of employees of the Borrower and its Subsidiaries that could reasonably expected to be incurred in connection with a Liquidation, (5) Customer Credit Liabilities; (6) warehousemens or bailees charges and other Liens permitted under Section 9.1 which could reasonably be expected to have priority over the interests of the Administrative Agent in the Current Asset Collateral; (7) the Gas Station Disposal Reserve; (8) reserves in respect of self insured workers compensation, general liability, health and dental care insurance, disability insurance and other self funded insurances; (9) reserves in respect of Cash Management Obligations, provided that reserves of the type described in this clause (9) in respect of such Cash Management Obligations shall require the written consent of the Borrower; (10) reserves in respect of Obligations in respect of Secured Hedge Agreements, provided that, if such Obligations in respect of Secured Hedge Agreements shall constitute Specified Secured Hedge Obligations, then reserves of the type described in this clause (10) shall require the prior written consent of the Borrower; (11) the PASA Reserve, and (12) additional reserves in the Administrative Agents Permitted Discretion.
Average Historical Excess Availability means, at any Adjustment Date, the average daily Excess Availability for the three month period immediately preceding such Adjustment Date.
Average Revolving Loan Utilization means, at any Adjustment Date, the average daily aggregate Revolving Credit Outstandings (excluding any Revolving Credit Outstandings resulting from any outstanding Swing Loans) for the three month period immediately preceding such Adjustment Date (or, if less, the period from the Restatement Effective Date to such Adjustment Date), divided by the Aggregate Revolving Commitments at such time.
Bail-In Action means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
Bail-In Legislation means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the
6
European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
Bankers Acceptance has the meaning specified in Section 2.4(m) .
Base Rate means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate, as in effect from time to time, plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Wells Fargo as its prime rate and (c) the Adjusted Eurocurrency Rate on such day for an Interest Period of one (1) month plus 1.00% (or, if such day is not a Business Day, the immediately preceding Business Day), provided that, if such rate is below zero, the Base Rate shall be deemed to be zero. The prime rate is a rate set by Wells Fargo based upon various factors including Wells Fargos costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Wells Fargo shall take effect at the opening of business on the day specified in the public announcement of such change.
Base Rate Loan means any Loan during any period in which it bears interest based on the Base Rate.
Base Rate Revolving Loan means any Revolving Loan during any period in which it bears interest based on the Base Rate.
Base Rate Term Loan means any portion of the Term Loan during any period in which it bears interest based on the Base Rate.
Borrower has the meaning specified in the preamble to this Agreement. Borrower Materials has the meaning specified in Section 7.2 .
Borrowing means a Revolving Credit Borrowing, a Term Borrowing or a Swing Loan Borrowing, as the context may require.
Borrowing Base means, at any time of calculation, an amount equal to:
(a) the face amount of Eligible Credit Card Receivables multiplied by the Revolving Credit Card Advance Rate; plus
(b) the face amount of Eligible Accounts multiplied by the Revolving Eligible Accounts Advance Rate; plus
(c) the Net Recovery Percentage of Eligible Inventory multiplied by the Revolving Inventory Advance Rate multiplied by the Cost of Eligible Inventory, net of Inventory Reserves attributable to Eligible Inventory; plus
(d) 100% of Qualified Cash; provided , that the amount of Qualified Cash included in the Borrowing Base shall not exceed an amount equal to 10% of the Borrowing Base (as calculated after giving effect to this clause (d)); minus
7
(e) the then amount of all Availability Reserves.
The Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the Administrative Agent pursuant to Section 7.4 , as adjusted to give effect to Reserves following such delivery; provided , that such Reserves shall not be established or changed except upon not less than three (3) Business Days written notice to the Borrower (during which period the Administrative Agent shall be available to discuss any such proposed Reserve or change with the Borrower and the Borrower may take such action as may be required so that the event, condition or matter that is the basis for such Reserve or change no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent); provided further that no such written notice shall be required for changes to any Reserves resulting solely by virtue of mathematical calculations of the amount of the Reserves in accordance with the methodology of calculation previously utilized (such as, but not limited to, rent, Customer Credit Liabilities and the Term Loan Reserve). The amount of any Reserve established by the Administrative Agent, and any change in the amount of any Reserve, shall have a reasonable relationship to the event, condition or other matter that is the basis for such Reserve or such change. Notwithstanding anything herein to the contrary, Reserves shall not duplicate eligibility criteria contained in the definition of Eligible Account, Eligible Credit Card Receivables, Eligible Inventory, Qualified Cash or any other Reserve then established.
Borrowing Base Certificate means a certificate of the Borrower substantially in the form of Exhibit J .
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the jurisdiction where the Administrative Agents Office with respect to Obligations is located and if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Dollars, any fundings, disbursements, settlements and payments in Dollars in respect of any such Eurocurrency Rate Loan, or any other dealings in Dollars to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank Eurocurrency market.
Capital Expenditures means, for any period, the aggregate of (a) all amounts that would be reflected as additions to property, plant or equipment on a Consolidated statement of cash flows of the Borrower and its Restricted Subsidiaries in accordance with GAAP and (b) the value of all assets under Capitalized Leases incurred by the Borrower and its Restricted Subsidiaries during such period; provided that the term Capital Expenditures shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment or software to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay the Loans pursuant to
8
Section 2.9(b) or the loans under the First Lien Term Facility or the Second Lien Term Facility, (iv) expenditures that are accounted for as capital expenditures by the Borrower or any Restricted Subsidiary and that actually are paid for, or reimbursed to the Borrower or any Restricted Subsidiary in cash or Cash Equivalents, by a Person other than the Borrower or any Restricted Subsidiary and for which neither the Borrower nor any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation (other than rent) in respect of such expenditures to such Person or any other Person (whether before, during or after such period), (v) expenditures to the extent constituting any portion of a Permitted Acquisition, (vi) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (A) used or surplus equipment traded in at the time of such purchase and (B) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business, (vii) expenditures relating to the construction, acquisition, replacement, reconstruction, development, refurbishment, renovation or improvement of any property which has been transferred to a Person other than the Borrower or a Restricted Subsidiary during the same Fiscal Year in which such expenditures were made pursuant to a sale-leaseback transaction to the extent of the cash proceeds received by the Borrower or such Restricted Subsidiary pursuant to such sale-leaseback transaction or (viii) expenditures financed with the proceeds of an issuance of Equity Interests of the Borrower or a capital contribution to the Borrower or Indebtedness permitted to be incurred hereunder.
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a Capitalized Lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.
Capitalized Leases means all leases that have been or are required to be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.
Captive Insurance Subsidiary means any Subsidiary of the Borrower that is subject to regulation as an insurance company (or any Subsidiary thereof).
Cash Collateralize means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Administrative Agent, an Issuer or the Swing Loan Lender (as applicable) and the Lenders, as collateral for Letter of Credit Obligations, Obligations in respect of Swing Loans, or obligations of Lenders to fund participations in respect of either thereof (as the context may require), cash or deposit account balances or, if the applicable Issuer or Swing Loan Lender benefiting from such collateral shall agree in its sole discretion, other credit support, in each case (a) in an amount and pursuant to documentation in form and substance reasonably satisfactory to (i) the Administrative Agent and (ii) the applicable Issuer or the Swing Loan Lender (as applicable) and (b) subject to the sole dominion and control of the Administrative Agent. Cash Collateral shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
Cash Dominion Period means (a) each period beginning on the date that Excess Availability shall have been less than the greater of (x) 10.0% of the Maximum Credit and (y)
9
$60,000,000, in either case, for five (5) consecutive Business Days, and ending on the date Excess Availability shall have been equal to or greater than the greater of (x) 10.0% of the Maximum Credit and (y) $60,000,000, in each case, for thirty (30) consecutive calendar days or (b) upon the occurrence of a Specified Event of Default, the period that such Specified Event of Default shall be continuing; provided that (A) a Cash Dominion Period may not be deemed to have ended under this definition on more than three (3) occasions in any period of 365 consecutive days and (B) the expiration of any Cash Dominion Period in accordance with this definition shall not impair the commencement of any subsequent Cash Dominion Period.
Cash Equivalents means any of the following types of Investments, to the extent owned by the Borrower or any Restricted Subsidiary:
(a) Dollars or Euros;
(b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business and not for speculation;
(c) readily marketable direct obligations issued or directly and fully and unconditionally guaranteed or insured by the United States government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 12 months or less from the date of acquisition;
(d) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, demand deposits, bankers acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic or foreign commercial bank having capital and surplus of not less than $500,000,000 (or the foreign currency equivalent thereof as of the date of such investment);
(e) repurchase obligations for underlying securities of the types described in clauses (c) and (d) above or clause (g) below entered into with any financial institution meeting the qualifications specified in clause (d) above;
(f) commercial paper rated at least P-2 by Moodys or at least A-2 by S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) and in each case maturing within 12 months after the date of creation thereof;
(g) marketable short-term money market and similar highly liquid funds having a rating of at least P-2 or A-2 from either Moodys or S&P, respectively (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency);
(h) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade Rating from either Moodys or S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) with maturities of 12 months or less from the date of acquisition;
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(i) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moodys (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency);
(j) investment funds investing substantially all of their assets in securities of the types described in clauses (a) through (i) above; and
(k) solely with respect to any Captive Insurance Subsidiary, any investment that a Captive Insurance Subsidiary is not prohibited to make in accordance with applicable law.
In the case of Investments by any Foreign Subsidiary that is a Restricted Subsidiary or Investments made in a country outside the United States, Cash Equivalents shall also include (i) Investments of the type and maturity described in clauses (a) through (j) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies and (ii) other short-term investments utilized by Foreign Subsidiaries that are Restricted Subsidiaries in accordance with normal investment practices for cash management in investments analogous to the foregoing investments in clauses (a) through (j) and in this paragraph.
Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clause (a) above, provided that such amounts are converted into Dollars as promptly as practicable and in any event within ten (10) Business Days following the receipt of such amounts.
Cash Management Bank means, as of any date of determination, any Person that is a Lender or an Affiliate of a Lender on such date.
Cash Management Obligations means obligations owed by any Loan Party or any Restricted Subsidiary to any Cash Management Bank in respect of or in connection with any Cash Management Services and designated by the Cash Management Bank and the Borrower in writing to the Administrative Agent as Cash Management Obligations. Any Cash Management Services provided by Wells Fargo and/or any of its Affiliates to any Loan Party or any Restricted Subsidiary shall, for so long as such Person is a Lender or an Affiliate of a Lender, be deemed to be Cash Management Obligations.
Cash Management Services means any agreement or arrangement to provide cash management services, including treasury, depository, overdraft, credit card processing, credit or debit card, purchase card, electronic funds transfer, supply-chain financing with respect to short-term payables and other cash management arrangements.
Cash Receipts shall have the meaning specified in Section 8.12 .
Cash Taxes means, with respect to each Test Period, all taxes paid or payable in cash by the Borrower and its Restricted Subsidiaries during such period.
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Change in Law means the occurrence, after the Effective Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty (excluding the taking effect after the Effective Date of a law, rule, regulation or treaty adopted prior to the Effective Date), (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. It is understood and agreed that (i) the DoddFrank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173), all Laws relating thereto, all interpretations and applications thereof and any compliance by a Lender with any request or directive relating thereto, shall, for the purposes of this Agreement, be deemed to be adopted subsequent to the Effective Date and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a Change in Law, regardless of the date enacted, adopted or issued.
Change of Control means the earliest to occur of:
(a) (i) at any time prior to the consummation of a Qualifying IPO, the Permitted Holders ceasing to own, in the aggregate, directly or indirectly, beneficially and of record, at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings; or
(ii) at any time upon or after the consummation of a Qualifying IPO (1) any Person (other than a Permitted Holder) or (2) Persons (other than one or more Permitted Holders) constituting a group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person and its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), becomes the beneficial owner (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of Equity Interests representing more than thirty-five percent (35%) of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings and the percentage of aggregate ordinary voting power so held is greater than the percentage of the aggregate ordinary voting power represented by the Equity Interests of Holdings beneficially owned, directly or indirectly, in the aggregate by the Permitted Holders;
unless, in the case of either clause (a)(i) or (a)(ii) above, the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the board of directors of Holdings; or
(b) any Change of Control (or any comparable term) in any document pertaining to the First Lien Term Facility, the Second Lien Term Facility or any Permitted Refinancing of any thereof; or
(c) the Borrower ceases to be a direct Wholly-Owned Subsidiary of Holdings (or any successor of Holdings that (x) becomes the direct parent of the Borrower and owns no other direct Subsidiaries and (y) has expressly assumed (and is in compliance with) all the obligations
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of Holdings under this Agreement and the other Loan Documents to which Holdings is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent).
Class (a) when used with respect to Commitments, refers to whether such Commitment is a Term Commitment, a Revolving Credit Commitment, an Extended Revolving Credit Commitment of a given Revolving Extension Series, (b) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such Borrowing, are Term Loans, Revolving Loans, Loans under a given Term Extension Series, Loans under Extended Revolving Credit Commitments of a given Revolving Extension Series and (c) when used with respect to Lenders, refers to whether such Lenders has a Loan or Commitment with respect to a particular Class of Loans or Commitments.
Co-Documentation Agent means each of BMO Harris Bank N.A., Capital One, National Association, ING Capital LLC, TD Bank, N.A. and U.S. Bank National Association, as a co-documentation agent under this Agreement.
Co-Investor means any of (a) the assignees, if any, of the equity commitments of any Sponsor who become holders of Equity Interests in the Borrower (or any of the direct or indirect parent companies of the Borrower) on the Effective Date in connection with the Acquisition and (b) the transferees, if any, that acquire, within one hundred and twenty (120) days of the Effective Date, any Equity Interests in the Borrower (or any of the direct or indirect parent companies of the Borrower) held by any Sponsor as of the Effective Date.
Co-Syndication Agent means each of Bank of America, National Association and Deutsche Bank Securities Inc., as a co-syndication agent under this Agreement.
Code means the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder.
Collateral means all the Collateral (or equivalent term) as defined in any Collateral Document and shall include the Mortgaged Properties.
Collateral Access Agreement means an agreement reasonably satisfactory in form and substance to the Administrative Agent executed by, as the case may be, (a) a bailee or other Person in possession of Collateral, and (b) any landlord of any premises leased by any Loan Party, pursuant to which such Person (i) acknowledges the Administrative Agents Lien on the Collateral, (ii) releases or subordinates such Persons Liens in the Collateral held by such Person or located on such premises, (iii) agrees to provide the Administrative Agent with access to the Collateral held by such bailee or other Person or located in or on such premises for the purpose of conducting field examinations, appraisals or Liquidation and (iv) makes such other agreements with the Administrative Agent as the Administrative Agent may reasonably require.
Collateral and Guarantee Requirement means, at any time, the requirement that:
(a) the Administrative Agent shall have received at the applicable time each Collateral Document required to be delivered pursuant to Section 4.1(a)(iv) or pursuant to
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Section 8.11 , Section 8.12 , Section 8.13 or Section 8.15 , duly executed by each Loan Party party thereto;
(b) all Obligations shall have been unconditionally guaranteed by Holdings, each Restricted Subsidiary of the Borrower that is a wholly owned Material Domestic Subsidiary and not an Excluded Subsidiary, including those Subsidiaries that are listed on Schedule II hereto (each such guarantor, a Guarantor ) and any Subsidiary of the Borrower that Guarantees any Indebtedness incurred by the Borrower (or is a co-borrower with the Borrower) pursuant to the First Lien Term Facility, the Second Lien Term Facility or any Junior Financing (or, in each case, any Permitted Refinancing thereof) shall be a Guarantor hereunder;
(c) the Obligations and the Guaranty shall have been secured by a perfected first-priority security interest (subject only to non-consensual Liens permitted by Section 9.1 and Liens permitted under Section 9.1 (including under clause (w) and (x)) thereof) securing Obligations (as defined under the First Lien Term Facility Credit Agreement), Obligations (as defined under the Second Lien Term Facility Credit Agreement) or any Permitted Refinancing thereof (in each case, subject to the terms of the Intercreditor Agreement)) in (i) all the Equity Interests of the Borrower, (ii) all Equity Interests of each directly owned Wholly- Owned Subsidiary that is a Domestic Subsidiary (other than a Domestic Subsidiary described in the following clause (iii)(A) ) that is directly owned by the Borrower or any Subsidiary Guarantor and (iii) 65% of the issued and outstanding Equity Interests of (A) each Wholly-Owned Subsidiary that is a Domestic Subsidiary that is directly owned by the Borrower or by any Subsidiary Guarantor if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries and (B) each Wholly-Owned Subsidiary that is a Foreign Subsidiary that is directly owned by the Borrower or by any Subsidiary Guarantor;
(d) except to the extent otherwise provided hereunder, including subject to Liens permitted by Section 9.1 , or under any Collateral Document, the Obligations and the Guaranty shall have been secured by a perfected first-priority security interest (to the extent such security interest may be perfected by delivering certificated securities, filing financing statements under the UCC or making any necessary filings with the United States Patent and Trademark Office or United States Copyright Office) in substantially all tangible and intangible personal property of the Borrower and each Guarantor (including, without limitation, accounts, accounts receivable, Inventory, equipment, investment property, contract rights, applications and registrations of intellectual property filed in the United States, other general intangibles, and proceeds of the foregoing), in each case, with the priority required by the Collateral Documents, in each case subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents; provided that any such security interests in the Collateral shall be subject to the terms of the Intercreditor Agreement;
(e) the Administrative Agent shall have received (i) counterparts of a Mortgage with respect to each Material Real Property listed on Schedule 1.1D (it being acknowledged by the Administrative Agent that it has so received such Mortgage counterparts as of the Restatement Effective Date) or required to be delivered pursuant to Sections 8.11 and 8.13(b) (the Mortgaged Properties ) duly executed and delivered by the record owner of such property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company
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insuring the Lien of each such Mortgage as a valid Lien on the property described therein, free of any other Liens except as expressly permitted by Section 9.1 , together with such endorsements, coinsurance and reinsurance as the Administrative Agent may reasonably request, and (iii) such surveys, abstracts and appraisals (if required under FIRREA), flood certifications under Regulation H of the Federal Reserve Board and such customary legal opinions and other documents as the Administrative Agent may reasonably request with respect to any such Mortgaged Property, provided that the Borrower will provide at least forty-five (45) days prior written notice to the Administrative Agent and the Lenders prior to delivering a Mortgage with respect to any Material Real Property and shall not execute and deliver any Mortgage with respect to any Material Real Property prior to written confirmation from the Administrative Agent and the Lenders of the completion of due diligence with respect to flood insurance requirements for such Material Real Property and receipt of evidence of compliance with flood insurance requirements set forth in the Loan Documents that is reasonably satisfactory thereto.
The foregoing definition shall not require the creation, perfection or maintenance of pledges of or security interests in, or the obtaining of title insurance, surveys, abstracts or appraisals with respect to, Excluded Assets and any other particular assets if and for so long as, in the reasonable judgment of the Administrative Agent, the cost of creating, perfecting or maintaining such pledges or security interests in such assets or obtaining title insurance, surveys, abstracts or appraisals in respect of such assets shall be excessive in view of the fair market value or the practical benefit thereof to be obtained by the Lenders therefrom.
The Administrative Agent may grant extensions of time for the perfection of security interests in or the obtaining of title insurance and surveys with respect to particular assets (including extensions beyond the Restatement Effective Date for the perfection of security interests in the assets of the Loan Parties on such date) where it reasonably determines, in consultation with the Borrower, that perfection cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the Collateral Documents.
Collateral Documents means, collectively, the Security Agreement, the Intellectual Property Security Agreements, the Mortgages, each Deposit Account Control Agreement, each of the mortgages, collateral assignments, the Security Agreement Supplements, security agreements, pledge agreements or other similar agreements delivered to the Agents and the Lenders pursuant to Section 4.1(a)(iv) , Section 8.11 , Section 8.12 , Section 8.13 or Section 8.15 , the Guaranty, each Collateral Access Agreement, the Intercreditor Agreement and each of the other agreements, instruments or documents that creates or purports to create a Lien or Guarantee in favor of the Administrative Agent for the benefit of the Secured Parties (including, without limitation, any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions this Agreement).
Commitment means a Term Commitment or a Revolving Credit Commitment, as the context may require.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
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Company has the meaning specified in the introductory paragraph to this Agreement.
Compliance Certificate means a certificate substantially in the form of Exhibit P and which certificate shall in any event be a certificate of a Responsible Officer (a) certifying as to whether a Default has occurred and is continuing and, if applicable, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (b) setting forth a reasonably detailed calculation of the Fixed Charge Coverage Ratio for the most recently completed Test Period, and (c) setting forth reasonably detailed calculations, in the case of financial statements delivered under Section 7.1 , of the Net Cash Proceeds received during the applicable period by or on behalf of, Holdings, the Borrower or any of its Restricted Subsidiaries in respect of any Disposition subject to prepayment pursuant to Section 2.9(b) .
Concentration Account has the meaning specified in Section 8.12(c) .
Consolidated means, with respect to any Person, the consolidation of accounts of such Person and any other Person in accordance with GAAP.
Consolidated Depreciation and Amortization Expense means, for any period, the total amount of depreciation and amortization expense of the Borrower and its Restricted Subsidiaries (including the amortization of deferred financing fees or costs for such period) on a Consolidated basis and otherwise determined in accordance with GAAP.
Consolidated EBITDA means, for any period, the Consolidated Net Income of the Borrower and its Restricted Subsidiaries for such period,
(a) increased by (without duplication, and as determined in accordance with GAAP to the extent applicable):
(i) provision for taxes based on income or profits or capital, plus franchise or similar taxes and foreign withholding taxes, of such Persons for such period deducted in computing Consolidated Net Income; plus
(ii) (A) total interest expense of such Persons for such period and (B) bank fees and costs of surety bonds, in each case under this clause (B) , in connection with financing activities and, in each case under clauses (A) and (B) , to the extent the same was deducted in computing Consolidated Net Income; plus
(iii) Consolidated Depreciation and Amortization Expense of such Persons for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income; plus
(iv) any expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness permitted to be incurred hereunder including a refinancing thereof (whether or not successful) and any amendment or modification to the terms of any such transactions, in each case, deducted in computing Consolidated Net Income; plus
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(v) the amount of any restructuring charge or reserve deducted in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with (A) Permitted Acquisitions after the Effective Date or (B) the closing of any Stores or distribution centers after the Effective Date; provided that the aggregate amount of cash charges added pursuant to this clause (v) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (v) ); plus
(vi) the amount of costs relating to pre-opening and opening costs for Stores, signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, consolidation and closing costs for Stores and costs incurred in connection with non-recurring product and intellectual property development after the Effective Date, other business optimization expenses (including costs and expenses relating to business optimization programs), and new systems design and implementation costs and project start-up costs; provided that the aggregate amount of all foregoing cash items added pursuant to this clause (vi) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (vi) ); plus
(vii) any other non-cash expenses or charges including any write-offs or write downs reducing Consolidated Net Income for such period ( provided that if any such non-cash expenses or charges represent an accrual or reserve for potential cash items in any future period, (1) the Borrower may determine not to add back such non-cash expense or charge in the current period and (2) to the extent the Borrower does decide to add back such non-cash expense or charge, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus
(viii) the amount of any minority interest expense deducted in calculating Consolidated Net Income; plus
(ix) the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued in such period under the Sponsor Management Agreement or otherwise to the Sponsors to the extent permitted under Section 9.8 and deducted in such period in computing Consolidated Net Income; plus
(x) the amount of net cost savings and synergies (other than any of the foregoing related to Specified Transactions) projected by the Borrower in good faith to result from actions taken, committed to be taken or reasonably expected to be taken no later than twelve (12) months after the end of such period (which net cost savings and synergies shall be subject to certification by a Responsible Officer and calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of the period for which Consolidated EBITDA is being determined), net of the amount of actual benefits realized during such period from such actions; provided that
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(A) such cost savings and synergies are reasonably identifiable and factually supportable and (C) the aggregate amount of cost savings and synergies added pursuant to this clause (x) for any Test Period shall not exceed, after the Effective Date, the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (x) ); plus
(xi) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to paragraph (b) below for any previous period and not added back; plus
(xii) any costs or expenses incurred by the Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or stockholders agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests), plus
(xiii) after the Restatement Effective Date, any fees, premiums, expenses or charges incurred or paid in connection with the Agreement and the Transactions (including the Restatement Effective Date Dividend), in each case, deducted in computing Consolidated Net Income.
(b) decreased by (without duplication, and as determined in accordance with GAAP to the extent applicable):
(i) any non-cash gains increasing Consolidated Net Income of such Persons for such period, excluding any gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period (other than such cash charges that have been added back to Consolidated Net Income in calculating Consolidated EBITDA in accordance with this definition); plus
(ii) any non-cash gains with respect to cash actually received in a prior period unless such cash did not increase Consolidated EBITDA in such prior period; plus
(iii) the amount of cash payments made during such Test Period on account of any non-cash charge which was added back to the calculation of Consolidated EBITDA in any prior period pursuant to clause (a)(v) above solely to the extent that (A) the aggregate amount of such cash payments during such Test Period plus (B) the aggregate amount of cash charges added back pursuant to clause (a)(v) above during such Test Period exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (b)(iii) ).
Consolidated Net Cash Interest Expense means, with respect to the Borrower and its Restricted Subsidiaries on a Consolidated basis for any period, determined in accordance with GAAP, (a) total interest expense paid or payable in cash in such period (including that
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attributable to obligations with respect to Capitalized Leases in accordance with GAAP in effect on the Effective Date but excluding any imputed interest as a result of purchase accounting) of the Borrower and its Restricted Subsidiaries on a Consolidated basis and all commissions, discounts and other fees and charges owed with respect to Indebtedness of the Borrower and its Restricted Subsidiaries, but excluding (i) any non-cash interest or deferred financing costs, (ii) any amortization or write-down of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (iii) any expensing of bridge, commitment and other financing fees and (iv) penalties and interest related to taxes minus (b) interest income of the Borrower and its Restricted Subsidiaries actually received in cash during such period. For purposes of the foregoing, interest expense of the Borrower and its Restricted Subsidiaries shall be determined after giving effect to any net payments made or received by such Persons with respect to interest rate Swap Contracts.
Consolidated Net Income means, for any period, the aggregate of the Net Income of the Borrower and its Restricted Subsidiaries for such period, on a Consolidated basis, and otherwise determined in accordance with GAAP; provided, however , that, without duplication:
(a) any net after-tax extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses, and Transaction Expenses, relocation costs, integration costs, facility consolidation and closing costs (other than with respect to Stores), severance costs and expenses and one-time compensation charges, shall be excluded; provided that the aggregate amount of cash losses excluded pursuant to this clause (a) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (a) ); provided further that Net Income for such period shall be reduced by an amount equal to the amount by which (if any) (i) the aggregate amount of cash losses incurred during such Test Period on account of any non-cash loss which was excluded from the calculation of Consolidated Net Income in any prior period pursuant to this clause (a) plus (ii) the aggregate amount of cash losses excluded from the calculation of Consolidated Net Income pursuant to the first proviso of this clause (a) during such Test Period, exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (a) );
(b) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period, whether effected through a cumulative effect adjustment or a retroactive application in each case in accordance with GAAP;
(c) effects of adjustments (including the effect of such adjustments pushed down to the Borrower and the Restricted Subsidiaries) in the Borrowers Consolidated financial statements pursuant to GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded;
(d) any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed or discontinued operations shall be excluded;
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provided that the aggregate amount of cash losses excluded pursuant to this clause (d) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (d) ); provided further that Net Income for such period shall be reduced by an amount equal to the amount by which (if any) (i) the aggregate amount of cash losses incurred during such Test Period on account of any non-cash loss which was excluded from the calculation of Consolidated Net Income in any prior period pursuant to this clause (d) plus (ii) the aggregate amount of cash losses excluded from the calculation of Consolidated Net Income pursuant to the first proviso of this clause (d) during such Test Period, exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (d) )
(e) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions or the sale or other disposition of any Equity Interests of any Person other than in the ordinary course of business, as determined in good faith by the Borrower, shall be excluded;
(f) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Borrower and its Restricted Subsidiaries shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by the referent Person to the Borrower or a Restricted Subsidiary thereof in respect of such period;
(g) [ reserved ] ;
(h) (i) any net unrealized gain or loss (after any offset) resulting in such period from obligations in respect of Swap Contracts and the application of Financial Accounting Standards Board Accounting Standards Codification 815 (Derivatives and Hedging), (ii) any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including the net loss or gain (A) resulting from Swap Contracts for currency exchange risk and (B) resulting from intercompany Indebtedness) and all other foreign currency translation gains or losses to the extent such gain or losses are non-cash items, and (iii) any net after-tax income (loss) for such period attributable to the early extinguishment or conversion of (A) Indebtedness, (B) obligations under any Swap Contracts or (C) other derivative instruments, shall be excluded;
(i) any impairment charge or asset write-off, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded;
(j) any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in
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fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded;
(k) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days), expenses, charges or losses with respect to liability or casualty events or business interruption shall be excluded; and
(l) any non-cash (for such period and all other periods) compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs shall be excluded.
Consolidated Total Debt means, as of any date of determination, (a) the aggregate principal amount of Indebtedness of the Borrower and the Restricted Subsidiaries outstanding on such date, determined on a Consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with any Permitted Acquisition or any other Investment permitted hereunder), consisting of Indebtedness for borrowed money, unreimbursed obligations in respect of drawn letters of credit, obligations in respect of Capitalized Leases and debt obligations evidenced by promissory notes or similar instruments, minus (b) unencumbered, unrestricted domestic cash and Cash Equivalents of the Borrower and the Restricted Subsidiaries on such date (which excludes Qualified Cash except to the extent of the outstanding principal amount of Revolving Loans at such time); provided that Consolidated Total Debt shall not include Indebtedness in respect of (i) any letter of credit, except to the extent of unreimbursed obligations in respect of drawn letters of credit (provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated Total Debt until three (3) Business Days after such amount is drawn (it being understood that any borrowing, whether automatic or otherwise, to fund such reimbursement shall be counted)) and (ii) obligations under Swap Contracts.
Constituent Documents means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
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Cost means the cost of purchases of Inventory determined according to the accounting policies used in the preparation of the Borrowers financial statements.
Covenant Trigger Event means that Excess Availability on any day is less than the greater of (i) $60,000,000 and (ii) 10% of the Maximum Credit. For purposes hereof, the occurrence of a Covenant Trigger Event shall be deemed to be continuing until Excess Availability is equal to or greater than the greater of (i) $60,000,000 and (ii) 10% of the Maximum Credit, in each case, for thirty (30) consecutive days, in which case a Covenant Trigger Event shall no longer be deemed to be continuing for purposes of this Agreement. The expiration of any Covenant Trigger Event in accordance with this definition shall not impair the commencement of any subsequent Covenant Trigger Event.
Credit Card Agreements means all agreements now or hereafter entered into by the Borrower or any Guarantor for the benefit of the Borrower or a Subsidiary Guarantor, in each case with any Credit Card Issuer or any Credit Card Processor, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including, but not limited to, the agreements set forth on Schedule 1.1E hereto.
Credit Card Issuer means any Person (other than the Borrower or a Guarantor) who issues or whose members issue credit cards, including MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche and other non-bank credit or debit cards, including credit or debit cards issued by or through American Express Travel Related Services Company, Inc., and Novus Services, Inc.
Credit Card Notification means, collectively, the notices to Credit Card Issuers or Credit Card Processors who are parties to Credit Card Agreements in a form reasonably satisfactory to the Administrative Agent, and which Credit Card Notifications shall require the ACH or wire transfer no less frequently than each Business Day (and whether or not there are then any outstanding Obligations) to an Approved Deposit Account of all payments due from Credit Card Processors.
Credit Card Processor means any servicing or processing agent or any factor or financial intermediary who facilitates, services, processes or manages the credit authorization, billing transfer and/or payment procedures with respect to the Borrowers or any Guarantors sales transactions involving credit card or debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.
Credit Card Receivables means, collectively, (a) all present and future rights of the Borrower or any Guarantor to payment from any Credit Card Issuer, Credit Card Processor or other third party arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card and (b) all present and future rights of the Borrower or any Guarantor to payment from any Credit Card Issuer, Credit Card Processor or other third party in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to
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become due from any Credit Card Issuer or Credit Card Processor under the Credit Card Agreements or otherwise, in each case above calculated net of prevailing interchange charges.
Credit Extension means each of the following: (a) a Borrowing and (b) any Letter of Credit Issuance.
Cure Amount has the meaning specified in Section 10.4(b) .
Current Asset Collateral means all the ABL Priority Collateral as defined in the Intercreditor Agreement.
Customer Credit Liabilities means, at any time, the aggregate remaining balance at such time of (a) outstanding gift certificates and gift cards of the Borrower and each Subsidiary Guarantor entitling the holder thereof to use all or a portion of the certificate or gift card to pay all or a portion of the purchase price for any Inventory and (b) outstanding merchandise credits and customer rewards of the Borrower and each Subsidiary Guarantor, in each case, net of any dormancy reserves maintained by the Borrower and such Subsidiary Guarantor on its books and records in the ordinary course of business consistent with past practices.
Debtor Relief Laws means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Default means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would constitute an Event of Default.
Default Rate means an interest rate equal to (a) with respect to Obligations (other than the outstanding principal amount of Loans), the Base Rate, plus (i) the Applicable Margin, if any, applicable to Base Rate Term Loans, plus (ii) 2.00% per annum and (b) that with respect to the outstanding principal amount of any Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan (giving effect to Section 2.11 ) plus 2.00% per annum, in each case, to the fullest extent permitted by applicable Laws.
Defaulting Lender means, subject to Section 2.16(b) , any Lender that, as determined by the Administrative Agent in its reasonable discretion, (a) has failed to perform any of its funding obligations hereunder, including in respect of its Loans or participations in respect of Letters of Credit or Swing Loans, within one (1) Business Day of the date required to be funded by it hereunder, (b) has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder or under other agreements in which it commits to extend credit, (c) has failed, within one (1) Business Day after request by the Administrative Agent, to confirm in a manner satisfactory to the Administrative Agent that it will comply with its funding obligations ( provided that any Lender that has failed to give such timely confirmation shall cease to be a Defaulting Lender under this clause (c) upon receipt of such confirmation by the Administrative Agent), or (d) has, or has a direct or indirect parent company that has, after the
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Restatement Effective Date, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it, (iii) taken any action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment or (iv) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority.
Deposit Account means any checking or other demand deposit account maintained by the Loan Parties, including any deposit accounts under Article 9 of the UCC. All funds in such Deposit Accounts shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agent and the Lenders shall have no duty to inquire as to the source of the amounts on deposit in the Deposit Accounts, subject to the Security Agreement and the Intercreditor Agreement.
Deposit Account Control Agreement has the meaning specified in Section 8.12(a) .
Designated Non-Cash Consideration means the fair market value of non-cash consideration received by the Borrower or a Restricted Subsidiary in connection with a Disposition pursuant to Section 9.5(j) that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer, setting forth the basis of such valuation (which amount will be reduced by the fair market value of the portion of the non-cash consideration converted to cash within one-hundred eighty (180) days following the consummation of the applicable Disposition).
Disposition or Dispose means the sale, transfer, license, lease or other disposition (including any sale-leaseback transaction and any sale or issuance of Equity Interests in a Restricted Subsidiary) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
Disqualified Equity Interests means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Aggregate Commitments and all outstanding Letters of Credit (unless the Outstanding Amount of the Letter of Credit Obligations related thereto has been Cash Collateralized or back-stopped by a letter of credit in form and substance reasonably satisfactory to the applicable Issuer)), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the Latest Maturity Date of the
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Loans at the time of issuance; provided that if such Equity Interests are issued pursuant to a plan for the benefit of employees of Holdings, the Borrower or the Restricted Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because it may be required to be repurchased by Holdings, the Borrower or the Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations.
Document has the meaning set forth in Article 9 of the UCC.
Documentary Letter of Credit means any Letter of Credit that is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by the Borrower or a Guarantor in the ordinary course of its business.
Dollars and $ mean lawful money of the United States.
Domestic Subsidiary means any Subsidiary that is organized under the Laws of the United States, any state thereof or the District of Columbia.
EEA Financial Institution means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a Subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
EEA Member Country means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
EEA Resolution Authority means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
Effective Date means September 30, 2011.
Eligible Accounts means, as of any date of determination thereof, the aggregate amount of all Accounts due to the Borrower and each Subsidiary Guarantor, except to the extent that (determined without duplication):
(a) such Account does not arise from the sale of goods or the performance of services by the Borrower or Subsidiary Guarantor in the ordinary course of its business;
(b) (i) the Borrowers or Subsidiary Guarantors right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever (other than the preparation and delivery of an invoice) or (ii) as to which such Person is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process;
(c) any defense, counterclaim, set-off or dispute exists as to such Account, but only to the extent of such defense, counterclaim, set-off or dispute;
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(d) such Account is not a true and correct statement of bona fide indebtedness incurred in the amount of the Account for merchandise sold to or services rendered and accepted by the applicable Account Debtor;
(e) an invoice, reasonably acceptable to the Administrative Agent in form and substance or otherwise in the form otherwise required by any Account Debtor, has not been sent to the applicable Account Debtor in respect of such Account on or before the date as of which such Account is first included in the Borrowing Base Certificate or otherwise reported to the Administrative Agent as Collateral;
(f) such Account (i) is not owned by the Borrower or Subsidiary Guarantor or (ii) is not subject to the first priority, valid and perfected security interest and Lien of Administrative Agent, for and on behalf of itself and the Lenders (subject only to Liens permitted under Section 9.1 having priority by operation of applicable Law over the Liens of the Administrative Agent) or (iii) is subject to any other Lien (other than (x) Liens permitted hereunder pursuant to clauses (a) , (c) , (d) , (h) and (bb) of Section 9.1 and (y) Liens permitted under Section 9.1 (including clauses (w) and (x)) thereof) securing the Obligations (as defined under the First Lien Term Facility Credit Agreement) and the Obligations (as defined under the Second Lien Term Facility Credit Agreement) (in each case, subject to the terms of the Intercreditor Agreement)) (the foregoing clauses (ii) and (iii) (other than in respect of the immediately foregoing clause (y) ) not being intended to limit the ability of the Administrative Agent to change, establish or eliminate any Reserves in its Permitted Discretion on account of any such permitted Liens);
(g) such Account is the obligation of an Account Debtor that is (i) a director, officer, other employee or Affiliate of the Borrower or Subsidiary Guarantor or (ii) a natural person; provided that this clause (g) shall not exclude any Account of an Account Debtor solely on the basis that it is a portfolio company of any Sponsor;
(h) such Account is the obligation of an Account Debtor that is any Governmental Authority;
(i) Accounts subject to a partial payment plan;
(j) the Borrower or Subsidiary Guarantor is liable for goods sold or services rendered by the applicable Account Debtor to the Borrower but only to the extent of the potential offset;
(k) the Account is not paid on or prior to ninety (90) days following the original invoice date;
(l) the Account is not paid on or prior to sixty (60) days following the date on which such Account was due;
(m) such Account is the obligation of an Account Debtor from whom 50% or more of the amount of all Accounts owing by that Account Debtor are ineligible under the criteria set forth in this definition;
(n) any of the representations or warranties in the Loan Documents with respect to such Account are untrue in any material respect with respect to such Account (or, with respect to
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representations or warranties that are qualified by materiality, any of such representations and warranties are untrue);
(o) such Account is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment;
(p) such Account, together with all other Accounts owing by such Account Debtor and its Affiliates as of any date of determination, exceeds the greater of (i) 25% of all Eligible Accounts and (ii) 15% of the Borrowing Base (but, in each case, only to the extent of such excess);
(q) such Account is payable in any currency other than Dollars;
(r) such Account has been redated, extended, compromised, settled or otherwise modified or discounted, except discounts or modifications that are granted by the Borrower or Subsidiary Guarantor in the ordinary course of business and that are reflected in the calculation of the Borrowing Base;
(s) such Account is of an Account Debtor that is located in a state requiring the filing of a notice of business activities report or similar report in order to permit the Borrower or Subsidiary Guarantor to seek judicial enforcement in such state of payment of such Account, unless the Borrower or Subsidiary Guarantor has qualified to do business in such state or has filed a notice of business activities report or equivalent report for the then-current year or if such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;
(t) such Account was acquired or originated by a Person acquired in a Permitted Acquisition (until such time as the Administrative Agent has completed a customary due diligence investigation as to such Accounts and such Person, which investigation may, at the sole discretion of the Administrative Agent and at the expense of the Borrower (without regard to, or counting against, any limitations on expense reimbursement or the number of Field Examinations that may be conducted during any period, as contained in Section 7.4 ), include a Field Examination, and the Administrative Agent is satisfied with the results thereof in its Permitted Discretion);
(u) Account Debtor is subject to an event of the type described in Section 10.1(f) ;
(v) such Account represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment or other repurchase or return basis;
(w) the Account Debtor is organized or has its principal offices or assets outside the United States, unless such Account is backed by a letter of credit reasonably acceptable to the Administrative Agent (which is issued by a bank reasonably acceptable to the Administrative Agent) and such letter of credit is subject to a first priority perfected Lien in favor of the Administrative Agent;
(x) the Account Debtor shall have returned the merchandise purchased giving rise to such Account;
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(y) the portion, if any, of any Account that includes a billing for interest, fees or late charges; or
(z) such Account constitutes a Credit Card Receivable.
Any Account which is not an Eligible Account shall nevertheless be part of the Collateral.
Eligible Assignee means any Person that meets the requirements to be an assignee under Section 12.2(b)(iii) and (v) (subject to such consents, if any, as may be required under Section 12.2(b)(iii) ).
Eligible Credit Card Receivables means, as to the Borrower and each Subsidiary Guarantor, Credit Card Receivables of such Person which satisfy the criteria set forth below:
(a) such Credit Card Receivables arise from the actual and bona fide sale and delivery of goods or rendition of services by such Person in the ordinary course of the business of such Person;
(b) such Credit Card Receivables are not past due (beyond any stated applicable grace period, if any, therefor) pursuant to the terms set forth in the Credit Card Agreements with the Credit Card Issuer or Credit Card Processor of the credit card or debit card used in the purchase which give rise to such Credit Card Receivables;
(c) such Credit Card Receivables are not unpaid more than five (5) Business Days after the date of the sale of Inventory giving rise to such Credit Card Receivables;
(d) the Credit Card Issuer or Credit Card Processor obligated in respect of such Credit Card Receivable has not failed to remit any monthly payment in respect of such Credit Card Receivable;
(e) the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not asserted a counterclaim, defense or dispute against such Credit Card Receivables (other than customary set-offs to fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with such Person from time to time), but the portion of the Credit Card Receivables owing by such Credit Card Issuer or Credit Card Processor in excess of the amount owing by such Person to such Credit Card Issuer or Credit Card Processor pursuant to such fees and chargebacks shall be deemed Eligible Credit Card Receivables;
(f) the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not set off against amounts otherwise payable by such Credit Card Issuer or Credit Card Processor to such Person for the purpose of establishing a reserve or collateral for obligations of such Person to such Credit Card Issuer or Credit Card Processor (other than customary set-offs and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor from time to time) but the portion of the Credit Card Receivables owing by such Credit Card Issuer or Credit Card Processor in excess of the set-off amounts shall be deemed Eligible Credit Card Receivables;
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(g) such Credit Card Receivables (x) are owned by the Borrower or a Subsidiary Guarantor and such Person has a good title to such Credit Card Receivables, (y) are subject to the first priority, valid and perfected security interest and Lien of Administrative Agent, for and on behalf of itself and the Lenders (subject only to Liens permitted under Section 9.1 having priority by operation of applicable Law over the Liens of the Administrative Agent), and (z) are not subject to any other Lien (other than (1) Liens permitted hereunder pursuant to clauses (a) , (c) , (d) , (h) and (bb) of Section 9.1 and (2) Liens permitted under Section 9.1 (including clauses (w) and (x) thereof) securing the Obligations (as defined under the First Lien Term Facility Credit Agreement) and the Obligations (as defined under the Second Lien Term Facility Credit Agreement) (in each case, subject to the terms of the Intercreditor Agreement)) (the foregoing clauses (y) and (z) (other than in respect of the immediately foregoing clause (2) ) not being intended to limit the ability of the Administrative Agent to change, establish or eliminate any Reserves in its Permitted Discretion on account of any such permitted Liens);
(h) the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables is not subject to an event of the type described in Section 10.1(f) ;
(i) no event of default has occurred under the Credit Card Agreement of such Person with the Credit Card Issuer or Credit Card Processor who has issued the credit card or debit card or handles payments under the credit card or debit card used in the sale which gave rise to such Credit Card Receivables which event of default gives such Credit Card Issuer or Credit Card Processor the right to cease or suspend payments to such Person;
(j) the customer using the credit card or debit card giving rise to such Credit Card Receivable shall not have returned the merchandise purchased giving rise to such Credit Card Receivable;
(k) to the extent required by Section 8.12(b) , the Credit Card Receivables are subject to Credit Card Notifications;
(l) the Credit Card Processor is organized and has its principal offices or assets within the United States or is otherwise acceptable to the Administrative Agent in its Permitted Discretion;
(m) such Credit Card Receivables are not evidenced by chattel paper or an instrument of any kind, and have not been reduced to judgment;
(n) the portion of such Credit Card Receivables that does not include a billing for interest, fees or late charges; and
(o) in the case of a Credit Card Receivable due from a Credit Card Processor (other than Fifth Third Bank, American Express Travel Related Services Company, Inc. and Barclays Bank Delaware in the absence of a material adverse change in the creditworthiness of such Credit Card Processor), the Administrative Agent has not notified the Borrower that the Administrative Agent has determined in its Permitted Discretion that such Credit Card Receivable is unlikely to be collected.
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Any Credit Card Receivables which are not Eligible Credit Card Receivables shall nevertheless be part of the Collateral.
Eligible Inventory means, as to the Borrower and each Subsidiary Guarantor, Inventory consisting of finished goods merchantable and readily saleable to the public in the ordinary course of the business of such Person but shall not include:
(a) work-in-process;
(b) raw materials;
(c) spare parts for equipment;
(d) packaging and shipping materials;
(e) supplies used or consumed in such Persons business;
(f) Inventory located at premises owned and operated by a Person other than, and not leased by, the Borrower or any Subsidiary Guarantor, if the Administrative Agent shall not have received a Collateral Access Agreement from the owner and operator with respect to such location, duly authorized, executed and delivered by such owner and operator (or the Administrative Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by the Administrative Agent), unless the Administrative Agent has, at its option, established such Availability Reserves in respect of amounts at any time due or to become due to the owner and operator thereof as the Administrative Agent shall determine in its Permitted Discretion;
(g) Inventory consisting of gasoline or diesel fuel;
(h) bill and hold goods;
(i) obsolete, unmerchantable, seconds, used, unfit for sale or slow moving Inventory;
(j) Inventory (i) which is not subject to the first priority, valid and perfected security interest of the Administrative Agent, for and on behalf of itself and the Lenders (subject only to Liens permitted under having priority by operation of applicable Law over the Liens of the Administrative Agent) or (ii) which is subject to any other Lien (other than (x) Liens permitted hereunder pursuant to clauses (a) , (c) , (d) , (h) , (q) and (bb) of Section 9.1 and (y) Liens permitted under Section 9.1 (including clauses (w) and (x) thereof) securing the Obligations (as defined under the First Lien Term Facility Credit Agreement) and the Obligations (as defined under the Second Lien Term Facility Credit Agreement) (in each case, subject to the terms of the Intercreditor Agreement)) (the foregoing clauses (i) and (ii) (other than in respect of the immediately foregoing clause (y) ) not being intended to limit the ability of the Administrative Agent to change, establish or eliminate any Reserves in its Permitted Discretion on account of any such permitted Liens);
(k) damaged and/or defective Inventory;
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(l) returned Inventory which is not held for sale in the ordinary course of business;
(m) Inventory purchased or sold on consignment;
(n) Inventory acquired in a Permitted Acquisition, unless (i) such Inventory otherwise meets the requirements of Eligible Inventory and (ii) the Administrative Agent has completed or received, in any case at the expense of the Borrower (without regard to, or counting against, any limitations on expense reimbursement or the number of Field Examinations or Inventory Appraisals that may be conducted during any period, as contained in Section 7.4 ) (A) an Inventory Appraisal of such Inventory from appraisers reasonably satisfactory to the Administrative Agent, and established Inventory Reserves (if applicable) therefor and (B) such other due diligence as the Administrative Agent may require in its Permitted Discretion, all of the results of the foregoing to be satisfactory to the Administrative Agent in its Permitted Discretion (provided, it is agreed that so long as the Administrative Agent has received reasonable prior notice of such Permitted Acquisition and the Loan Parties reasonably cooperate (and cause the Person being acquired to reasonably cooperate) with the Administrative Agent, the Administrative Agent shall use reasonable best efforts to complete such due diligence and a related appraisal on or prior to the closing date of such Permitted Acquisition);
(o) Inventory that is not solely owned by the applicable Loan Party or the applicable Loan Party does not have good and valid title thereto;
(p) Inventory that is not located in the United States (excluding territories or possessions of the United States);
(q) custom items;
(r) spare parts or promotional or marketing materials;
(s) samples, labels, and other similar non-merchandise categories;
(t) Inventory that is not in material compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale;
(u) Inventory that is not insured in compliance with this Agreement;
(v) Inventory that has been sold but not yet delivered or as to which the Borrower has accepted a deposit;
(w) Inventory that is subject to any licensing or royalty agreement (including those agreements regarding the use or ownership of IP Rights) with any third party from which the Borrower or any of its Subsidiaries has received notice of a dispute in respect of any such agreement (but ineligibility shall be limited to the amount of such dispute);
(x) In-Transit Inventory (whether or not financed with Letters of Credit issued hereunder); and
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(y) Except as otherwise agreed by the Administrative Agent in its Permitted Discretion, Inventory that represents goods that do not conform in all material respects to the representations and warranties contained in this Agreement or any of the Collateral Documents.
Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral.
EMU Legislation means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.
Entitlement Holder has the meaning given to such term in Article 8 of the UCC. Entitlement Order has the meaning given to such term in Article 8 of the UCC.
Environmental Claim means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by any Loan Party or any of its Subsidiaries (a) in the ordinary course of such Persons business or (b) as required in connection with a financing transaction or an acquisition or disposition of real estate) or proceedings with respect to any Environmental Liability (hereinafter Claims ), including (i) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief pursuant to any Environmental Law.
Environmental Laws means any and all Laws relating to the protection of the environment or, to the extent relating to exposure to Hazardous Materials, human health.
Environmental Liability means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities) of any Loan Party or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Environmental Permit means any permit, approval, identification number, license or other authorization required under any Environmental Law.
Equity Interests means, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.
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ERISA Affiliate means any trade or business (whether or not incorporated) that together with any Loan Party is treated as a single employer within the meaning of Section 414(b) or (c) of the Code or, solely for purposes of Section 302 or 303 of ERISA or Section 412, 430 or 4971 of the Code, is treated as a single employer within the meaning of Section 414 of the Code.
ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any of their respective ERISA Affiliates from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any of their respective ERISA Affiliates from a Multiemployer Plan, receipt of written notification by any Loan Party or any of their respective ERISA Affiliates concerning the imposition of Withdrawal Liability or written notification that a Multiemployer Plan is insolvent within the meaning of Section 4245 of ERISA; (d) the filing by the plan administrator under Section 4041(c) of ERISA of a notice of intent to terminate a Pension Plan, the treatment of a Pension Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) the imposition of any liability under Title IV of ERISA with respect to the termination of any Pension Plan or Multiemployer Plan, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any of their respective ERISA Affiliates, (f) the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Pension Plan, (g) the imposition of a lien under Section 303(k) of ERISA with respect to any Pension Plan or (h) a determination that any Pension Plan is in at risk status (within the meaning of Section 303(i) of ERISA).
EU Bail-In Legislation Schedule means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
Eurocurrency Rate means:
(a) for any Interest Period with respect to a Eurocurrency Rate Loan, the rate per annum which appears on the Reuters Screen LIBOR01 page as of 11:00 a.m., London time, on the second London Business Day preceding the first day of such Interest Period (or if such rate does not appear on the Reuters Screen LIBOR01 Page, then the rate as determined by the Administrative Agent from another recognized source or interbank quotation), for a term, and in an amount, comparable to the Interest Period and the amount of the Eurocurrency Rate Loan requested (whether as an initial Eurocurrency Rate Loan or as a continuation of a Eurocurrency Rate Loan or as a conversion of a Base Rate Loan to a Eurocurrency Rate Loan) by the Borrower in accordance with this Agreement (and, if any such rate is below zero, the Eurocurrency Rate shall be deemed to be zero), which determination shall be made by Administrative Agent and shall be conclusive in the absence of manifest error. If such rate is not available at such time for any reason, then the Eurocurrency Rate for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first date of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted by Wells Fargo and with a term equivalent to such Interest Period would be offered to Wells Fargo by major banks in the London interbank eurodollar market in which Wells Fargo participates at their request at approximately
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11:00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period; and
(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) the rate per annum rate which appears on the Reuters Screen LIBOR01 page as of 11:00 a.m., London time, on the second London Business Day prior to such date for Dollar deposits being delivered in the London interbank market for a term of one (1) month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum, as determined by the Administrative Agent, to be the rate at which deposits in Dollars for delivery on the date of determination in Same Day Funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one (1) month would be offered by major financial institutions reasonably satisfactory to the Administrative Agent and the Borrower in the London interbank market on such date of determination.
Eurocurrency Rate Loan means a Loan that bears interest at a rate based on clause (a) of the definition of Eurocurrency Rate.
Eurocurrency Rate Revolving Loan means any Revolving Loan that bears interest at a rate based on clause (a) of the definition of Eurocurrency Rate.
Eurocurrency Rate Term Loan means any portion of the Term Loan that bears interest at a rate based on clause (a) of the definition of Eurocurrency Rate.
Euros means the lawful currency of the Participating Member States introduced in accordance with the EMU Legislation.
Event of Default has the meaning specified in Section 10.1 .
Excess Availability means, at any time, an amount equal to (a) the lesser of (i) the Aggregate Revolving Credit Commitments at such time or (ii) the Borrowing Base as in effect at such time, minus (b) the aggregate Revolving Credit Outstandings at such time.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Assets has the meaning specified in the Security Agreement.
Excluded Subsidiary means, if and to the extent such Subsidiary is not a borrower or guarantor under the First Lien Term Facility or the Second Lien Term Facility, or any Permitted Refinancing thereof, (a) any Subsidiary that is not a Wholly-Owned Subsidiary of the Borrower or a Guarantor, (b) any Foreign Subsidiary of the Borrower or of any direct or indirect Domestic Subsidiary or Foreign Subsidiary, (c) any Domestic Subsidiary if substantially all of its assets consist of Equity Interests in one or more Foreign Subsidiaries, (d) any Domestic Subsidiary that is a direct or indirect Subsidiary of a Foreign Subsidiary, (e) any Subsidiary that is prohibited or restricted by applicable Law from providing a Guaranty or if such Guaranty would require governmental (including regulatory) consent, approval, license or authorization, (f) any Subsidiary that is a special purpose securitization vehicle (or similar entity), (g) any Subsidiary that is a not-for-profit organization, (h) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent (confirmed in writing by notice to the
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Borrower), the cost or other consequences (including any adverse tax consequences) of providing the Guaranty shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (i) each Unrestricted Subsidiary and (j) any Captive Insurance Subsidiary.
Excluded Swap Obligation means, with respect to any Guarantor or any Limited Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor or the Limited Recourse Guaranty of such Limited Guarantor, as applicable, of, or the grant by such Guarantor of a security interest to secure or the grant by such Limited Guarantor of a Mortgage to secure, such Swap Obligation (or any Guaranty or Limited Recourse Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantors or Limited Guarantors, as applicable, failure for any reason to constitute an eligible contract participant as defined in the Commodity Exchange Act at the time the Guaranty or Limited Guaranty of such Guarantor or Limited Guarantor, as applicable, becomes effective with respect to such related Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which the Guaranty of such Guarantor or the Limited Recourse Guaranty of such Limited Guarantor, as applicable, or the grant by such Guarantor of a security interest or the grant by such Limited Guarantor of a Mortgage, as applicable, is or becomes illegal.
Existing Credit Agreement has the meaning set forth in the preliminary statements.
Existing Facility means the credit facilities set forth in the Existing Credit Agreement.
Existing Lender has the meaning set forth in the preliminary statements.
Existing Letter of Credit means any letter of credit or bankers acceptance previously issued for the account of the Company or any Subsidiary Guarantor by Wells Fargo or Bank of America, N.A. (as the case may be) that is (a) outstanding on the Restatement Effective Date and (b) listed on Schedule 1.1F .
Existing Revolver Tranche has the meaning specified in Section 2.17(a) .
Existing Revolving Loans means the outstanding Revolving Loans under and as defined in the Existing Credit Agreement.
Existing Term Loan Facilities means, collectively, (i) the credit facilities under that certain credit agreement dated as of the Effective Date evidencing a senior secured first lien term facility, among the Borrower, Holdings, the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, as the same may be amended, restated, modified or supplemented and in effect immediately prior to the Restatement Effective Date (the Existing First Lien Term Facility Credit Agreement ), and (ii) the credit facilities under that certain credit agreement dated as of the Effective Date evidencing a senior secured second lien term facility, among the Borrower, Holdings, the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, as the same has been amended, restated, modified or supplemented and in effect immediately prior to the Restatement Effective Date (the Existing Second Lien Term Facility Credit Agreement ).
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Existing Term Loans means the outstanding Term Loans under and as defined in the Existing Credit Agreement.
Existing Term Tranche has the meaning specified in Section 2.18(a) .
Extended Revolving Credit Commitments has the meaning specified in Section 2.17(a) .
Extended Term Loans has the meaning specified in Section 2.18(a) .
Extending Revolving Credit Lender has the meaning specified in Section 2.17(b) .
Extending Term Lender has the meaning specified in Section 2.18(b) .
Facility means the Term Facility or the Revolving Credit Facility, as the context may require.
FATCA means Sections 1471 through 1474 of the Code as in effect on the Restatement Effective Date (or any amended or successor provision that is substantively comparable and not materially more onerous to comply with), any current or future regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements entered into thereunder.
Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent in a commercially reasonable manner.
Federal Reserve Board means the Board of Governors of the United States Federal Reserve System, or any successor thereto.
Fee Letter means that certain Fee Letter dated as of January 19, 2017, among the Borrower and Wells Fargo.
Field Examination has the meaning specified in Section 7.4(d) .
Financial Asset has the meaning given to such term in Article 8 of the UCC.
Financial Statements means the financial statements of the Borrower and its Subsidiaries delivered in accordance with Sections 7.1(a) and 7.1(b) .
FIRREA means the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended.
First Lien Term Facility means the credit facilities under the First Lien Term Facility Credit Agreement.
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First Lien Term Facility Administrative Agent means Nomura Corporate Funding Americas, LLC, in its capacity as administrative agent and collateral agent under the First Lien Term Facility Credit Agreement, or any successor administrative agent and collateral agent under the First Lien Term Facility Credit Agreement.
First Lien Term Facility Credit Agreement means that certain credit agreement dated as of the Restatement Effective Date evidencing a senior secured first lien term facility, among the Borrower, Holdings, the lenders party thereto and Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent, as the same may be amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements (in each case with the same or new lenders, institutional investors or agents), including any agreement extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof, in each case as and to the extent permitted by this Agreement and the Intercreditor Agreement.
First Lien Term Facility Documentation means the First Lien Term Facility Credit Agreement and all security agreements, guarantees, pledge agreements and other agreements or instruments executed in connection therewith.
First Lien Term Facility Lenders means the lenders from time to time party to the First Lien Term Facility Credit Agreement.
Fiscal Month means a fiscal month of any Fiscal Year. Fiscal Quarter means a fiscal quarter of any Fiscal Year.
Fiscal Year means the fiscal year of the Borrower and its Subsidiaries ending on the Saturday closest to January 31 in the following calendar year.
Fixed Charge Coverage Ratio means, with respect to the Borrower and its Restricted Subsidiaries for any Test Period, the ratio of (a) (i) Consolidated EBITDA for such period, minus (ii) Capital Expenditures paid or payable in cash during such period, minus (iii) Cash Taxes for such period, to (b) the Fixed Charges of such Person for such period.
Fixed Charges means, with respect to the Borrower and its Restricted Subsidiaries for any Test Period, the sum, determined on a Consolidated basis in accordance with GAAP, of (a) Consolidated Net Cash Interest Expense for such period, plus (b) scheduled payments of principal on Indebtedness for borrowed money due and payable during such period.
Foreign Lender has the meaning specified in Section 3.1(b) .
Foreign Plan means any material employee benefit plan, program or agreement maintained or contributed to by, or entered into with, Holdings or any Subsidiary of Holdings with respect to employees employed outside the United States (other than benefit plans, programs or agreements that are mandated by applicable Laws).
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Foreign Subsidiary means any direct or indirect Restricted Subsidiary of the Borrower that is not a Domestic Subsidiary.
Fronting Exposure means, at any time there is a Defaulting Lender, (a) with respect to an Issuer, such Defaulting Lenders Applicable Revolving Credit Percentage of the outstanding Letter of Credit Obligations to the extent that such Defaulting Lenders Applicable Revolving Credit Percentage of such outstanding Letter of Credit Obligations has not been reallocated pursuant to Section 2.16(a)(iv) or Cash Collateralized pursuant to Section 2.16(c) , and (b) with respect to the Swing Loan Lender, such Defaulting Lenders Applicable Revolving Credit Percentage of Swing Loans to the extent that such Defaulting Lenders Applicable Revolving Credit Percentage of Swing Loans has not been reallocated pursuant to Section 2.16(a)(iv) or Cash Collateralized pursuant to Section 2.16(c) .
Fund means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.
GAAP means generally accepted accounting principles in the United States, as in effect from time to time; provided , however , that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Effective Date in GAAP or in the application thereof (including through the adoption of IFRS) on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Requisite Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof (including through the adoption of IFRS), then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.
Gas Station Disposal Reserve a reserve as may be established from time to time by the Administrative Agent, in its Permitted Discretion, with respect to costs that will need to be paid to close down gas stations of the Borrower and the Subsidiary Guarantors in compliance with applicable Environmental Laws, to the extent that such costs are reasonably expected to be incurred as a result of the closure of any such gas stations in connection with a Liquidation.
Governmental Authority means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
Granting Lender has the meaning specified in Section 12.2(g) .
Guarantee means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the
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primary obligor ) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Effective Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
Guarantors has the meaning specified in the definition of Collateral and Guarantee Requirement. For the avoidance of doubt, the Borrower may cause any Restricted Subsidiary that is not a Guarantor to Guarantee the Obligations by causing such Restricted Subsidiary to execute a supplement to the Guaranty in substantially the form attached thereto, and any such Restricted Subsidiary shall be a Guarantor hereunder and thereunder for all purposes. On the Restatement Effective Date, the Guarantors are (a) Holdings, (b) BJME Operating Corp., a Massachusetts corporation, (c) BJNH Operating Co., LLC, a Delaware limited liability company, and (d) Natick Realty, Inc., a Maryland corporation.
Guaranty means (a) the guaranty made by Holdings and the other Guarantors in favor of the Administrative Agent on behalf of the Secured Parties pursuant to clause (b) of the definition of Collateral and Guarantee Requirement , substantially in the form of Exhibit H , and (b) each other guaranty and guaranty supplement delivered pursuant to Section 8.11 (it being understood, for the avoidance of doubt, that each Limited Recourse Guaranty shall not be a Guaranty hereunder).
Hazardous Materials means all explosive or radioactive substances or wastes, all hazardous or toxic substances, and all wastes or pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas and infectious or medical wastes regulated pursuant to any Environmental Law.
Hedge Bank means, with respect to any Swap Contract, as of any date of determination, (a) any Person that is a Lender or an Affiliate of a Lender on such date, in their
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capacity as a counterparty to such Swap Contract or (b) any Person who (i) was a Lender or an Affiliate of a Lender at the time such Swap Contract was entered into and who is no longer a Lender or an Affiliate of a Lender, (ii) is, and at all times remains, in compliance with the provisions of Section 11.13(b)(i) and (iii) agrees in writing (x) that the Agents and the other Secured Parties shall have no duty to such Person (other than the payment of any amounts to which such Person may be entitled under Section 10.3 ) and acknowledges that the Agents and the other Secured Parties may deal with the Loan Parties and the Collateral as they deem appropriate (including the release of any Loan Party or all or any portion of the Collateral) without notice or consent from such Person, whether or not such action impairs the ability of such Person to be repaid Obligations owing to it in respect of the Secured Hedge Agreements to which it is a party) and (y) to be bound by Section 11.13(b)(ii) .
Holdings has the meaning specified in the introductory paragraph to this Agreement.
IFRS means international accounting standards within the meaning of the IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.
In-Transit Inventory means Inventory located outside of the United States or in transit within or outside of the United States to the Borrower or any Subsidiary Guarantor from vendors and suppliers that has not yet been received into a distribution center or store of such Person.
Incremental Amendment has the meaning specified in Section 2.15 .
Incremental Availability has the meaning specified in Section 2.15(a) .
Incremental Facility Effective Date has the meaning specified in Section 2.15 .
Indebtedness means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) the maximum amount (after giving effect to any prior drawings or reductions that may have been reimbursed) of all letters of credit (including standby and commercial), bankers acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts and accrued expenses payable in the ordinary course of business, (ii) any earn-out obligation until such obligation is not paid after becoming due and payable and (iii) accruals for payroll and other liabilities accrued in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional
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sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness;
(g) all obligations of such Person in respect of Disqualified Equity Interests; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall (A) include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, except to the extent such Persons liability for such Indebtedness is otherwise limited and only to the extent such Indebtedness would be included in the calculation of Consolidated Total Debt, and (B) in the case of Restricted Subsidiaries that are not Loan Parties, exclude loans and advances made by Loan Parties having a term not exceeding 364 days (inclusive of any roll over or extensions of terms) and made in the ordinary course of business solely to the extent that such intercompany loans and advances are evidenced by one or more notes in form and substance reasonably satisfactory to the Administrative Agent and pledged as Collateral. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of Indebtedness of any Person for purposes of clause (e) shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value (as determined by such Person in good faith) of the property encumbered thereby as determined by such Person in good faith.
Indemnified Liabilities has the meaning specified in Section 12.4(a).
Indemnitees has the meaning specified in Section 12.4(a) .
Independent Financial Advisor means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing that is, in the good faith judgment of the Borrower, qualified to perform the task for which it has been engaged and that is independent of the Borrower and its Affiliates.
Information has the meaning specified in Section 12.19 .
Initial Inventory Appraisal means that certain report prepared by Tiger Valuation Services for the Administrative Agent dated August 17, 2011.
Intellectual Property has the meaning specified in the Security Agreement.
Intellectual Property Security Agreements has the meaning specified in the Security Agreement.
Intercompany Subordination Agreement means an agreement executed by each Restricted Subsidiary of the Borrower, in substantially the form of Exhibit L .
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Intercreditor Agreement means the intercreditor agreement, dated as of the Restatement Effective Date, among Holdings, the Borrower, the Administrative Agent, the First Lien Term Facility Administrative Agent and the Second Lien Term Facility Administrative Agent, substantially in the form attached as Exhibit K , as amended, restated, supplemented or otherwise modified from time to time in accordance therewith and herewith.
Interest Period means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one week, or one, two, three or six months thereafter, or to the extent consented to by each applicable Lender, nine or twelve months (or such period of less than one month (other than a period of one week) as may be consented to by each applicable Lender), as selected by the Borrower in its Notice of Borrowing or Notice of Conversion or Continuation; provided that:
(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period (other than an Interest Period having a duration of less than one month) that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the applicable Scheduled Termination Date of the Class of Loans of which the Eurocurrency Rate Loan is a part.
Inventory has the meaning given to such term in Article 9 of the UCC.
Inventory Reserves means (a) such reserves as may be established from time to time by the Administrative Agent, in its Permitted Discretion, with respect to changes in the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as negatively affect the market value of the Eligible Inventory and (b) Shrink Reserves.
Investment means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition (including without limitation by merger or otherwise) of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person (excluding, in the case of the Borrower and its Restricted Subsidiaries, intercompany loans, advances, or Indebtedness having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and made in the ordinary course of business) or (c) the purchase or other acquisition (in one transaction or a series of transactions, including without limitation by merger or otherwise) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant compliance, the amount of any Investment at any time shall be the amount actually
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invested (measured at the time made), without adjustment for subsequent changes in the value of such Investment, net of any return representing a return of capital with respect to such Investment.
Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB (or the equivalent) by S&P, or an equivalent rating by any other nationally recognized statistical rating agency selected by the Borrower.
IP Rights has the meaning specified in Section 5.15 .
IRS means the Internal Revenue Service of the United States.
ISP means, with respect to any Letter of Credit, the International Standby Practices 1998 published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
Issue means, with respect to any Letter of Credit, to issue, extend the expiration date of, renew (including by failure to object to any automatic renewal on the last day such objection is permitted), increase the face amount of, or reduce or eliminate any scheduled decrease in the face amount of, such Letter of Credit, or to cause any Person to do any of the foregoing. The terms Issued , issued , Issuing and Issuance shall have a corresponding meaning.
Issuer means Wells Fargo, Bank of America, N.A. and each other Lender or Affiliate of a Lender that (a) is listed on the signature pages hereof as an Issuer, (b) hereafter becomes an Issuer with the approval of the Administrative Agent and the Borrower by agreeing pursuant to an agreement with and in form and substance satisfactory to the Administrative Agent and the Borrower to be bound by the terms hereof applicable to Issuers (and in the case of any resignation, subject to and in accordance with Section 12.2(h) ) and (c) with respect to any Existing Letter of Credit, Wells Fargo or Bank of America, N.A., as applicable.
Issuer Documents means, with respect to any Letter of Credit, the Letter of Credit Request, and any other document, agreement (including any master agreement) and instrument entered into by an Issuer and the Borrower (or any of its Subsidiaries) or in favor of such Issuer and relating to such Letter of Credit.
Joint Bookrunners means Wells Fargo, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., each in its capacity as a joint lead bookrunner under this Agreement.
Joint Venture means (a) any Person which would constitute an equity method investee of the Borrower or any of the Restricted Subsidiaries and (b) any Person in whom the Borrower or any of the Restricted Subsidiaries beneficially owns any Equity Interest that is not a Restricted Subsidiary (other than an Unrestricted Subsidiary).
Junior Financing means any Indebtedness of a Loan Party (other than Holdings) that is unsecured or expressly subordinated to the Obligations (other than Indebtedness among the Borrower and its Restricted Subsidiaries) on subordination terms reasonably satisfactory to the Administrative Agent.
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Junior Financing Documentation means any documentation governing any Junior Financing.
Landlord Lien State means any state in which, at any time, a landlords claim for rent has priority notwithstanding any contractual provision to the contrary by operation of applicable Law over the lien of the Administrative Agent in any of the Collateral.
Latest Maturity Date means, at any date of determination, the latest Scheduled Termination Date applicable to any Loan or any Commitment hereunder at such time, including the latest termination date of any Extended Revolving Credit Commitment or Extended Term Loan, as applicable, as extended in accordance with this Agreement from time to time.
Laws means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities and executive orders, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.
L/C Sublimit has the meaning specified in Section 2.4(a)(iii) .
Leases means, with respect to any Person, all of those leasehold estates in Real Property of such Person, as lessee, as such may be amended, supplemented or otherwise modified from time to time.
Lender means the Swing Loan Lender, the Revolving Credit Lenders, the Term Lenders and each other financial institution or other entity that (a) is listed on the signature pages hereof as a Lender or (b) from time to time becomes a party hereto by execution of an Assignment and Assumption or, in connection with a Revolving Commitment Increase, an Incremental Amendment or, in connection with an Extended Revolving Credit Commitment or an Extended Term Loan, a Revolving Extension Amendment or Term Extension Amendment, as applicable.
Lending Office means, as to any Lender, the office or offices of such Lender described as such in such Lenders Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.
Letter of Credit means any letter of credit Issued pursuant to Section 2.4 and any Existing Letter of Credit. A Letter of Credit may be a Documentary Letter of Credit or a Standby Letter of Credit.
Letter of Credit Borrowing means an extension of credit resulting from a drawing under any Letter of Credit that has not been reimbursed on the applicable Reimbursement Date or refinanced as a Revolving Loan.
Letter of Credit Fee has the meaning specified in Section 2.12(b) .
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Letter of Credit Obligations means, at any time, the aggregate of all liabilities at such time of any Loan Party to all Issuers with respect to Letters of Credit (including (x) any Letters of Credit issued for the account of any other Subsidiary of the Borrower and (y) in respect of Bankers Acceptance issued by any Issuer for the account or benefit of the Borrower or any Subsidiary in connection with Letters of Credit), whether or not any such liability is contingent, including, without duplication, the sum of (a) the Reimbursement Obligations at such time and (b) the Letter of Credit Undrawn Amounts at such time.
Letter of Credit Reimbursement Agreement has the meaning specified in clause (v) of the proviso to clause (a) of Section 2.4 .
Letter of Credit Request has the meaning specified in Section 2.4(c).
Letter of Credit Undrawn Amounts means, at any time, the aggregate undrawn face amount of all Letters of Credit outstanding at such time.
Lien means any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing); provided , that in no event shall an operating lease in and of itself be deemed a Lien.
Limited Guarantor means each Restricted Subsidiary that is a limited guarantor under a Limited Recourse Guaranty, in its capacity as limited guarantor thereunder. As of the Restatement Effective Date, the Limited Guarantors are Natick NH Hooksett Realty Corp., a New Hampshire corporation, Natick NJ Flemington Realty Corp., a New Jersey corporation, and Natick NJ 1993 Realty Corp., a New Jersey corporation.
Limited Recourse Guaranty means (a) each ABL Limited Recourse Guaranty, dated as of March 28, 2012, between the Restricted Subsidiary identified therein, as limited guarantor, and the Administrative Agent, and (b) each other limited recourse guaranty by a Restricted Subsidiary, as limited guarantor, in connection with Section 8.13.
Liquidation means the exercise by the Administrative Agent of those rights and remedies accorded to the Administrative Agent under the Loan Documents and applicable Law as a creditor of the Loan Parties with respect to the realization on the Collateral, including (after the occurrence and continuation of an Event of Default) the conduct by the Loan Parties acting with the consent of the Administrative Agent, of any public, private or going out of business sale or other disposition of the Collateral for the purpose of liquidating the Collateral. Derivations of the word Liquidation (such as Liquidate ) are used with like meaning in this Agreement.
Loan means any loan made by any Lender pursuant to this Agreement, including Swing Loans and any loans made in respect of any Revolving Commitment Increase.
Loan Documents means, collectively, (a) this Agreement, (b) the Revolving Credit Notes, (c) the Term Notes, (d) any Incremental Amendment, (e) any Revolving Extension
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Amendment or Term Extension Amendment, (f) the Guaranty, (g) the Fee Letter, (h) each Letter of Credit Reimbursement Agreement, (i) the Collateral Documents, (j) the Issuer Documents and (k) each Borrowing Base Certificate.
Loan Parties means, collectively, (a) Holdings, (b) the Borrower and (c) each other Guarantor.
London Business Day means a day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in London, England.
Management Stockholders means the members of management of Holdings or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof.
Margin Stock has the meaning set forth in Regulation U of the Board of Governors of the United States Federal Reserve System, or any successor thereto.
Master Agreement has the meaning specified in the definition of Swap Contract .
Material Adverse Effect means any event, circumstance or condition that has had a materially adverse effect on (a) the business, operations, assets, liabilities (actual or contingent) or financial condition of Holdings and its Subsidiaries, taken as a whole, (b) the ability of the Loan Parties (taken as a whole) to perform their respective payment obligations under any Loan Document to which any of the Loan Parties is a party or (c) the rights and remedies of the Lenders or the Administrative Agent under any Loan Document.
Material Bank Accounts has the meaning specified in Section 8.12 .
Material Domestic Subsidiary means, at any date of determination, each of the Borrowers Domestic Subsidiaries (a) whose total assets at the last day of the most recent Test Period for which financial statements have been or are required to have been delivered pursuant to Section 7.1(a) or (b) were equal to or greater than 2.5% of Total Assets at such date or (b) whose gross revenues for such Test Period were equal to or greater than 2.5% of the consolidated gross revenues of the Borrower and the Restricted Subsidiaries for such period, in each case determined in accordance with GAAP; provided that if, at any time Domestic Subsidiaries that are not Guarantors solely because they do not meet the thresholds set forth in clauses (a) or (b) comprise in the aggregate more than 5.0% of Total Assets as of the end of the most recently ended Fiscal Quarter of the Borrower for which financial statements have been or are required to have been delivered pursuant to Section 7.1 or more than 5.0% of the consolidated gross revenues of the Borrower and the Restricted Subsidiaries for the period of four consecutive Fiscal Quarters ending as of the last day of such Fiscal Quarter, then the Borrower shall, not later than forty-five (45) days after the date by which financial statements for such quarter are required to be delivered pursuant to this Agreement (or such longer period as may be agreed by the Administrative Agent in its reasonable discretion), (i) designate in writing to the Administrative Agent one or more of such Domestic Subsidiaries as Material Domestic Subsidiaries to the extent required such that the foregoing condition ceases to be true and (ii) comply with the provisions of Sections 8.11 , 8.12 and 8.13 applicable to such Subsidiary.
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Material Foreign Subsidiary means, at any date of determination, each of the Borrowers Foreign Subsidiaries (a) whose total assets at the last day of the most recent Test Period for which financial statements have been or are required to have been delivered pursuant to Section 7.1(a) or (b) were equal to or greater than 2.5% of Total Assets at such date or (b) whose gross revenues for such Test Period were equal to or greater than 2.5% of the consolidated gross revenues of the Borrower and the Restricted Subsidiaries for such period, in each case determined in accordance with GAAP.
Material Indebtedness means Indebtedness having an aggregate outstanding principal amount of $35,000,000 or more.
Material Real Property means any real property owned by the Borrower or any Loan Party (i) with a fair market value in excess of $5,000,000 and (ii) that is not located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area.
Material Subsidiary means any Material Domestic Subsidiary or any Material Foreign Subsidiary.
Maximum Credit means, at any time, the lesser of (i) the Aggregate Revolving Credit Commitments in effect at such time plus the Outstanding Amount of the Term Loan at such time and (ii) the Aggregate Borrowing Base as in effect at such time.
Maximum Rate has the meaning specified in Section 12.27 .
Maximum Revolving Credit means, at any time, the lesser of (i) the Aggregate Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base as in effect at such time.
Monthly Borrowing Base Certificate shall have the meaning specified in Section 7.4(a ).
Moodys means Moodys Investors Service, Inc. and any successor thereto.
Mortgage Policies has the meaning specified in Section 8.13(b)(ii) hereof.
Mortgaged Properties has the meaning specified in paragraph (e) of the definition of Collateral and Guarantee Requirement .
Mortgages means, collectively, the deeds of trust, trust deeds, hypothecs and mortgages made by the Loan Parties in favor or for the benefit of the Administrative Agent on behalf of the Lenders in form and substance reasonably satisfactory to the Administrative Agent, and any other mortgages executed and delivered pursuant to Sections 8.11 or 8.13 .
Multiemployer Plan means any multiemployer plan as defined in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA, to which any Loan Party or any of their respective ERISA Affiliates makes or is obligated to make contributions or has any liability, or during the preceding five plan years has made or been obligated to make contributions or had any liability.
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Net Cash Proceeds means
(a) with respect to the Disposition of any asset by the Borrower or any of the Restricted Subsidiaries, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such Disposition (including any cash and Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by the asset subject to such Disposition and that is required to be repaid in connection with such Disposition (other than Indebtedness under the Loan Documents, the First Lien Term Facility Documentation or any Permitted Refinancing of the Indebtedness under the First Lien Term Facility Documentation or the Second Lien Term Facility Documentation or any Permitted Refinancing of the Indebtedness under the Second Lien Term Facility Documentation), (B) the out-of-pocket fees and expenses (including attorneys fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred by the Borrower or such Restricted Subsidiary in connection with such Disposition, (C) taxes or distributions made pursuant to Section 9.6(g)(i) and Section 9.6(g)(iii) paid or reasonably estimated to be payable in connection therewith (including taxes imposed on the distribution or repatriation of any such Net Cash Proceeds), (D) in the case of any Disposition by a non-wholly owned Restricted Subsidiary, the pro rata portion of the Net Cash Proceeds thereof (calculated without regard to this clause (D)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Restricted Subsidiary as a result thereof, and (E) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Borrower or any Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, it being understood that Net Cash Proceeds shall include the amount of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in this clause (E) ; and
(b) (i) with respect to the incurrence or issuance of any Indebtedness by the Borrower or any Restricted Subsidiary or any Permitted Equity Issuance by the Borrower or any direct or indirect parent of the Borrower, the excess, if any, of (A) the sum of the cash and Cash Equivalents received in connection with such incurrence or issuance over (B) the investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other customary expenses, incurred by the Borrower or such Restricted Subsidiary in connection with such incurrence or issuance and (ii) with respect to any Permitted Equity Issuance by any direct or indirect parent of the Borrower, the amount of cash from such Permitted Equity Issuance contributed to the capital of the Borrower.
Net Income means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.
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Net Recovery Percentage means the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the recovery on the aggregate amount of the Inventory at such time on a going out of business sale basis as set forth in the most recent appraisal of Inventory received by the Administrative Agent in accordance with Section 7.4 , in each case, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable original cost of the aggregate amount of the Inventory subject to appraisal. The Net Recovery Percentage for any category of Inventory used in determining the Borrowing Base shall be based on the applicable percentage in the most recent appraisal conducted as set forth in Section 7.4 , as applicable .
New Revolving Commitment Lender has the meaning specified in Section 2.17(c) .
New Term Lender has the meaning specified in Section 2.18(c) .
Non-Bank Certificate has the meaning specified in Section 3.1(b) .
Non-Consenting Lender has the meaning specified in Section 3.7 .
Non-Core Business Segment means any business segment or separate department of the Borrower and its Restricted Subsidiaries which represented less than 5% of Consolidated EBITDA of the Borrower and its Restricted Subsidiaries as of the Fiscal Year immediately prior to the date of such calculation.
Non-Loan Party means any Subsidiary of the Borrower that is not a Loan Party.
Note means a Term Note or a Revolving Credit Note, as the context may require.
Notice of Borrowing has the meaning specified in Section 2.2.
Notice of Conversion or Continuation has the meaning specified in Section 2.11(a) .
Notice of Intent to Cure has the meaning specified in Section 7.2 .
Obligations means all (a) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees and expenses that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, fees, and expenses are allowed claims in such proceeding, (b) obligations arising under any Secured Hedge Agreement (excluding any Excluded Swap Obligations), and (c) Cash Management Obligations. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and any of their Subsidiaries to the extent they have obligations under the Loan Documents) include the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit reimbursement obligations (including in respect of Bankers Acceptances issued by any Issuer for the account or benefit of the Borrower or any Subsidiary in connection with Letters of
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Credit), charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by any Loan Party under any Loan Document.
OFAC has the meaning specified in Section 5.18 .
OID means original issue discount.
Other Taxes has the meaning specified in Section 3.1 .
Outstanding Amount means (a) with respect to the Term Loan, Revolving Loans and Swing Loans on any date, the aggregate outstanding principal amount thereof on such date after giving effect to any borrowings and prepayments or repayments of Revolving Loans (including any refinancing of Letter of Credit Obligations as a Revolving Loan), the Term Loan and Swing Loans, as the case may be, occurring on such date; and (b) with respect to any Letter of Credit Obligations on any date, the amount of such Letter of Credit Obligations on such date after giving effect to any related extension of any Letter of Credit occurring on such date and any other changes thereto as of such date, including as a result of any reimbursements of outstanding Letter of Credit Obligations (including any refinancing of outstanding Letter of Credit Obligations under related Letters of Credit or related extensions of any Letters of Credit as a Revolving Loan) or any reductions in the maximum amount available for drawing under related Letters of Credit taking effect on such date.
Overnight Rate means, for any day, the greater of (a) the Federal Funds Rate and (b) an overnight rate determined by the Administrative Agent, an Issuer, or the Swing Loan Lender, as applicable, in accordance with banking industry rules on interbank compensation.
PACA Reserve means all amounts owed from time to time by the Borrower or any Subsidiary Guarantor to any Person on account of the purchase price or other amounts owed in respect of agricultural products or any services related to the foregoing and subject to PACA, to the extent that (i) such amounts are secured (by way of a growers lien, sellers lien, statutory trust or similar security interest or priority arrangement) by the applicable agricultural products (such lien, a PACA Super Priority Lien ) in accordance with PACA and (ii) the Administrative Agent determines in its Permitted Discretion that such PACA Super Priority Lien would have priority over the Administrative Agents Lien in such agricultural products to the extent constituting Current Asset Collateral.
PACA means the Perishable Agricultural Commodities Act, 1930.
PASA means the Packers and Stockyards Act, 1921.
PASA Reserve means all amounts owed from time to time by the Borrower or any Subsidiary Guarantor to any Person on account of the purchase price or other amounts owed in respect of livestock, livestock products, poultry, poultry products, other meat and meat products, or any services related to the foregoing and subject to PASA, to the extent that (i) such amounts are secured (by way of a growers lien, sellers lien, statutory trust or similar security interest or priority arrangement) by the applicable livestock, livestock products, poultry, poultry products, other meat and meat products (such lien, a PASA Super Priority Lien ) in accordance with
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PASA and (ii) the Administrative Agent determines in its Permitted Discretion that such PASA Super Priority Lien would have priority over the Administrative Agents Lien in such livestock, livestock products, poultry, poultry products, other meat and meat products to the extent constituting Current Asset Collateral.
Participant has the meaning specified in Section 12.2(d) .
Participant Register has the meaning specified in Section 12.2(e) .
Participating Member State means each state so described in any EMU Legislation.
Payment Conditions means, at any time of determination, that (a) no Event of Default exists or would arise as a result of the making of the subject Specified Payment, (b) after giving Pro Forma Effect to such Specified Payment and projected for the succeeding six (6) months following such Specified Payment, Excess Availability shall be greater than 12.5% of the Maximum Credit and (c) solely to the extent Excess Availability, as calculated pursuant to clause (b) above, shall be less than 20.0% of the Maximum Credit, the Fixed Charge Coverage Ratio as of the end of the most recent period of twelve consecutive Fiscal Months of the Borrower ended on or prior to such time (taken as one accounting period) shall be greater than or equal to 1.00 to 1.00 after giving Pro Forma Effect to such Specified Payment as if such Specified Payment (if applicable to such calculation) had been made as of the first day of such period, and, in each case, the Borrower shall have delivered, in accordance with Section 7.2(f) hereof, to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that the conditions contained in the foregoing clauses (a), (b) and, to the extent applicable, (c) have been satisfied.
PBGC means the Pension Benefit Guaranty Corporation or any successor thereto.
Pension Plan means any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any of their respective ERISA Affiliates or to which any Loan Party or any of their respective ERISA Affiliates contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions or had any obligation to contribute in the preceding five plan years.
Permitted Acquisition means the purchase or other acquisition by the Borrower or any of its Restricted Subsidiaries of property and assets or businesses of any Person or of assets constituting a business unit, a line of business or division of such Person, a Store or Equity Interests in a Person that, upon the consummation thereof, will be a wholly owned Restricted Subsidiary of the Borrower (including as a result of a merger or consolidation); provided that, with respect to each such purchase or other acquisition:
(i) the property, assets and businesses acquired in such purchase or other acquisition shall constitute Collateral and each applicable Loan Party and any newly created or acquired Subsidiary (and, to the extent required under the Collateral and Guarantee Requirement, the Subsidiaries of such created or acquired Subsidiary) shall be
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Guarantors and shall have complied with the requirements of Section 8.11 and 8.12 , within the times specified therein (for the avoidance of doubt, this clause (i) shall not override any provisions of the Collateral and Guarantee Requirement, subject to the limit in clause (iv) below);
(ii) the Borrower shall have delivered to the Administrative Agent (and the Borrower shall have used commercially reasonable efforts to deliver no later than five (5) Business Days before the date on which any such purchase or other acquisition is consummated), on behalf of the Lenders, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this definition have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition;
(iii) the acquired property, assets, business or Person is in a business permitted under Section 9.7 ;
(iv) except with respect to Domestic Subsidiaries up to an acquisition amount not to exceed $50,000,000 in the aggregate for all such Domestic Subsidiaries, to the extent such Investments are made in Persons that do not become Loan Parties, the RP Conditions shall have been satisfied; and
(v) the Borrower is in compliance, on a pro forma basis after giving effect to such transaction, with the Payment Conditions.
Permitted Discretion means a determination made by the Administrative Agent in good faith in the exercise of its reasonable (from the perspective of an asset-based lender) business judgment.
Permitted Equity Issuance means any sale or issuance of any Qualified Equity Interests of the Borrower or any direct or indirect parent of the Borrower (in which case the Net Cash Proceeds have been received by the Borrower as cash common equity), in each case to the extent permitted hereunder.
Permitted Holder means any of (a) the Sponsor, (b) the Management Stockholders and (c) the Co-Investors, provided that for purposes of the definition of Change of Control, (i) in each of clause (a)(i) , the final reference to Permitted Holders in clause (a)(ii) and the proviso to clause (a), the Co-Investors shall not constitute Permitted Holders at any time that they hold voting power equal to more than 33.33% of the ordinary voting power of all Equity Interests collectively held by the Sponsors, the Management Stockholders and the Co-Investors and the Sponsors hold voting power equal to less than 66.67% of the ordinary voting power of all such Equity Interest, (ii) in the final reference to Permitted Holders in clause (a)(ii) , the Co-Investors shall not constitute Permitted Holders if they are part of the group referred to in clause (a)(ii)(2) of the definition of Change of Control and (iii) in the parenthetical in each of clauses (a)(ii)(1) and (2) , the Co-Investors shall not constitute Permitted Holders.
Permitted Refinancing means, with respect to any Person, any modification, refinancing, refunding, replacement, renewal or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed
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the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, replaced, renewed or extended except by an amount equal to unpaid accrued interest and premium (including tender premiums) thereon, plus reasonable OID and upfront fees plus other fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, replacement, renewal or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Sections 9.3(b) and (e) , such modification, refinancing, refunding, replacement, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, replaced, renewed or extended, (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 9.3(e) , at the time thereof, no Event of Default shall have occurred and be continuing, (d) if such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is Junior Financing, (i) to the extent such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal, replacement or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, replaced, renewed or extended, (ii) to the extent such Indebtedness being modified, refinanced, refunded, replaced, renewed, or extended is secured by Liens, (x) such modification, refinancing, refunding, replacement, renewal or extension is either unsecured or is not secured by any Liens that do not also secure the Obligations and (y) to the extent that such Liens are subordinated to the Liens securing the Obligations, such modification, refinancing, refunding, replacement, renewal or extension is secured by Liens that are subordinated to the Liens securing the Obligations on terms at least as favorable to the Lenders as those contained in the documentation (including any intercreditor or similar agreements) governing the Indebtedness being modified, refinanced, replaced, refunded, replaced, renewed or extended, (iii) the terms and conditions (including, if applicable, as to collateral but excluding as to subordination, pricing, premiums and optional prepayment or redemption provisions) of any such modified, refinanced, refunded, replaced, renewed or extended Indebtedness, taken as a whole, are not more restrictive with respect to the Borrower and the Restricted Subsidiaries, as reasonably determined by the Borrower in good faith, than the terms and conditions of the Indebtedness being modified, refinanced, refunded, replaced, renewed or extended; provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five (5) Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five (5) Business Day period that it disagrees with such determination (including a reasonably detailed description of the basis upon which it disagrees) and (iv) such modification, refinancing, refunding, replacement, renewal or extension is incurred by the Person who is the obligor of the Indebtedness being modified, refinanced, refunded, replaced, renewed or extended and no additional obligors become liable for such Indebtedness, (e) in the case of any Permitted Refinancing in respect of the First Lien Term Facility, such Permitted Refinancing is secured
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only by assets pursuant to one or more security agreements permitted by and subject to the Intercreditor Agreement (or another intercreditor agreement containing terms that are at least as favorable to the Secured Parties as those contained in the Intercreditor Agreement) and (f) in the case of any Permitted Refinancing in respect of the Second Lien Term Facility, such Permitted Refinancing is secured only by assets pursuant to one or more security agreements permitted by and subject to the Intercreditor Agreement (or another intercreditor agreement containing terms that are at least as favorable to the Secured Parties as those contained in the Intercreditor Agreement).
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
Plan means any material employee benefit plan (as such term is defined in Section 3(3) of ERISA), other than a Foreign Plan, established by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any of their respective ERISA Affiliates.
Platform has the meaning specified in Section 7.2 .
Pledged Debt has the meaning specified in the Security Agreement.
Pledged Equity has the meaning specified in the Security Agreement.
Pro Forma Basis and Pro Forma Effect means, with respect to compliance with any test or covenant or calculation hereunder, the determination or calculation of such test, covenant or ratio (including in connection with Specified Transactions) in accordance with Section 1.8 .
Proceeds has the meaning given to such term in Article 9 of the UCC.
Projection s shall have the meaning specified in Section 7.1(d) .
Protective Advances means an overadvance made or deemed to exist by the Administrative Agent, in its discretion, which:
(a) is made to maintain, protect or preserve the Collateral and/or the Secured Parties rights under the Loan Documents or which is otherwise for the benefit of the Secured Parties and/or the Loan Parties; or
(b) is made to enhance the likelihood of, or to maximize the amount of, repayment of any Obligation; or
(c) is made to pay any other amount chargeable to any Loan Party hereunder; and
(d) together with all other Protective Advances then outstanding, shall not (i) exceed five percent (5%) of the Aggregate Borrowing Base at any time or (ii) unless a Liquidation is taking place, remain outstanding for more than forty-five (45) consecutive Business Days, unless in each case, the Requisite Lenders otherwise agree.
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Public Lender has the meaning specified in Section 7.2 .
Qualified Cash means unrestricted cash or Cash Equivalents of the Borrower or any Subsidiary Guarantor that are subject to the valid, enforceable and first priority perfected security interest of, and subject to the sole and exclusive control of, the Administrative Agent in a Qualified Cash Securities Account, and which cash and Cash Equivalents are not subject to any other Lien, claim or interest (other than (A) Liens permitted hereunder pursuant to clauses (c) , (d) or (h) of Section 9.1 , (B) Liens permitted under Section 9.1 (including clauses (w) and (x) thereof) securing the Obligations (as defined under the First Lien Term Facility Credit Agreement) and the Obligations (as defined under the Second Lien Term Facility Credit Agreement) (subject, in each case, to the terms of the Intercreditor Agreement), (C) any other Lien having priority by operation of applicable Law over the Liens of the Administrative Agent, or (D) customary Liens or rights of setoff of the institution maintaining such accounts permitted hereunder solely in its capacity as a depository; provided that, for purposes of the amount of Qualified Cash included in the calculation of Borrowing Base, such amount may be reduced, at the Administrative Agents option, by any obligations owing to any lienholder in respect of the Liens referred to in the foregoing clauses (A) , (C) and (D) , and the Borrower shall provide such information with respect to such obligations as the Administrative Agent may from time to time reasonably request).
Qualified Cash Securities Account means any Approved Securities Account with a Lender or an Affiliate of a Lender and that is under the sole and exclusive control (subject to Section 8.12(h) ) of the Administrative Agent, including without limitation, under which the Administrative Agent is the sole Entitlement Holder and the only Person authorized to give Entitlement Orders with respect thereto.
Qualified ECP Guarantor means, in respect of any Swap Obligation, each Loan Party or Limited Guarantor that has total assets exceeding $10,000,000 at the time the relevant Guaranty or Limited Guaranty or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an eligible contract participant under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an eligible contract participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Qualified Equity Interests means any Equity Interests that are not Disqualified Equity Interests.
Qualified Holding Company Debt means unsecured Indebtedness of Holdings (A) that is not subject to any Guarantee by any Subsidiary of Holdings, (B) that will not mature prior to the date that is six (6) months after the Latest Maturity Date in effect on the date of issuance or incurrence thereof, (C) that has no scheduled amortization or scheduled payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemption provisions satisfying the requirements of clause (E) below), (D) that does not require any payments in cash of interest or other amounts in respect of the principal thereof prior to the earlier to occur of (1) the date that is four (4) years from the date of the issuance or incurrence thereof and (2) the date that is ninety-one (91) days after the Latest Maturity Date in effect on the
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date of such issuance or incurrence, and (E) that has mandatory prepayment, repurchase or redemption, covenant, default and remedy provisions customary for senior discount notes of an issuer that is the parent of a borrower under senior secured credit facilities, and in any event, with respect to covenant, default and remedy provisions, no more restrictive (taken as a whole) than those set forth in this Agreement (other than provisions customary for senior discount notes of a holding company); provided that the Borrower shall have delivered a certificate of a Responsible Officer to the Administrative Agent at least five (5) Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has reasonably determined in good faith that such terms and conditions satisfy the foregoing requirement (and such certificate shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five (5) Business Day period that it disagrees with such determination (including a reasonably detailed description of the basis upon which it disagrees)); provided further that any such Indebtedness shall constitute Qualified Holding Company Debt only if immediately after giving effect to the issuance or incurrence thereof and the use of proceeds thereof, no Event of Default shall have occurred and be continuing.
Qualifying IPO means the issuance by Holdings or any direct or indirect parent of Holdings of its common Equity Interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering).
Quarterly Financial Statements means the unaudited condensed consolidated balance sheets and related statements of income and cash flows of the Company and its Subsidiaries for the most recent Fiscal Quarters after the date of the Annual Financial Statements and ended at least forty-five (45) days before the Restatement Effective Date.
Ratable Portion , Pro Rata Share , ratable share or (other than in the expression equally and ratably) ratably means, (a) with respect to any Revolving Lender, the percentage obtained by dividing (i) the Revolving Credit Commitment of such Class of such Revolving Lender by (ii) the aggregate Revolving Credit Commitments of all Revolving Lenders of such Class (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing the aggregate outstanding principal balance of the Revolving Credit Outstandings of such Class owing to such Revolving Lender by the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to all Revolving Lenders of such Class), (b) with respect to any Term Lender, the percentage obtained by dividing (i) the Term Commitment of such Class of such Term Lender by (ii) the aggregate Term Commitments of all Term Lenders of such Class (or, at any time after the after the Restatement Effective Date, the percentage obtained by dividing the aggregate outstanding principal balance of the Term Outstandings of such Class owing to such Term Lender by the aggregate outstanding principal balance of the Term Outstandings owing to all Term Lenders of such Class) and (c) with respect of the aggregate of the Term Facility and the Revolving Facility with respect to any Lender, the percentage obtained by dividing (i) the aggregate of the Revolving Credit Commitment of such Lender and the Term Commitment (or, after the Restatement Effective Date, the outstanding Term Loans) of such Lender by (ii) the sum of the aggregate Revolving Credit Commitments of all Lenders and the
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aggregate Term Commitment (or, after the Restatement Effective Date, the aggregate outstanding Term Loans) of all Lenders (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Revolving Credit Exposure owing to such Lender and the outstanding Term Loans owing to such Lender by (ii) the aggregate outstanding principal balance of the Revolving Credit Outstandings and the aggregate outstanding Term Loans owing to all Lenders).
Register has the meaning specified in Section 12.2(c) .
Reimbursement Date has the meaning specified in Section 2.4(h) .
Reimbursement Obligations means, as and when matured, the obligation of any Loan Party to pay, on the date payment is made or scheduled to be made to the beneficiary under each such Letter of Credit (or at such other date as may be specified in the applicable Letter of Credit Reimbursement Agreement), all amounts of each drafts and other requests for payments drawn under Letters of Credit, and all other matured reimbursement or repayment obligations of any Loan Party to any Issuer with respect to amounts drawn under Letters of Credit.
Related Indemnified Person of an Indemnitee means (a) any controlling person or controlled affiliate of such Indemnitee, (b) the respective directors, officers, or employees of such Indemnitee or any of its controlling persons or controlled affiliates and (c) the respective agents of such Indemnitee or any of its controlling persons or controlled affiliates, in the case of this clause (c) , acting at the instructions of such Indemnitee, controlling person or such controlled affiliate; provided that each reference to a controlled affiliate or controlling person in this definition shall pertain to a controlled affiliate or controlling person involved in the negotiation or syndication of the Facilities.
Related Parties means, with respect to any Person, such Persons Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Persons Affiliates.
Released Mortgage Properties means real properties located in Connecticut and Maryland with respect to which the Borrower and its Restricted Subsidiaries had delivered a mortgage under the Existing Credit Agreement.
Reportable Event means, with respect to any Pension Plan, any of the events set forth in Section 4043 of ERISA or the regulations issued thereunder, other than events for which the applicable notice period has been waived.
Requisite Class Lenders shall mean, with respect to any Class on any date of determination, Lenders having more than 50% of the aggregate outstanding amount of the commitments of such Class or, after the commitments with respect to such Class have been terminated, more than fifty percent (50%) of the aggregate outstanding amount of the Loans, and if applicable to such Class, the outstanding Letters of Credit Obligations of, such Class; provided that the unused commitment of, and the portion of the Loans and outstanding Letters of Credit Obligations held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Requisite Class Lenders.
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Requisite Lenders means, collectively, Lenders having more than fifty percent (50%) of the aggregate of the Revolving Credit Commitments and the Outstanding Amount of the Term Loan or, after the Revolving Credit Termination Date, more than fifty percent (50%) of the aggregate of the Revolving Credit Outstandings and the Outstanding Amount of the Term Loans (in either case, such 50% amount being referred to as the Requisite Amount ); provided that the unused Revolving Credit Commitment of, and the portion of the Loans and outstanding Letters of Credit Obligations held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Requisite Lenders.
Reserves means any Inventory Reserves and Availability Reserves.
Responsible Officer means the chief executive officer, president, vice president, chief financial officer, senior vice president, senior vice president (finance), treasurer or assistant treasurer, manager of treasury activities or other similar officer or Person performing similar functions of a Loan Party and, as to any document delivered on the Restatement Effective Date, any secretary or assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. Unless otherwise specified, all references herein to a Responsible Officer shall refer to a Responsible Officer of the Borrower.
Restatement Effective Date has the meaning specified in Section 4.1 .
Restatement Effective Date Dividend means (a) a one-time cash Restricted Payment by the Borrower to Holdings in an aggregate amount not to exceed $803,000,000 and (b) one or more Restricted Payments by Holdings to the holders of its Equity Interests with the proceeds of the Restricted Payment from the Borrower pursuant to clause (a), in each case not later than the date that is twenty (20) days after the Restatement Effective Date.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of Holdings, the Borrower or any of its Restricted Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrowers or Holdings stockholders, partners or members (or the equivalent Persons thereof).
Restricted Subsidiary means any Subsidiary of the Borrower other than an Unrestricted Subsidiary.
Revolving Commitment Increase has the meaning specified in Section 2.15 .
Revolving Commitment Increase Lender has the meaning specified in Section 2.15 .
Revolving Credit Borrowing means a borrowing consisting of Revolving Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurocurrency Rate Loans, having the same Interest Period.
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Revolving Credit Card Advance Rate means 90%.
Revolving Credit Commitment means, with respect to each Revolving Credit Lender, the commitment of such Revolving Credit Lender to make Revolving Loans and acquire interests in other Revolving Credit Outstandings expressed as an amount in Dollars representing the maximum principal amount of the Revolving Loans to be made by such Revolving Credit Lender under this Agreement, as such commitment may be (a) reduced from time to time pursuant to this Agreement and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Revolving Credit Lender pursuant to an Assignment and Assumption, (ii) a Revolving Commitment Increase, or (iii) a Revolving Extension Amendment. The initial amount of each Revolving Credit Lenders Revolving Credit Commitment is set forth on Schedule I under the caption Revolving Credit Commitment , as amended to reflect each Assignment and Assumption, Incremental Amendment or Revolving Extension Amendment, in each case executed by such Revolving Credit Lender.
Revolving Credit Exposure means, as to each Revolving Credit Lender, the sum of the Outstanding Amount of such Lenders Revolving Loans, its Pro Rata Share of the Letter of Credit Obligations and its Pro Rata Share of the Swing Loan Obligations at such time.
Revolving Credit Facility means, at any time, the Aggregate Revolving Credit Commitments at such time. The amount of the Revolving Credit Facility as of the Restatement Effective Date is $950,000,000.
Revolving Credit Lender means each Lender that (a) has a Revolving Credit Commitment, (b) holds a Revolving Loan or (c) participates in any Letter of Credit or Swing Loan.
Revolving Credit Note means a promissory note of the Borrower payable to the order of any Revolving Credit Lender in a principal amount equal to the amount of such Lenders Revolving Credit Commitment evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Revolving Loans of a given Class owing to such Lender.
Revolving Credit Outstandings means, at any particular time, the sum of (a) the principal amount of the Revolving Loans outstanding at such time, (b) the Letter of Credit Obligations outstanding at such time and (c) the principal amount of the Swing Loans outstanding at such time.
Revolving Credit Termination Date means the earliest of (a) the Scheduled Termination Date, (b) the date of termination of all of the Revolving Credit Commitments pursuant to Section 2.5 and (c) the date on which the Obligations become due and payable pursuant to Section 10.2 .
Revolving Eligible Accounts Advance Rate means 90%.
Revolving Extension Amendment has the meaning specified in Section 2.17(d) .
Revolving Extension Request has the meaning specified in Section 2.17(a) .
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Revolving Extension Series has the meaning specified in Section 2.17(f) .
Revolving Inventory Advance Rate means 90%.
Revolving Loan has the meaning specified in Section 2.1(a)(i) and shall include all Existing Revolving Loans.
RP Conditions means, at any time of determination, that (a) no Event of Default exists or would arise as a result of the subject Specified Payment, (b) after giving Pro Forma Effect to such Specified Payment and projected for the succeeding six (6) months following such Specified Payment, Excess Availability shall be greater than 15.0% of the Maximum Credit, and (c) solely to the extent Excess Availability, as calculated pursuant to clause (b) above, shall be less than 20.0% of the Maximum Credit, the Fixed Charge Coverage Ratio as of the end of the most recent period of twelve consecutive Fiscal Months of the Borrower ended on or prior to such time (taken as one accounting period) shall be greater than or equal to 1.00 to 1.00 after giving Pro Forma Effect to such Specified Payment as if such Specified Payment (if applicable to such calculation) had been made as of the first day of such period, and, in each case, the Borrower shall have delivered, in accordance with Section 7.2(f) hereof, to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that the conditions contained in the foregoing clauses (a), (b) and, to the extent applicable, (c) have been satisfied.
S&P means Standard & Poors Rating Services and any successor thereto.
Same Day Funds means disbursements and payments in immediately available funds.
Scheduled Termination Date means February 3, 2022, as may be extended pursuant to Section 12.1(b), Section 2.17 or Section 2.18 hereof; provided that if such day is not a Business Day, the Scheduled Termination Date shall be the Business Day immediately preceding such day.
SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Second Lien Term Facility means the credit facilities under the Second Lien Term Facility Credit Agreement.
Second Lien Term Facility Administrative Agent means Jefferies Finance LLC, in its capacity as administrative agent and collateral agent under the Second Lien Term Facility Credit Agreement, or any successor administrative agent and collateral agent under the Second Lien Term Facility Credit Agreement.
Second Lien Term Facility Credit Agreement means that certain credit agreement dated as of the Restatement Effective Date evidencing a senior secured second lien term facility, among the Borrower, Holdings, the lenders party thereto and Jefferies Finance LLC, as administrative agent and collateral agent, as the same may be amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements (in each case with the same or new lenders, institutional investors or agents), including any agreement extending the maturity thereof or otherwise restructuring all or any
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portion of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof, in each case as and to the extent permitted by this Agreement and the Intercreditor Agreement.
Second Lien Term Facility Documentation means the Second Lien Term Facility Credit Agreement and all security agreements, guarantees, pledge agreements and other agreements or instruments executed in connection therewith.
Second Lien Term Facility Lenders means the lenders from time to time party to the Second Lien Term Facility Credit Agreement.
Secured Cash Management Agreement means any agreement in respect of or in connection with Cash Management Obligations that is entered into by and between any Loan Party or Restricted Subsidiary and any Cash Management Bank.
Secured Hedge Agreement means any Swap Contract permitted under Section 9.3(f) that is either (a) provided to, or arranged for, any Loan Party or any Restricted Subsidiary by Wells Fargo and/or any of its respective Affiliates (or any assignee of any such Person) or (b) entered into by and between any Loan Party or any Restricted Subsidiary and any other Hedge Bank and, in the case of this clause (b), designated in writing by such Hedge Bank and the Borrower to, and acknowledged in writing by, the Administrative Agent as a Secured Hedge Agreement (such designation in writing by such Hedge Bank and the Borrower (or any subsequent written notice by such Hedge Bank to the Administrative Agent) may further designate any Obligations under such Secured Hedge Agreement as being Specified Secured Hedge Obligations as defined under this Agreement); provided that for the purposes of the Loan Documents in no circumstances shall any Excluded Swap Obligations constitute Obligations with respect to any Secured Hedge Agreement.
Secured Parties means, collectively, the Lenders, the Issuers, the Administrative Agent, each Hedge Bank, each Cash Management Bank and each co-agent or sub-agent (if any) appointed by the Administrative Agent from time to time pursuant to Section 11.5 .
Securities Account means all securities accounts of any Loan Party, including securities accounts within the meaning given to such term in Article 8 of the UCC.
Securities Account Control Agreement means an effective securities account control agreement with an Approved Securities Intermediary, in each case in form and substance reasonably satisfactory to the Administrative Agent.
Securities Act means the Securities Act of 1933, as amended.
Security means any Equity Interest, voting trust certificate, bond, debenture, note or other evidence of Indebtedness, whether secured, unsecured, convertible or subordinated, or any certificate of interest, share or participation in, any temporary or interim certificate for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing, but shall not include any evidence of the Obligations.
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Security Agreement means, collectively, the Security Agreement executed by the Loan Parties, substantially in the form of Exhibit I , together with each Security Agreement Supplement executed and delivered pursuant to Section 8.11 .
Security Agreement Supplement has the meaning specified in the Security Agreement.
Shrink Reserve means an amount reasonably estimated by the Administrative Agent to be equal to that amount which is required in order that the shrink reflected in current books and records of the Borrower and its Subsidiaries would be reasonably equivalent to the shrink calculated as part of the Borrowers most recent physical Inventory (it being understood and agreed that no Shrink Reserve established by the Administrative Agent shall be duplicative of any shrink as so reflected in the current books and records of the Borrower and its Subsidiaries or estimated by the Borrower for purposes of computing the Borrowing Base).
Solvent and Solvency mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the assets of such Person exceeds its debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of such Person is greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) such Person is able to pay its debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured and (d) such Person is not engaged in, and is not about to engage in, business for which it has unreasonably small capital. The amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.
SPC has the meaning specified in Section 12.2(g) .
Specified Event of Default means any Event of Default (a) of the type described in Section 10.1(a) , 10.1(b)(i)(A) , 10.1(b)(i)(B) , 10.1(b)(ii) , 10.1(b)(iii) , 10.1(c) (solely in respect of any breach of Section 8.12 ), 10.1(d) (with respect to any Borrowing Base Certificate) or, solely with respect to the Borrower, 10.1(f) .
Specified Payment means any Investment, incurrence of Indebtedness, Restricted Payment or payment made pursuant to Section 9.12 that in each case is subject to the satisfaction of the Payment Conditions or the RP Conditions.
Specified Secured Hedge Obligations means Obligations under any Secured Hedge Agreement which provides by its terms that such Obligations shall only be payable pursuant to Section 10.3 pursuant to clause Eleventh thereof. Any applicable Hedge Bank may designate or cancel such designation of Obligations under any applicable Secured Hedge Agreement as Specified Secured Hedge Obligations by delivering notice in writing to the Administrative Agent of such designation or cancellation of designation.
Specified Transaction means any Investment that results in a Person becoming a Restricted Subsidiary, any designation of a Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary, any Permitted Acquisition, any Disposition that results in a Restricted Subsidiary ceasing to be a Subsidiary of the Borrower, any Investment constituting an
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acquisition of assets constituting a business unit, line of business or division of another Person or a Store or any Disposition of a business unit, line of business or division or a Store of the Borrower or a Restricted Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise, or any incurrence or repayment of Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes), Restricted Payment or Incremental Loan that by the terms of this Agreement requires such test to be calculated on a Pro Forma Basis or after giving Pro Forma Effect.
Sponsor means collectively Leonard Green & Partners, L.P. and CVC Capital Partners Advisory (U.S.), Inc. (for so long as Leonard Green & Partners, L.P., CVC Capital Partners Advisory (U.S.), Inc. or any of its Affiliates retains control of the voting power thereof) and any of their respective Affiliates and funds or partnerships managed or advised by any of them or any of their respective Affiliates but not including, however, any portfolio company of any of the foregoing.
Sponsor Management Agreement means the management services agreement by and among Leonard Green & Partners, L.P. and CVC Capital Partners Advisory (U.S.), Inc. or certain of the management companies associated with either of them or their advisors and the Borrower, as the same may be amended, modified, supplemented or otherwise modified from time to time in accordance with its terms, but only to the extent that any such amendment, modification, supplement or other modification does not, directly or indirectly, increase the obligation of Holdings, the Borrower or any of its Restricted Subsidiaries to make any payments thereunder.
Sponsor Termination Fees means the one-time payment under the Sponsor Management Agreement of a termination fee to one or more of the Sponsors in the event of either a Change of Control or the completion of a Qualifying IPO.
Standby Letter of Credit means any Letter of Credit that is not a Documentary Letter of Credit.
Statutory Reserve Rate means, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by any Governmental Authority of the United States with respect to eurodollar fundings. Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Rate Loans shall be deemed to constitute eurodollar funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Store means any retail store or retail warehouse (which includes any real property, fixtures, equipment, Inventory and other property related thereto) operated, or to be operated, by the Borrower or any Restricted Subsidiary.
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Store Accounts means Deposit Accounts established for the purposes of receiving retail warehouse receipts from a retail warehouse location of a Loan Party.
Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity (excluding, for the avoidance of doubt, charitable foundations) of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of the Borrower.
Subsidiary Guarantor means any Guarantor other than Holdings.
Successor Borrower has the meaning specified in Section 9.4(d) .
Successor Holdings has the meaning specified in Section 9.4(e) .
Supermajority Amount has the meaning given to such term in the definition of Supermajority Lenders .
Supermajority Lenders means, collectively, Lenders having more than 66.67% of the aggregate of the Revolving Credit Commitments and the Outstanding Amount of the Term Loan or, after the Revolving Credit Termination Date, more than 66.67% of the aggregate of the Revolving Credit Outstandings and the Outstanding Amount of the Term Loans (in either case, such 66.67% amount being referred to as the Supermajority Amount ); provided that the unused Revolving Credit Commitment of, and the portion of the Loans and outstanding Letters of Credit Obligations held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Supermajority Lenders.
Swap Contract means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a Master Agreement ), including any such obligations or liabilities under any Master Agreement.
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Swap Obligation means, with respect to any Guarantor or Limited Guarantor, as applicable, any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the Commodity Exchange Act.
Swap Termination Value means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) , the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
Swing Loan has the meaning specified in Section 2.3(a) .
Swing Loan Lender means Wells Fargo in its capacity as the Swing Loan Lender hereunder.
Swing Loan Obligations means, as at any date of determination, the aggregate Outstanding Amount of all Swing Loans.
Swing Loan Request has the meaning specified in Section 2.3(b) .
Swing Loan Sublimit means the lesser of (a) $75,000,000 and (b) the aggregate principal amount of the Revolving Credit Commitments. The Swing Loan Sublimit is part of, and not in addition to, the Revolving Credit Commitments.
Taxes has the meaning specified in Section 3.1(a) .
Term Borrowing means a borrowing consisting of Term Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurocurrency Rate Loans, having the same Interest Period. All Term Borrowings shall be denominated in Dollars.
Term Borrowing Base means, at any time of calculation, an amount equal to:
(a) the face amount of Eligible Credit Card Receivables multiplied by the Term Credit Card Advance Rate; plus
(b) the face amount of Eligible Accounts multiplied by the Term Eligible Accounts Advance Rate; plus
(c) the Net Recovery Percentage of Eligible Inventory multiplied by the Term Inventory Advance Rate multiplied by the Cost of Eligible Inventory, net of Inventory Reserves attributable to Eligible Inventory; minus
(d) the then amount of all Availability Reserves taken in respect of the Term Borrowing Base.
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The Term Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the Administrative Agent pursuant to Section 7.4 , as adjusted to give effect to Reserves following such delivery; provided , that the establishment of, or change to, such Reserves shall not be effective until the date that the Administrative Agent has provided written notice to the Borrower of such establishment of, or change to, such Reserves; provided further that no such written notice shall be required for changes to any Reserves resulting solely by virtue of mathematical calculations of the amount of the Reserves in accordance with the methodology of calculation previously utilized (such as, but not limited to, rent, Customer Credit Liabilities and the Term Loan Reserve). The amount of any Reserve established by the Administrative Agent, and any change in the amount of any Reserve, shall have a reasonable relationship to the event, condition or other matter that is the basis for such Reserve or such change. Notwithstanding anything herein to the contrary, Reserves shall not duplicate eligibility criteria contained in the definition of Eligible Account, Eligible Credit Card Receivables, Eligible Inventory, Qualified Cash or any other Reserve then established.
Term Commitment means, as to each Term Lender, its obligation to make Term Loans on the Restatement Effective Date and to continue its Existing Term Loans under the Existing Credit Agreement to be Term Loans under this Agreement on the Restatement Effective Date in an aggregate principal amount not to exceed the amount set forth opposite such Term Lenders name on Schedule I under the caption Term Commitment .
Term Credit Card Advance Rate means 5%.
Term Eligible Accounts Advance Rate means 5%.
Term Extension Amendment has the meaning specified in Section 2.18(d) .
Term Extension Request has the meaning specified in Section 2.18(a) .
Term Extension Series has the meaning specified in Section 2.18(f) .
Term Facility means, at any time, (a) on the Restatement Effective Date, the aggregate amount of the Term Commitments at such time and (b) thereafter, the aggregate principal amount of the Term Loans of all Term Lenders outstanding at such time. As of the Restatement Effective Date, the amount of the Term Facility is $50,000,000.
Term Inventory Advance Rate means 5%.
Term Lender means (a) on the Restatement Effective Date, any Lender that has a Term Commitment and/or Existing Term Loan at such time and (b) at any time after the Restatement Effective Date, any Lender that holds Term Loans at such time.
Term Loan has the meaning specified in Section 2.1(b) .
Term Loan Reserve means a reserve established by the Administrative Agent equal to the amount by which the Outstanding Amount of the Term Loan exceeds the Term Borrowing Base.
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Term Loan Termination Date means the earliest of (a) the Scheduled Termination Date, (b) the prepayment of all Term Loans pursuant to Section 2.8 and (c) the date on which the Obligations become due and payable pursuant to Section 10.2 .
Term Note means a promissory note of the Borrower payable to the order of any Term Lender evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Term Loans of a given Class owing to such Lender.
Term Outstandings means, at any particular time, the principal amount of Term Loans outstanding at such time.
Test Period in effect at any time means either (x) the most recent period of four consecutive Fiscal Quarters or, as applicable, (y) the most recent period of twelve consecutive Fiscal Months of the Borrower ended on or prior to such time (taken as one accounting period). A Test Period may be designated by reference to the last day thereof (i.e., the January 28, 2012 Test Period refers to the period of four consecutive Fiscal Quarters or, as applicable, twelve consecutive Fiscal Months, of the Borrower ended January 28, 2012), and a Test Period shall be deemed to end on the last day thereof.
Total Assets means the total assets of the Borrower and the Restricted Subsidiaries on a Consolidated basis in accordance with GAAP, as shown on the most recent balance sheet of the Borrower delivered pursuant to Sections 7.1(a) or 7.1(b) .
Total Leverage Ratio means, with respect to any Test Period for which financial statements have been or are required to have been delivered pursuant to Section 7.1(a) or (b) , the ratio of (a) Consolidated Total Debt as of the last day of such Test Period to (b) Consolidated EBITDA of the Borrower for such Test Period.
Transaction means, collectively, (a) the execution and delivery of the First Lien Term Facility Credit Agreement and the Second Lien Term Facility Credit Agreement and the funding of the loans under each of the First Lien Term Facility and the Second Lien Term Facility on the Restatement Effective Date, (b) the execution and delivery of this Agreement and the funding of the Loans on the Restatement Effective Date, if any, (c) the repayment and cancellation of the Existing First Lien Term Facility Credit Agreement and the Existing Second Lien Term Facility Credit Agreement on the Restatement Effective Date, (d) the making of Restatement Effective Date Dividend; (e) the consummation of any other transactions in connection with the foregoing, and (f) the payment of the fees and expenses incurred in connection with any of the foregoing.
Transaction Expenses means any fees or expenses incurred or paid by Holdings or any of its Subsidiaries in connection with the Transaction, this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby.
Type means, with respect to a Loan, its character as a Base Rate Loan or a Eurocurrency Rate Loan.
UCC means the Uniform Commercial Code or any successor provision thereof as the same may from time to time be in effect in the State of New York or the Uniform Commercial
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Code or any successor provision thereof (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
United States and U.S . mean the United States of America.
Unrestricted Subsidiary means any Subsidiary of the Borrower designated by the board of directors of the Borrower as an Unrestricted Subsidiary pursuant to Section 8.3 subsequent to the Restatement Effective Date, in each case, until such Person ceases to be an Unrestricted Subsidiary of the Borrower in accordance with Section 8.3 or ceases to be a Subsidiary of the Borrower.
Unused Commitment Fee has the meaning specified in Section 2.12(a) .
Updated Inventory Appraisal has the meaning specified in Section 7.4 .
U.S. Lender has the meaning specified in Section 3.1 .
USA PATRIOT Act means The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)), as amended or modified from time to time.
Weekly Monitoring Event means (a) a Specified Event of Default has occurred and is continuing or (b) the Borrower has failed to maintain, for five (5) consecutive Business Days, Excess Availability of the greater of (i) $60,000,000 and (ii) 12.5% of the Maximum Credit; provided that a Weekly Monitoring Event shall be deemed continuing until the date on which, as applicable, in the case of the foregoing clause (a) , such Specified Event of Default is cured or waived in accordance with Section 12.1 , or, in the case of the foregoing clause (b) , Excess Availability has been greater than or equal to the greater of (i) $60,000,000 and (ii) 12.5% of the Maximum Credit, in each case under clauses (i) and (ii) , for at least thirty (30) consecutive days.
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (b) the then outstanding principal amount of such Indebtedness; provided , that for purposes of determining the Weighted Average Life to Maturity of any Indebtedness that is being modified, refinanced, refunded, renewed, replaced or extended (the Applicable Indebtedness ), the effects of any prepayments made on such Applicable Indebtedness prior to the date of the applicable modification, refinancing, refunding, renewal, replacement or extension shall be disregarded.
Wells Fargo means Wells Fargo Bank, National Association and its successors.
Wholly-Owned Subsidiary of a Person means a Subsidiary of such Person, all of the outstanding Equity Interests of which (other than (x) directors qualifying shares and (y) nominal
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shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more Wholly-Owned Subsidiaries of such Person.
Withdrawal Liability means the liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such term is defined in Part I of Subtitle E of Title IV of ERISA.
Write-Down and Conversion Powers means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
SECTION 1.2 Other Interpretive Provisions .
With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) (i) The words herein, hereto, hereof and hereunder and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.
(ii) References in this Agreement to an Exhibit, Schedule, Article, Section, clause or sub-clause refer (A) to the appropriate Exhibit or Schedule to, or Article, Section, clause or sub-clause in this Agreement or (B) to the extent such references are not present in this Agreement, to the Loan Document in which such reference appears,
(iii) The term including is by way of example and not limitation, subject, in the case of computations of time periods, to clause (d) below,
(iv) The term documents includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, and
(v) Unless otherwise expressly indicated herein, the words above and below, when following a reference to a clause or a sub-clause of any Loan Document, refer to a clause or sub-clause within, respectively, the same Section or clause.
(c) The terms Lender, Issuer and Administrative Agent include, without limitation, their respective successors.
(d) In the computation of periods of time from a specified date to a later specified date, the word from means from and including, the words to and until each mean to but excluding and the word through means to and including.
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(e) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
SECTION 1.3 Accounting Terms .
All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, except as otherwise specifically prescribed herein.
SECTION 1.4 Rounding .
Any financial ratios required to be satisfied in order for a specific action to be permitted under this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
SECTION 1.5 [ Reserved ] .
SECTION 1.6 References to Agreements, Laws, Etc.
Unless otherwise expressly provided herein, (a) references to Constituent Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all appendices, exhibits and schedules thereto and all subsequent amendments, restatements, extensions, supplements and other modifications thereto (but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted by any Loan Document); and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.
SECTION 1.7 Times of Day .
Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
SECTION 1.8 Pro Forma Calculations .
(a) Notwithstanding anything to the contrary herein, the Total Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated in the manner prescribed by this Section 1.8 ; provided that, notwithstanding anything to the contrary in this Section 1.8 , when calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio for purposes of determining actual compliance (and not compliance on a Pro Forma Basis) with Section 6.1 , the events described in this Section 1.8 that occurred subsequent to the end of the applicable Test Period shall not be given pro forma effect.
(b) For purposes of calculating the Total Leverage Ratio and the Fixed Charge Coverage Ratio, Specified Transactions (and the incurrence or repayment of any Indebtedness in
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connection therewith) that have been made (i) during the applicable Test Period or (ii) subsequent to such Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made shall be calculated on a pro forma basis assuming that all such Specified Transactions (and any increase or decrease in Consolidated EBITDA and the component financial definitions used therein attributable to any Specified Transaction) had occurred on the first day of the applicable Test Period (with respect to the calculation of the Fixed Charge Coverage Ratio) or the last day of the applicable Test Period (with respect to calculation of the Total Leverage Ratio), as applicable. If since the beginning of any applicable Test Period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any of its Restricted Subsidiaries since the beginning of such Test Period shall have made any Specified Transaction that would have required adjustment pursuant to this Section 1.8 , then the Total Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated to give pro forma effect thereto in accordance with this Section 1.8 .
(c) In the event that the Borrower or any Restricted Subsidiary incurs (including by assumption or guarantees) or repays (including by redemption, repayment, retirement or extinguishment) any Indebtedness included in the calculations of the Total Leverage Ratio and the Fixed Charge Coverage Ratio, as the case may be (in each case, other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes), (i) during the applicable Test Period or (ii) subsequent to the end of the applicable Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made, then the Total Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence or repayment of Indebtedness, to the extent required, as if the same had occurred on the last day of the applicable Test Period (with respect to calculation of the Total Leverage Ratio) or the first day of the applicable Test Period (with respect to the calculation of the Fixed Charge Coverage Ratio), as applicable.
(d) Whenever pro forma effect is to be given to a Specified Transaction, the pro forma calculations shall be made in good faith by a Responsible Officer of the Borrower and may include, for the avoidance of doubt, the amount of cost savings and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken, committed to be taken or expected to be taken (calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of such period and as if such cost savings and synergies were realized during the entirety of such period) relating to such Specified Transaction, net of the amount of actual benefits realized during such period from such actions; provided , that (A) such amounts are reasonably identifiable, quantifiable and factually supportable in the good faith judgment of the Borrower, (B) such actions are taken, committed to be taken or reasonably expected to be taken no later than twelve (12) months after the date of such Specified Transaction, (C) no amounts shall be added pursuant to this clause (d) to the extent duplicative of any amounts that are otherwise added back in computing Consolidated EBITDA, whether through a pro forma adjustment or otherwise, with respect to such period, (D) such cost savings and synergies are reasonably acceptable to the Administrative Agent and (E) the aggregate amount of cost savings and synergies added pursuant to this clause (d) for any such period after the Effective Date shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (giving pro forma effect to the relevant Specified Transaction (but not to any cost savings or synergies)).
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(e) If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of the event for which the calculation of the Fixed Charge Coverage Ratio is made had been the applicable rate for the entire period (taking into account any hedging obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurodollar interbank offered rate, or other rate, shall be determined to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Company may designate.
SECTION 1.9 Currency Equivalents Generally .
(a) For purposes of determining compliance with Sections 9.1 , 9.2 and 9.3 with respect to any amount of Indebtedness or Investment in a currency other than Dollars, no Default shall be deemed to have occurred solely as a result of changes in rates of currency exchange occurring after the time such Indebtedness or Investment is incurred (so long as such Indebtedness or Investment, at the time incurred, made or acquired, was permitted hereunder).
(b) For purposes of determining the Total Leverage Ratio and the Fixed Charge Coverage Ratio, amounts denominated in a currency other than Dollars will be converted to Dollars at the currency exchange rates used in preparing the Borrowers financial statements corresponding to the Test Period with respect to the applicable date of determination and will, in the case of Indebtedness, reflect the currency translation effects, determined in accordance with GAAP, of Swap Contracts permitted hereunder for currency exchange risks with respect to the applicable currency in effect on the date of determination of the Dollar equivalent of such Indebtedness.
ARTICLE II
THE FACILITY
SECTION 2.1 The Commitments .
(a) The Revolving Credit Commitments .
(i) On the terms and subject to the conditions contained in this Agreement, each Revolving Credit Lender severally agrees to make loans in Dollars (each, a Revolving Loan ) to the Borrower from time to time on any Business Day during the period from the Restatement Effective Date until the Revolving Credit Termination Date in an aggregate principal amount at any time outstanding for all such loans by such Revolving Credit Lender not to exceed such Lenders Revolving Credit Commitment; provided, however , that at no time shall (A) any Revolving Credit Lender be obligated to make a Revolving Loan in excess of such Revolving Credit Lenders Ratable Portion of the Maximum Revolving Credit and (B) the amount of the Revolving Credit Outstandings plus the Term Outstandings exceed the Maximum Credit. Within the limits
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of the Revolving Credit Commitment of each Lender, amounts of Loans repaid may be reborrowed under this Section 2.1(a)(i) . All Existing Revolving Loans shall be deemed to have been made pursuant hereto, and from and after the Restatement Effective Date, all Existing Revolving Loans shall continue as Revolving Loans hereunder.
(ii) Subject to the limitations set forth below (and notwithstanding anything to the contrary in Section 4.2 ), the Administrative Agent is authorized by the Borrower and the Lenders, from time to time in the Administrative Agents sole discretion (but shall have absolutely no obligation), to make Revolving Loans to the Borrower, on behalf of all Lenders at any time that any condition precedent set forth in Section 4.2 has not been satisfied or waived, which the Administrative Agent, in its Permitted Discretion, deems necessary or desirable for the purposes specified in the definition of Protective Advances. Any Protective Advance may be made in a principal amount that would cause the aggregate Revolving Credit Exposure to exceed the Borrowing Base; provided that the aggregate amount of outstanding Protective Advances plus the aggregate of all other Revolving Credit Exposure shall not exceed the Aggregate Revolving Credit Commitments. Protective Advances may be made even if the conditions precedent set forth in Section 4.2 have not been satisfied or waived. Each Protective Advance shall be secured by the Liens in favor of the Administrative Agent in and to the Collateral and shall constitute Obligations hereunder. The Administrative Agents authorization to make Protective Advances may be revoked at any time by the Requisite Lenders. Any such revocation must be in writing and shall become effective prospectively upon the Administrative Agents receipt thereof. The making of a Protective Advance on any one occasion shall not obligate the Administrative Agent to make any Protective Advance on any other occasion. At any time that the conditions precedent set forth in Section 4.2 have been satisfied or waived, the Administrative Agent may request the Lenders to make a Revolving Loan to repay a Protective Advance. At any other time, the Administrative Agent may require the Lenders to fund their risk participations described in Section 2.1(a)(iii) .
(iii) Upon the making of a Protective Advance by the Administrative Agent (whether before or after the occurrence of a Default), each Revolving Credit Lender shall be deemed, without further action by any party hereto, unconditionally and irrevocably to have purchased from the Administrative Agent without recourse or warranty, an undivided interest and participation in such Protective Advance in proportion to its Applicable Percentage. From and after the date, if any, on which any Revolving Credit Lender is required to fund its participation in any Protective Advance purchased hereunder, the Administrative Agent shall promptly distribute to such Revolving Credit Lender, such Revolving Credit Lenders Applicable Percentage of all payments of principal and interest and all proceeds of Collateral received by the Administrative Agent in respect of such Protective Advance.
(b) The Term Commitment; Existing Term Loans . On the terms and subject to the conditions contained in this Agreement, the Existing Term Loans shall be deemed to have been made pursuant hereto and, from and after the Restatement Effective Date, continue as a single loan made by each Term Lender denominated in Dollars (each, a Term Loan ) to the Borrower in an amount equal to such Term Lenders Term Commitment; provided, however , that at no
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time shall the sum of the amount of the Revolving Credit Outstandings plus the Term Outstandings exceed the Maximum Credit. The Term Borrowing on the Restatement Effective Date shall consist of Term Loans made simultaneously by the Term Lenders in accordance with their respective Term Commitment. Amounts borrowed under this Section 2.1(b) and repaid or prepaid may not be reborrowed.
SECTION 2.2 Borrowing Procedures .
(a) Each Borrowing shall be made on notice given by the Borrower to the Administrative Agent not later than (i) 11:00 a.m. on the same Business Day, in the case of a Borrowing of Base Rate Loans, or (ii) 12:00 noon three (3) Business Days, in the case of a Borrowing of Eurocurrency Rate Loans, in each case prior to the date of the proposed Borrowing. Each such notice shall be in substantially the form of Exhibit C (a Notice of Borrowing ), specifying (A) the date of such proposed Borrowing, which shall be a Business Day, (B) the aggregate amount of such proposed Borrowing, (C) whether any portion of the proposed Borrowing will be of Base Rate Loans or Eurocurrency Rate Loans, (D) the initial Interest Period or Interest Periods for any Eurocurrency Rate Loans, (E) the Class of such proposed Borrowing, and (F) with respect to any Borrowing the proceeds of which will be used to fund a Restricted Payment subject to the satisfaction of the RP Conditions, an additional solvency representation and warranty of the Borrower and its Subsidiaries (taken as a whole) after giving effect to such Borrowing and the use of proceeds thereof. The Loans shall be made as Base Rate Loans, unless, subject to Section 2.14 , the Notice of Borrowing specifies that all or a portion thereof shall be Eurocurrency Rate Loans. Each Borrowing shall be in an aggregate amount of not less than $500,000 or an integral multiple of $100,000 in excess thereof.
(b) The Administrative Agent shall give to each Appropriate Lender prompt notice of the Administrative Agents receipt of a Notice of Borrowing, and, if Eurocurrency Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate determined pursuant to Section 2.14(a) . Each Lender shall, before 1:00 p.m. on the date of the proposed Borrowing, make available to the Administrative Agent at its address referred to in Section 12.8 , in Same Day Funds, such Lenders Ratable Portion of such proposed Borrowing. Upon fulfillment (or due waiver in accordance with Section 12.1) (i) on the Restatement Effective Date, of the applicable conditions set forth in Section 4.1 and (ii) at any time (including the Restatement Effective Date), of the applicable conditions set forth in Section 4.2 , and, subject to clause (c) below, after the Administrative Agents receipt of such funds, the Administrative Agent shall make such funds available to the Borrower as promptly as reasonably practicable.
(c) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lenders Ratable Portion of such Borrowing (or any portion thereof), the Administrative Agent may assume that such Lender has made such Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is
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made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate for the first Business Day and thereafter at the interest rate applicable at the time to the Loans comprising such Borrowing. If such Lender shall repay to the Administrative Agent such corresponding amount, such corresponding amount so repaid shall constitute such Lenders Loan as part of such Borrowing for purposes of this Agreement. If the Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have hereunder to the Borrower.
(d) The failure of any Defaulting Lender to make on the date specified any Loan or any payment required by it, including any payment in respect of its participation in Swing Loans and Letter of Credit Obligations, shall not relieve any other Lender of its obligations to make such Loan or payment on such date but, except to the extent otherwise provided herein, no such other Lender shall be responsible for the failure of any Defaulting Lender to make a Loan or payment required under this Agreement.
(e) After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than ten (10) Interest Periods in effect unless otherwise agreed between the Borrower and the Administrative Agent; provided that after the establishment of any new Class of Loans pursuant to a Revolving Extension Amendment and/or a Term Extension Amendment, the number of Interest Periods otherwise permitted by this Section 2.2(e) shall increase by three (3) Interest Periods for each applicable Class so established.
SECTION 2.3 Swing Loans .
(a) On the terms and subject to the conditions contained in this Agreement, the Swing Loan Lender shall make loans (each, a Swing Loan ) otherwise available to the Borrower under the Revolving Credit Facility from time to time on any Business Day during the period from the Restatement Effective Date until the Revolving Credit Termination Date in an aggregate principal amount at any time outstanding (together with the aggregate outstanding principal amount of any other Loan made by the Swing Loan Lender hereunder in its capacity as the Swing Loan Lender) not to exceed the Swing Loan Sublimit; provided , however , that at no time shall (A) the Swing Loan Lender make any Swing Loan to the extent that, after giving effect to such Swing Loan, the aggregate Revolving Credit Outstandings would exceed the Maximum Revolving Credit or (B) the amount of the Revolving Credit Outstandings (after giving effect to such Swing Loan) plus the Term Outstandings exceed the Maximum Credit; provided further that in the event that the Swing Loan Lender and the Administrative Agent are not the same Person, then the Swing Loan Lender shall only make a Swing Loan after having given prior notice thereof to the Administrative Agent; provided further that the Swing Loan Lender shall not be required to make any Swing Loan to the extent that such Swing Loan Lender reasonably believes that any Revolving Credit Lender is a Defaulting Lender, unless after giving effect to the requested Swing Loans, there would exist no Fronting Exposure (in the good faith determination of the Swing Loan Lender). Each Swing Loan shall be a Base Rate Loan and must be repaid in full within seven (7) days after its making or, if sooner, upon any Borrowing hereunder and shall in any event mature no later than the Revolving Credit Termination Date
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(without giving effect to any extensions of the type referred to in the proviso to Section 12.1(b) hereof). Within the limits set forth in the first sentence of this clause (a) , amounts of Swing Loans repaid may be reborrowed under this clause (a) .
(b) In order to request a Swing Loan, the Borrower shall telecopy (or forward by electronic mail or similar means) to the Administrative Agent a duly completed request in substantially the form of Exhibit D , setting forth the requested amount and date of such Swing Loan (a Swing Loan Request ), to be received by the Administrative Agent not later than 1:00 p.m. on the day of the proposed borrowing. The Administrative Agent shall promptly notify the Swing Loan Lender of the details of the requested Swing Loan. Subject to the terms of this Agreement, the Swing Loan Lender shall make a Swing Loan available to the Administrative Agent and, in turn, the Administrative Agent shall make such amounts available to the Borrower as promptly as reasonably practicable on the date set forth in the relevant Swing Loan Request. The Swing Loan Lender shall not make any Swing Loan (other than a Protective Advance) in the period commencing on the first Business Day after it receives written notice from the Administrative Agent or any Lender that one or more of the conditions precedent contained in Section 4.2 shall not on such date be satisfied, and ending when such conditions are satisfied. The Swing Loan Lender shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 4.2 have been satisfied in connection with the making of any Swing Loan.
(c) The Swing Loan Lender may demand at any time that each Revolving Credit Lender pay to the Administrative Agent, for the account of the Swing Loan Lender, in the manner provided in clause (d) below, such Revolving Credit Lenders Ratable Portion of all or a portion of the outstanding Swing Loans, which demand shall be made through the Administrative Agent, shall be in writing and shall specify the outstanding principal amount of Swing Loans demanded to be paid.
(d) The Administrative Agent shall forward each demand referred to in clause (c) above to each Revolving Credit Lender on the day such notice or such demand is received by the Administrative Agent (except that any such notice or demand received by the Administrative Agent after 2:00 p.m. on any Business Day or any such notice or demand received on a day that is not a Business Day shall not be required to be forwarded to the Revolving Credit Lenders by the Administrative Agent until the next succeeding Business Day), together with a statement prepared by the Administrative Agent specifying the amount of each Revolving Credit Lenders Ratable Portion of the aggregate principal amount of the Swing Loans stated to be outstanding in such notice or demanded to be paid pursuant to such demand, and, notwithstanding whether or not the conditions precedent set forth in Sections 4.2 and 2.1 shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive), each Revolving Credit Lender shall, before 11:00 a.m. on the Business Day next succeeding the date of such Lenders receipt of such notice or demand, make available to the Administrative Agent, in Same Day Funds, for the account of the Swing Loan Lender, the amount specified in such statement. Upon such payment by a Revolving Credit Lender, such Revolving Credit Lender shall, except as provided in clause (e) below, be deemed to have made a Revolving Loan to the Borrower in the amount of such payment. The Administrative Agent shall use such funds to repay the Swing Loans to the Swing Loan Lender.
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(e) Upon the occurrence of a Default under Section 10.1(f) , each Revolving Credit Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Loan otherwise required to be repaid by such Revolving Credit Lender pursuant to clause (d) above, which participation shall be in a principal amount equal to such Revolving Credit Lenders Ratable Portion of such Swing Loan, by paying to the Swing Loan Lender on the date on which such Revolving Credit Lender would otherwise have been required to make a payment in respect of such Swing Loan pursuant to clause (d) above, in Same Day Funds, an amount equal to such Revolving Credit Lenders Ratable Portion of such Swing Loan. If all or part of such amount is not in fact made available by such Revolving Credit Lender to the Swing Loan Lender on such date, the Swing Loan Lender shall be entitled to recover any such unpaid amount on demand from such Revolving Credit Lender together with interest accrued from such date at the Federal Funds Rate for the first Business Day after such payment was due and thereafter at the rate of interest then applicable to Base Rate Loans.
(f) From and after the date on which any Revolving Credit Lender (i) is deemed to have made a Revolving Loan pursuant to clause (d) above with respect to any Swing Loan or (ii) purchases an undivided participation interest in a Swing Loan pursuant to clause (e) above, the Swing Loan Lender shall promptly distribute to such Lender such Lenders Ratable Portion of all payments of principal and interest received by the Swing Loan Lender on account of such Swing Loan other than those received from a Lender pursuant to clause (d) or (e) above.
SECTION 2.4 Letters of Credit .
(a) On the terms and subject to the conditions contained herein, the Borrower may request that one or more Issuers Issue, each Issuer agrees to issue, in accordance with such Issuers usual and customary business practices and for the account of the Borrower or a Restricted Subsidiary ( provided that any Letter of Credit issued for the benefit of any Restricted Subsidiary that is not the Borrower shall be issued naming the Borrower as the account party on any such Letter of Credit but such Letter of Credit may contain a statement that it is being issued for the benefit of such Restricted Subsidiary), Letters of Credit (denominated in Dollars) from time to time on any Business Day during the period commencing on the Restatement Effective Date and ending on the earlier of the Revolving Credit Termination Date and five (5) Business Days prior to the Scheduled Termination Date (or, if such day is not a Business Day, the next preceding Business Day), or such later date as agreed to by the Administrative Agent and the Issuers, in their sole discretion; provided , however , that no Issuer shall be under any obligation to Issue (and, upon the occurrence of any of the events described in clauses (ii) , (iii) , (iv) and (v)(A) below, shall not Issue) any Letter of Credit upon the occurrence of any of the following:
(i) any order, judgment or decree of any Governmental Authority or arbitrator having binding powers shall purport by its terms to enjoin or restrain such Issuer from Issuing such Letter of Credit or any Law applicable to such Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuer shall prohibit, or request that such Issuer refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuer is not otherwise compensated) not in effect on the Effective Date or result in any unreimbursed loss, cost or expense that was not applicable,
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in effect or known to such Issuer as of the Effective Date and that such Issuer in good faith deems material to it (for which such Issuer is not otherwise compensated);
(ii) such Issuer shall have received any written notice of the type described in clause (d) below;
(iii) after giving effect to the Issuance of such Letter of Credit, (A) the aggregate Revolving Credit Outstandings would exceed the Maximum Credit at such time, (B) the Revolving Credit Outstandings of any Lender would exceed such Lenders Revolving Credit Commitment, (C) the Letter of Credit Obligations would exceed $300,000,000 (the L /C Sublimit ) or (D) the amount of the Revolving Credit Outstandings plus the Term Outstandings would exceed the Maximum Credit;
(iv) such Letter of Credit is requested to be denominated in any currency other than Dollars;
(v) (A) any fees due in connection with a requested Issuance have not been paid, (B) such Letter of Credit is requested to be Issued in a form that is not acceptable to such Issuer or (C) the Issuer for such Letter of Credit shall not have received, in form and substance reasonably acceptable to it and, if applicable, duly executed by the Borrower, applications, agreements and other documentation (collectively, a Letter of Credit Reimbursement Agreement ) such Issuer generally employs in the ordinary course of its business for the Issuance of letters of credit of the type of such Letter of Credit;
(vi) any Lender is at that time a Defaulting Lender, unless (i) after giving effect to the requested Issuance, there would exist no Fronting Exposure (in the good faith determination of the applicable Issuer) or (ii) the applicable Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the applicable Issuer (in its good faith determination) with the Borrower or such Lender to eliminate such Issuers actual or potential Fronting Exposure (after giving effect to Section 2.16(a)(iv) ) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or any other Letter of Credit Obligations as to which such Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.
None of the Lenders (other than the Issuers in their capacity as such) shall have any obligation to Issue any Letter of Credit. Any Letter of Credit which has been or deemed Issued hereunder may be amended at any time to reduce the amount outstanding thereunder.
(b) In no event shall the expiration date of any Letter of Credit occur (i) on any day other than a Business Day, (ii) more than one (1) year after the date of issuance thereof, provided , however , that any Letter of Credit with a term less than or equal to one (1) year may provide for the renewal thereof for additional periods less than or equal to one (1) year, as long as, (x) on or before the expiration of each such term and each such period, the Borrower and the Issuer of such Letter of Credit shall have the option to prevent such renewal and (y) neither such Issuer nor the Borrower shall permit any such renewal to extend such expiration date beyond the date set forth in clause (iii) below (subject the exception contained therein) or (iii) later than five (5) Business Days prior to the Scheduled Termination Date unless the Borrower agrees to and
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delivers to the applicable Issuer on or prior to the date that occurs five (5) Business Days prior to the Scheduled Termination Date a letter of credit or letters of credit in form and substance reasonably acceptable to the Administrative Agent and the applicable Issuer issued by a bank acceptable to the Administrative Agent and the applicable Issuer, in each case in their sole discretion, and/or Cash Collateral in an amount equal to 101% of the maximum drawable amount of any such Letter of Credit.
(c) In connection with the Issuance of each Letter of Credit, the Borrower shall give the relevant Issuer and the Administrative Agent at least two (2) Business Days prior written notice, in substantially the form of Exhibit E (or in such other written or electronic form as is acceptable to such Issuer), of the requested Issuance of such Letter of Credit (a Letter of Credit Request ). Such notice shall specify the Issuer of such Letter of Credit, the face amount of the Letter of Credit requested, the date on which such Letter of Credit is to expire (which date shall be a Business Day) and, in the case of an Issuance, the Person for whose benefit the requested Letter of Credit is to be Issued. Such notice, to be effective, must be received by the relevant Issuer and the Administrative Agent not later than 2:00 p.m. on the last Business Day on which such notice can be given under the first sentence of this clause (c) ; provided that the relevant Issuer and the Administrative Agent may agree in a particular instance in their sole discretion to a later time and date.
(d) Subject to the satisfaction of the conditions set forth in this Section 2.4 , the relevant Issuer shall, on the requested date, Issue a Letter of Credit on behalf of the Borrower in accordance with such Issuers usual and customary business practices. No Issuer shall Issue any Letter of Credit in the period commencing on the first Business Day after it receives written notice from the Administrative Agent that one or more of the conditions precedent contained in Section 4.2 or clause (a ) above (other than those conditions set forth in clauses (a)(i) , (a)(v)(B) and (C) above and, to the extent such clause relates to fees owing to the Issuer of such Letter of Credit and its Affiliates , clause (a)(v)(A) above) are not on such date satisfied or duly waived and ending when such conditions are satisfied or duly waived. No Issuer shall otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 4.2 have been satisfied in connection with the Issuance of any Letter of Credit.
(e) The Borrower agrees that, if requested by the Issuer of any Letter of Credit prior to the issuance of a Letter of Credit, it shall execute a Letter of Credit Reimbursement Agreement in respect to any Letter of Credit Issued hereunder. In the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall govern.
(f) Each Issuer shall comply with the following:
(i) give the Administrative Agent written notice (or telephonic notice confirmed promptly thereafter in writing), which writing may be a telecopy or electronic mail, of the Issuance of any Letter of Credit Issued by it, all drawings under any Letter of Credit Issued by it and of the payment (or the failure to pay when due) by the Borrower of any Reimbursement Obligation when due (which notice shall contain a reasonably detailed description of such Issuance, drawing or payment, and shall be transmitted by
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telecopy, electronic mail or similar transmission by the Administrative Agent to each Revolving Credit Lender);
(ii) upon the request of the Administrative Agent or any Lender, furnish to the Administrative Agent or such Lender copies of any Letter of Credit Reimbursement Agreement to which such Issuer is a party and such other documentation as may reasonably be requested by the Administrative Agent or such Lender; and
(iii) on the first Business Day of each calendar week, provide to the Administrative Agent (and the Administrative Agent shall provide a copy to each Revolving Credit Lender requesting the same) and the Borrower separate schedules for Documentary Letters of Credit and Standby Letters of Credit issued by it, in form and substance reasonably satisfactory to the Administrative Agent, setting forth the aggregate Letter of Credit Obligations outstanding at the end of the immediately preceding week, and any information requested by the Borrower or the Administrative Agent relating thereto.
(g) Immediately upon the issuance by an Issuer of a Letter of Credit in accordance with the terms and conditions of this Agreement, such Issuer shall be deemed to have sold and transferred to each Revolving Credit Lender, and each Revolving Credit Lender shall be deemed irrevocably and unconditionally to have purchased and received from such Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Revolving Credit Lenders Ratable Portion, in such Letter of Credit and the obligations of the Borrower with respect thereto (including all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty pertaining thereto.
(h) The Borrower agrees to pay to the Issuer of any Letter of Credit, and, to the extent so financed, all Reimbursement Obligations owing to such Issuer under any Letter of Credit issued for its account no later than (x) on the same Business Day that the Borrower receives written notice from such Issuer that payment has been made under such Letter of Credit in accordance with its terms if such notice is received by the Borrower by 11:00 a.m. and (y) on the next succeeding Business Day after which the Borrower receives written notice from such Issuer that payment has been made under such Letter of Credit in accordance with its terms if such notice is received by the Borrower after 11:00 a.m. (such date described in clause (x) or (y) above, the Reimbursement Date ), irrespective of any claim, set-off, defense or other right that the Borrower may have at any time against such Issuer or any other Person. In the event that any Issuer makes any payment under any Letter of Credit in accordance with its terms and the Borrower shall not have repaid such amount to such Issuer pursuant to this clause (h) (directly or by application of the deemed Loans described below in this clause (h ) or by virtue of the penultimate sentence of this clause (h) ) or any such payment by the Borrower is rescinded or set aside for any reason, such Reimbursement Obligation shall be payable on demand with interest thereon computed (i) from the date on which such Reimbursement Obligation arose to the Reimbursement Date, at the rate of interest applicable during such period to Base Rate Loans and (ii) from the Reimbursement Date until the date of repayment in full, at the rate of interest applicable during such period to past due Loans that are Base Rate Loans, and such Issuer shall promptly notify the Administrative Agent, which shall promptly notify each Revolving Credit Lender of such failure, and each Revolving Credit Lender shall promptly and unconditionally
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pay to the Administrative Agent for the account of such Issuer the amount of such Revolving Credit Lenders Ratable Portion of such payment in Same Day Funds. If the Administrative Agent so notifies such Revolving Credit Lender prior to 11:00 a.m. on any Business Day, such Revolving Credit Lender shall make available to the Administrative Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in Same Day Funds. Upon such payment by a Revolving Credit Lender, such Lender shall, except during the continuance of a Default or Event of Default under Section 10.1(f) and notwithstanding whether or not the conditions precedent set forth in Section 4.2 shall have been satisfied (which conditions precedent the Revolving Credit Lenders hereby irrevocably waive), be deemed to have made a Revolving Loan to the Borrower in the principal amount of such payment, provided that any such payment that is not deemed a Revolving Loan shall be deemed a funding by such Revolving Credit Lender of its participation in the applicable Letter of Credit and the Letter of Credit Obligation in respect of the related Reimbursement Obligations. Whenever any Issuer receives from the Borrower a payment of a Reimbursement Obligation as to which the Administrative Agent has received for the account of such Issuer any payment from a Revolving Credit Lender pursuant to this clause (h) , such Issuer shall pay over to the Administrative Agent any amount received in excess of such Reimbursement Obligation and, upon receipt of such amount, the Administrative Agent shall promptly pay over to each Revolving Credit Lender, in Same Day Funds, an amount equal to such Revolving Credit Lenders Ratable Portion of the amount of such payment adjusted, if necessary, to reflect the respective amounts the Revolving Credit Lender have paid in respect of such Reimbursement Obligation. (A) In the absence of written notice to the contrary from the Borrower, and subject to the other provisions of this Agreement (but without regard to the conditions to borrowing set forth in Section 4.2) , Reimbursement Obligations shall be financed when due with Swing Loans or Base Rate Loans, in each case to the Borrower and, to the extent so financed, the Borrowers obligation to make such payment shall be discharged and replaced by the resulting Base Rate Loan or Swing Loan, as the case may be, and (B) in the event that the Borrower has notified the Administrative Agent that it will not so finance any such payments, the Borrower will make payment directly to the applicable Issuer when due. The Administrative Agent shall promptly remit the proceeds from any Revolving Loans or Swing Loans made pursuant to clause (A) above in reimbursement of a draw under a Letter of Credit to the applicable Issuer.
(i) Each Defaulting Lender that is a Revolving Credit Lender agrees to pay to the Administrative Agent for the account of such Issuer forthwith on demand any such unpaid amount together with interest thereon, for the first Business Day after payment was first due at the Federal Funds Rate and, thereafter, until such amount is repaid to the Administrative Agent for the account of such Issuer, at a rate per annum equal to the rate applicable to Base Rate Loans under the Revolving Credit Facility.
(j) The Borrowers obligations to pay each Reimbursement Obligation and the obligations of the Revolving Credit Lenders to make payments to the Administrative Agent for the account of the Issuers with respect to Letters of Credit shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, including the occurrence of any Default or Event of Default, and irrespective of any of the following:
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(i) any lack of validity or enforceability of any Letter of Credit, any document transferring or purporting to transfer a Letter of Credit, or any Loan Document (including the sufficiency of any such instrument), or any term or provision therein or any modification to any provision of any of the foregoing;
(ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, set-off, abatement, recoupment, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, any Issuer, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction or the existence of any other withholding, abatement or reduction;
(iv) any draft or other document presented under a Letter of Credit being forged, fraudulent, invalid, insufficient or inaccurate in any respect;
(v) any loss or delay, including in the transmission of any document;
(vi) payment by the Issuer under a Letter of Credit against presentation of a draft or other document that does not strictly comply, but that does substantially comply, with the terms of such Letter of Credit;
(vii) in the case of the obligations of any Revolving Credit Lender, any adverse change in the condition (financial or otherwise) of any Loan Party; and
(viii) any other act or omission to act or delay of any kind of any Issuer, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.4 , constitute a legal or equitable discharge of the Borrowers or the Revolving Credit Lenders obligations hereunder.
Any action taken or omitted to be taken by the relevant Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not result in any liability of such Issuer to the Borrower or any Revolving Credit Lender. In determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof, the Issuers may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit, the Issuers may rely exclusively on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect
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whatsoever, and any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute willful misconduct or gross negligence of the applicable Issuer.
(k) Applicability of ISP and UCP . Unless otherwise expressly agreed by the relevant Issuer and the Borrower when a Letter of Credit is issued, (i) the rules of the ISP shall apply to each Standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance, shall apply to each Documentary Letter of Credit.
(l) Existing Letters of Credit . All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Restatement Effective Date shall be subject to and governed by the terms and conditions hereof.
(m) Bankers Acceptances. The Administrative Agent, the Lenders, the Issuers and the Loan Parties hereby acknowledge and agree that (a) each Issuer may from time to time in its discretion issue bankers acceptances, bank guaranties, time deposits and similar instruments (collectively, Bankers Acceptances ) for the account or benefit of the Borrower or any Subsidiary in connection with Documentary Letters of Credit issued under the Credit Agreement and (b) all such Bankers Acceptances shall be treated as Documentary Letters of Credit for all purposes of the Credit Agreement and shall constitute Obligations secured by all Collateral.
SECTION 2.5 Reduction and Termination of the Revolving Credit Commitments .
The Borrower may, upon at least three (3) Business Days prior notice to the Administrative Agent, terminate in whole or reduce in part ratably the unused portions of any Class of Revolving Credit Commitments of the Lenders without premium or penalty other than any amount required to be paid by the Borrower pursuant to Section 3.5; provided , however , that each partial reduction shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $500,000 in excess thereof; provided , further , that no reduction or termination of Revolving Credit Commitments having a later maturity shall be permitted on a greater than pro rata basis with commitments having an earlier maturity. Notwithstanding the foregoing, the Borrower may rescind or postpone any notice of termination of the Revolving Credit Commitments if such termination would have resulted from a refinancing of all of the Revolving Credit Facility, which refinancing shall not be consummated or otherwise shall be delayed.
SECTION 2.6 Repayment of Loans .
(a) Revolving Loans . The Borrower promises to repay to the Administrative Agent for the ratable account of each Appropriate Lender under the Revolving Credit Facility the aggregate unpaid principal amount of all Revolving Loans (including any Letter of Credit Borrowings and Swing Loans) of such Lenders on the applicable Revolving Credit Termination Date or earlier, if otherwise required by the terms hereof.
(b) Term Loans . The Borrower promises to repay to the Administrative Agent for the ratable account of each Appropriate Lender under the Term Facility the aggregate unpaid principal amount of all Term Loans of such Lenders on the applicable Term Loan Termination Date or earlier, if otherwise required by the terms hereof.
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SECTION 2.7 Evidence of Indebtedness .
(a) The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the Borrower, in each case in the ordinary course of business. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
(b) The entries made in the Register and in the accounts therein maintained pursuant to clause (a) and Section 12.2 hereof shall, to the extent permitted by applicable law, be prima facie evidence (absent manifest error) (or, in the case of entries made by the Administrative Agent, conclusive evidence (absent manifest error)) of the existence and amounts of the obligations recorded therein; provided , however , that the failure of any Lender or the Administrative Agent to maintain such accounts, the Register or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.
(c) Notwithstanding any other provision of the Agreement, in the event that any Lender requests that the Borrower execute and deliver a promissory note or notes payable to such Lender in order to evidence the Indebtedness owing to such Lender by the Borrower hereunder, the Borrower shall promptly execute and deliver a Note or Notes to such Lender evidencing the Loans of such Lender, substantially in the form of Exhibit B - 1 , in the case of Revolving Credit Notes, or Exhibit B-2 , in the case of Term Notes. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto; provided that the failure to do so shall in no way affect the obligations of the Borrower or any other Loan Party under any Loan Document.
SECTION 2.8 Optional Prepayments .
The Borrower may prepay the outstanding principal amount of the Loans and Swing Loans in whole or in part at any time without premium or penalty; provided , however , that (a) if any prepayment of any Eurocurrency Rate Loan is made by the Borrower other than on the last day of an Interest Period for such Loan, the Borrower shall also pay any amount owing pursuant to Section 3.5 and (b) no optional prepayment shall be made in respect of Term Loans under the Term Facility unless at such time or concurrently therewith (x) there shall be no Revolving Credit Outstandings and (y) all Revolving Credit Commitments shall have been terminated.
SECTION 2.9 Mandatory Prepayments .
(a) If at any time, (x) the aggregate principal amount of Revolving Credit Outstandings exceeds the aggregate Maximum Revolving Credit at such time or (y) the aggregate principal amount of Revolving Credit Outstandings plus the Term Outstandings exceed the aggregate Maximum Credit at such time, the Borrower shall, in each case, forthwith, upon notification by the Administrative Agent, prepay the Swing Loans first and then the other Revolving Loans then outstanding in an amount equal to such excess. If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and the other
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Revolving Loans, the Borrower shall Cash Collateralize the Letter of Credit Obligations in the manner set forth in Section 10.5 in an amount equal to 101% of such excess. If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and the other Revolving Loans and the Cash Collateralization of the Letter of Credit Obligations as provided above, the Borrower shall then prepay the Term Loan then outstanding in an amount equal to such excess.
(b) If (x) at any time during a Cash Dominion Period or (y) in respect of any Disposition that would result in the occurrence of a Cash Dominion Period, any Loan Party or any of its Subsidiaries receives any Net Cash Proceeds arising from any Disposition in respect of any Current Asset Collateral outside of the ordinary course of business, subject to the Intercreditor Agreement, the Borrower shall promptly (but in any event within five (5) Business Days of such receipt) prepay the Revolving Loans in an amount equal to 100% of such Net Cash Proceeds (and, to the extent such Net Cash Proceeds exceed the aggregate principal amount of Revolving Loans outstanding, Cash Collateralize Letters of Credit in an amount equal to up to 101% of the aggregate maximum drawable amount of such Letters of Credit).
(c) Subject to Section 3.5 hereof, all such payments in respect of the Loans pursuant to this Section 2.9 shall be without premium or penalty. All interest accrued on the principal amount of the Loans paid pursuant to this Section 2.9 shall be paid, or may be charged by the Administrative Agent to any loan account(s) of the Borrower, at the Administrative Agents option, on the date of such payment. Interest shall accrue and be due, until the next Business Day, if the amount so paid by the Borrower to the bank account designated by the Administrative Agent for such purpose is received in such bank account after 3:00 p.m.
(d) At all times after the occurrence and during the continuance of Cash Dominion Period and notification thereof by the Administrative Agent to the Borrower (subject to the provisions of Section 10.3 and to the terms of the Security Agreement), on each Business Day, at or before 1:00 p.m., the Agent shall apply all Same Day Funds credited to the Concentration Account and all amounts received pursuant to Section 2.9(b) , first to pay any fees or expense reimbursements then due to the Administrative Agent, the Issuers and the Lenders (other than in connection with Cash Management Obligations, Obligations in respect of Secured Hedge Agreements or any Revolving Commitment Increases), pro rata , second to pay interest due and payable in respect of any Revolving Loans, Swing Loans and any Protective Advances that may be outstanding , pro rata , third to prepay the principal of any Protective Advances that may be outstanding, pro rata , fourth to prepay the principal of the Revolving Loans, Swing Loans and to Cash Collateralize outstanding Letter of Credit Obligations, pro rata , fifth to pay interest due and payable in respect of any Term Loans, pro rata , and sixth to the Borrower or such other Person entitled thereto or as directed by a court of competent jurisdiction.
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SECTION 2.10 Interest .
(a) Rate of Interest . All Loans and the outstanding amount of all other Obligations owing under the Loan Documents shall bear interest, in the case of any Class of Loans, on the unpaid principal amount thereof from the date such Loans are made and, in the case of such other Obligations, from the date such other Obligations are due and payable until, in all cases, paid in full, except as otherwise provided in Section 4.1(k) or clause (c) below, as follows:
(i) if a Base Rate Revolving Loan, Swing Loan or such other Obligation (except as otherwise provided in this Section 2.10(a) ), at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time and (B) the Applicable Margin for Base Rate Revolving Loans;
(ii) if a Base Rate Term Loan, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time and (B) the Applicable Margin for Base Rate Term Loans;
(iii) if a Eurocurrency Rate Revolving Loan, at a rate per annum equal to the sum of (A) the Adjusted Eurocurrency Rate determined for the applicable Interest Period and (B) the Applicable Margin applicable to Eurocurrency Rate Revolving Loans in effect from time to time during such Interest Period; and
(iv) if a Eurocurrency Rate Term Loan, at a rate per annum equal to the sum of (A) the Adjusted Eurocurrency Rate determined for the applicable Interest Period and (B) the Applicable Margin applicable to Eurocurrency Rate Term Loans in effect from time to time during such Interest Period.
(b) Interest Payments . (i) Interest accrued on each Base Rate Loan (other than Swing Loans) shall be payable in arrears (A) on the first Business Day of each February, May, August and November, commencing on the first such day following the making of such Base Rate Loan and (B) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Base Rate Loan, (ii) interest accrued on Swing Loans shall be payable in arrears on the first Business Day of each February, May, August and November, and, if not previously paid in full, at maturity (whether by acceleration or otherwise), (iii) interest accrued on each Eurocurrency Rate Loan shall be payable in arrears (A) on the last day of each Interest Period applicable to such Loan and, if such Interest Period has a duration of more than three (3) months, on each date during such Interest Period occurring every three (3) months from the first day of such Interest Period, (B) upon the payment or prepayment thereof in full or in part and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Eurocurrency Rate Loan and (iv) interest accrued on the amount of all other Obligations shall be payable on demand from and after the time such Obligation becomes due and payable (whether by acceleration or otherwise).
(c) Default Interest . The Borrower shall pay interest on past due amounts at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.
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SECTION 2.11 Conversion/Continuation Option .
(a) The Borrower may elect (i) at any time on any Business Day, to convert Base Rate Loans (other than Swing Loans) or any portion thereof to Eurocurrency Rate Loans, and (ii) at the end of any applicable Interest Period, to convert Eurocurrency Rate Loans or any portion thereof into Base Rate Loans, or to continue such Eurocurrency Rate Loans or any portion thereof for an additional Interest Period; provided , however , that the aggregate amount of the Eurocurrency Rate Loans for each Interest Period must be in the amount of at least $500,000 or an integral multiple of $100,000 in excess thereof. Each conversion or continuation shall be allocated among the Loans of each Lender in accordance with such Lenders Ratable Portion. Each such election shall be in substantially the form of Exhibit F (a Notice of Conversion or Continuation ) and shall be made by giving the Administrative Agent at least three (3) Business Days prior written notice specifying (A) the applicable Term Loans and/or Revolving Loans which are the subject of such Notice of Conversion or Continuation, (B) the amount and Type of Loan being converted or continued, (C) in the case of a conversion to or a continuation of Eurocurrency Rate Loans, the applicable Interest Period and (D) in the case of a conversion, the date of such conversion.
(b) The Administrative Agent shall promptly notify each Appropriate Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein. Notwithstanding the foregoing, the Administrative Agent or the Requisite Lenders may require by notice to the Borrower that no conversion in whole or in part of Base Rate Loans to Eurocurrency Rate Loans, and no continuation in whole or in part of Eurocurrency Rate Loans upon the expiration of any applicable Interest Period shall be permitted at any time at which (A) an Event of Default shall have occurred and be continuing or (B) the continuation of, or conversion into, a Eurocurrency Rate Loan would violate any provision of Section 2.14 . If, within the time period required under the terms of this Section 2.11 , the Administrative Agent does not receive a Notice of Conversion or Continuation from the Borrower containing a permitted election to convert any such Loans, then, upon the expiration of the applicable Interest Period, such Loans shall be automatically converted to Base Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable.
SECTION 2.12 Fees .
(a) Unused Commitment Fee . The Borrower agrees to pay in Same Day Funds in Dollars to the Administrative Agent for the account of each Lender a commitment fee (the Unused Commitment Fee ) on the average daily amount by which the Revolving Credit Commitment of such Lender exceeds such Lenders Ratable Portion of the sum of (i) the aggregate outstanding principal amount of Loans (excluding any outstanding Swing Loans) for the applicable Class and (ii) the outstanding amount of the aggregate Letter of Credit Undrawn Amounts from the Restatement Effective Date through the Revolving Credit Termination Date at the Applicable Unused Commitment Fee Rate, payable in arrears (x) on the first Business Day of each February, May, August and November, commencing on the first such Business Day following the Restatement Effective Date and (y) on the Revolving Credit Termination Date.
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For the avoidance of doubt, any Swing Loans outstanding shall reduce the Revolving Credit Commitment of the Swing Loan Lender in its capacity as a Lender.
(b) Letter of Credit Fees. The Borrower agrees to pay the following amounts with respect to Letters of Credit issued by any Issuer:
(i) to the Administrative Agent for the account of each Issuer of a Letter of Credit, with respect to each Letter of Credit issued by such Issuer, an issuance fee equal to 0.125% per annum of the average daily maximum undrawn face amount of such Letter of Credit for the immediately preceding calendar quarter (or portion thereof), payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such Business Day following the issuance of such Letter of Credit and (B) on the Revolving Credit Termination Date;
(ii) to the Administrative Agent for the ratable benefit of the Revolving Credit Lenders, with respect to each Letter of Credit, a fee at a rate per annum equal to (x) in the case of each Standby Letter of Credit, the Applicable Margin for Eurocurrency Rate Revolving Loans and (y) in the case of each Documentary Letter of Credit, 50% of the Applicable Margin for Eurocurrency Rate Revolving Loans (each such fee, a Letter of Credit Fee ), in each case multiplied by the average daily maximum undrawn face amount of such Letter of Credit for the immediately preceding calendar quarter (or portion thereof), payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such Business Day following the issuance of such Letter of Credit and (B) on the Revolving Credit Termination Date; provided , however , that any Letter of Credit Fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the applicable Issuer pursuant to Section 2.4 shall be payable, to the maximum extent permitted by applicable Law, to the other Revolving Credit Lenders in accordance with the upward adjustments in their respective Applicable Percentages allocable to such Letter of Credit pursuant to Section 2.16(a)(iv) , with the balance of such fee, if any, payable to the applicable Issuer for its own account; and
(iii) to the Issuer of any Letter of Credit, with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, customary documentary and processing charges in accordance with such Issuers standard schedule for such charges in effect at the time of issuance, amendment, transfer or drawing, as the case may be.
(c) Additional Fees. The Borrower agrees to pay to the Administrative Agent and the Arrangers additional fees, the amount and dates of payment of which are embodied in the Fee Letter.
SECTION 2.13 Payments and Computations.
(a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. The Borrower shall make each payment and prepayment hereunder (including fees and expenses) not later than 2:00 p.m. on the
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day when due to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agents Office for payments and in Same Day Funds by wire transfer or ACH transfer without condition or deduction for any defense, recoupment, set-off or counterclaim. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lenders Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall, in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(b) All computations of interest for Base Rate Loans shall be made on the basis of a year of 365 days or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall bear interest for one (1) day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
(c) [ reserved ]
(d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided , however , that if such extension would cause payment of interest on or principal of any Eurocurrency Rate Loan to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day. All repayments of any Loans shall be applied as follows: first , to repay any such Loans outstanding as Base Rate Loans and then , to repay any such Loans outstanding as Eurocurrency Rate Loans , with those Eurocurrency Rate Loans having earlier expiring Interest Periods being repaid prior to those having later expiring Interest Periods.
(e) Unless the Administrative Agent shall have received notice from the Borrower to the Lenders prior to the date on which any payment is due hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may (but shall not be so required to), in reliance upon such assumption, cause to be distributed to each Appropriate Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have made such payment to the Administrative Agent in Same Day Funds, then each such Lender shall repay to the Administrative Agent forthwith on demand the portion of such assumed payment that was made available to such Lender in Same Day Funds, together with interest thereon in respect of each day from and including the date such amount was made available to such Lender to the date such amount is repaid to the Administrative Agent in Same Day Funds at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
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(f) Except for payments and other amounts received by the Administrative Agent and applied in accordance with the provisions of Section 10.2(b) below (or required to be applied in accordance with Section 2.9 ), all payments and any other amounts received by the Administrative Agent from or for the benefit of the Borrower shall be applied as follows: first , to pay principal of, and interest on, any portion of the Loans the Administrative Agent may have advanced pursuant to the express provisions of this Agreement on behalf of any Lender, for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower, second , to pay all other Obligations then due and payable and third , as the Borrower so designates. Payments in respect of Swing Loans received by the Administrative Agent shall be distributed to the Swing Loan Lender; payments in respect of Loans received by the Administrative Agent shall be distributed to each Lender entitled thereto in accordance with such Lenders Ratable Portion thereof; and all payments of fees and all other payments in respect of any other Obligation shall be allocated among such of the Lenders and Issuers as are entitled thereto and, for such payments allocated to the Lenders, in proportion to their respective Ratable Portions.
(g) At the option of the Administrative Agent, principal on the Swing Loans, Reimbursement Obligations, interest, fees, expenses and other sums due and payable in respect of the Loans and Protective Advances may be paid from the proceeds of Swing Loans (except that Swing Loans may not be repaid with proceeds of new Swing Loans) or the Revolving Loans unless the Borrower makes such payments on the next succeeding Business Day after the Borrower receives written notice from the Administrative Agent requesting such payments. The Borrower hereby authorizes the Swing Loan Lender to make such Swing Loans pursuant to Section 2.3(a) and the Lenders to make such Loans pursuant to Section 2.2(a) from time to time in the amounts of any and all principal payable with respect to the Swing Loans, Reimbursement Obligations, interest, fees, expenses and other sums payable in respect of the Loans and Protective Advances, and further authorizes the Administrative Agent to give the Lenders notice of any Borrowing with respect to such Swing Loans and the Revolving Loans and to distribute the proceeds of such Swing Loans and the Revolving Loans to pay such amounts. The Borrower agrees that all such Swing Loans and the Revolving Loans so made shall be deemed to have been requested by it (irrespective of the satisfaction of the conditions in Section 4.2 , which conditions the Lenders irrevocably waive) and directs that all proceeds thereof shall be used to pay such amounts.
SECTION 2.14 Special Provisions Governing Eurocurrency Rate Loans .
(a) Determination of Interest Rate .
The Adjusted Eurocurrency Rate for each Interest Period for Eurocurrency Rate Loans shall be determined by the Administrative Agent pursuant to the procedures set forth in the definition of Eurocurrency Rate . The Administrative Agents determination shall be presumed to be correct and binding on the Loan Parties, absent manifest error.
(b) Interest Rate Unascertainable, Inadequate or Unfair .
In the event that (i) the Administrative Agent reasonably determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the
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Eurocurrency Rate then being determined is to be fixed or (ii) the Requisite Lenders reasonably determine and notify the Administrative Agent that the Eurocurrency Rate for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon each Eurocurrency Rate Loan shall automatically, on the last day of the current Interest Period for such Loan, convert into a Base Rate Loan and the obligations of the Lenders to make Eurocurrency Rate Loans or to convert Base Rate Loans into Eurocurrency Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower that the Requisite Lenders have determined that the circumstances causing such suspension no longer exist.
SECTION 2.15 Revolving Commitment Increase .
(a) The Borrower may at any time or from time to time after the Restatement Effective Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Revolving Credit Lenders), request one or more increases in the amount of any Class of Revolving Credit Commitments (each such increase, a Revolving Commitment Increase ); provided that upon the effectiveness of any Incremental Amendment referred to below, no Default or Event of Default shall exist. Each Revolving Commitment Increase shall be in an aggregate principal amount that is not less than $25,000,000 ( provided that such amount may be less than $25,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence). Notwithstanding anything to the contrary herein, the aggregate amount of the Revolving Commitment Increases shall not exceed $350,000,000 (the Incremental Availability ). Each notice from the Borrower pursuant to this Section shall set forth the requested amount and proposed terms of the relevant Revolving Commitment Increases. Revolving Commitment Increases may be provided by any existing Revolving Credit Lender (it being understood that no existing Revolving Credit Lender will have an obligation to provide a portion of any Revolving Commitment Increase), in each case on terms permitted in this Section 2.15 and otherwise on terms reasonably acceptable to the Administrative Agent or by any other bank or other financial institution or institutional lender or investor (any such other bank or other financial institution or institutional lender or investor being called an Additional Revolving Credit Lender ), provided that the Administrative Agent, each Issuer and the Swing Loan Lender shall have consented (in each case, such consent not to be unreasonably withheld) to such Revolving Credit Lenders or Additional Revolving Credit Lenders providing such Revolving Commitment Increases if such consent by the Administrative Agent, the applicable Issuer and the Swing Loan Lender, as the case may be, would be required under Section 12.2(b) for an assignment of Revolving Loans or Revolving Credit Commitments to such Lender or Additional Revolving Credit Lender. Revolving Credit Commitments in respect of Revolving Commitment Increases shall become Revolving Credit Commitments (or in the case of a Revolving Commitment Increase to be provided by an existing Lender, an increase in such Lenders applicable Revolving Credit Commitment) under this Agreement pursuant to an amendment (an Incremental Amendment ) to this Agreement and, as appropriate, the other Loan Documents, executed by Holdings, the Borrower, each Revolving Credit Lender agreeing to provide such Revolving Commitment Increase, if any, each Additional Revolving Credit Lender, if any, and the Administrative Agent. The Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section. The effectiveness of any
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Incremental Amendment shall be subject to the satisfaction on the date thereof (each, an Incremental Facility Effective Date ) of each of the conditions set forth in Section 4.2 (it being understood that all references to the date of such Loan or Issuance or similar language in such Section 4.2 shall be deemed to refer to the effective date of such Incremental Amendment), compliance with Section 8.5(b) and such other conditions as the parties thereto shall agree. Any Revolving Commitment Increase shall be documented as an increase to the Facility and shall be on terms identical to those applicable to the Facility, except with respect to any commitment, arrangement, upfront or similar fees that may be agreed to among the Borrower and the lenders agreeing to participate in such Revolving Commitment Increase. The Borrower shall use Revolving Commitment Increases for any purpose not prohibited by this Agreement. Upon each increase in the Revolving Credit Commitments pursuant to this Section 2.15 , (x) each Lender of the applicable Class immediately prior to such increase will automatically and without further act be deemed to have assigned to each Lender providing a portion of the Revolving Commitment Increase of the applicable Class (each a Revolving Commitment Increase Lender ) in respect of such increase, and each such Revolving Commitment Increase Lender will automatically and without further act be deemed to have assumed, a portion of such Lenders participations hereunder in outstanding Letters of Credit and Swing Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding (i) participations hereunder in Letters of Credit, (ii) participations hereunder in Swing Loans held by each Lender of the applicable Class and (iii) participations in Protective Advances held by each Lender of the applicable Class (including each such Revolving Commitment Increase Lender) will equal the percentage of the aggregate Revolving Credit Commitments of all Lenders of such Class represented by such Lenders Revolving Credit Commitment and (y) if, on the date of such increase, there are any Revolving Loans of such Class outstanding, such Revolving Loans shall on or prior to the effectiveness of such Revolving Commitment Increase be prepaid from the proceeds of additional Revolving Loans of such Class made hereunder (reflecting such increase in Revolving Credit Commitments of such Class), which prepayment shall be accompanied by accrued interest on the Revolving Loans of such Class being prepaid and any costs incurred by any Lender in accordance with Section 3.5 . The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.
(b) This Section 2.15 shall supersede any provisions in Section 12.1 or Section 12.7 to the contrary.
SECTION 2.16 Defaulting Lenders .
(a) Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i) Waivers and Amendments . That Defaulting Lenders right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 12.1.
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(ii) Reallocation of Payments . Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of that Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article X or otherwise, and including any amounts made available to the Administrative Agent by that Defaulting Lender pursuant to Section 12.6 ), shall be applied at such time or times as may be determined by the Administrative Agent as follows: first , to the payment of any amounts owing by that Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by that Defaulting Lender to any Issuer or the Swing Loan Lender hereunder; third , if so determined by the Administrative Agent or requested by any Issuer or the Swing Loan Lender, to be held as cash collateral for future funding obligations of that Defaulting Lender of any participation in any Swing Loan or Letter of Credit; fourth , as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of that Defaulting Lender to fund Loans under this Agreement; sixth , to the payment of any amounts owing to the Lenders, any Issuer or the Swing Loan Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, any Issuer or the Swing Loan Lender against that Defaulting Lender as a result of that Defaulting Lenders breach of its obligations under this Agreement; seventh , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lenders breach of its obligations under this Agreement; and eighth , to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or Letter of Credit Borrowings in respect of which that Defaulting Lender has not fully funded its appropriate share and (y) such Loans or Letter of Credit Borrowings were made at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Letter of Credit Borrowings owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Borrowings owed to, that Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.16(a)(ii) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees . That Defaulting Lender (x) shall not be entitled to receive any commitment fee pursuant to Section 2.12(a) for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender for such period) and (y) shall be limited in its right to receive Letter of Credit Fees as provided in Section 2.12(b) .
(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure . During any period in which there is a Defaulting Lender, for purposes of computing the
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amount of the obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swing Loans pursuant to Sections 2.3 and 2.4 , the Applicable Percentage of each non-Defaulting Lender shall be computed without giving effect to the Revolving Credit Commitment of that Defaulting Lender; provided that (i) each such reallocation shall be given effect only if, at the date the applicable Lender becomes a Defaulting Lender, no Default or Event of Default exists; and (ii) the aggregate obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swing Loans shall not exceed the positive difference, if any, of (1) the Revolving Credit Commitment of that non-Defaulting Lender minus (2) the Revolving Credit Exposure of that Lender.
(b) Defaulting Lender Cure . If the Borrower, the Administrative Agent, Swing Loan Lender and the Issuers agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Letters of Credit and Swing Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.16(a)(iv)) , whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower for the period that such Lender was a Defaulting Lender; and provided further that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lenders having been a Defaulting Lender.
(c) Cash Collateral . At any time that there shall exist a Defaulting Lender, immediately upon the request of the Administrative Agent, the applicable Issuer or the Swing Loan Lender, the Borrower shall deliver to the Administrative Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving effect to Section 2.16(a)(iv) and any Cash Collateral provided by the Defaulting Lender).
SECTION 2.17 Extensions of Revolving Loans .
(a) Request for Extended Revolving Credit Commitments . The Borrower may at any time and from time to time, upon written request to and the consent of the Administrative Agent (each, a Revolving Extension Request ), request that an aggregate principal amount of not less than $50,000,000 of the then existing Revolving Credit Commitments of a given Class (each, an Existing Revolver Tranche ) be amended to, among other things, extend the applicable Scheduled Termination Date with respect thereto to a date that is no earlier than the then Latest Maturity Date of any other Commitment or Loan hereunder (any such Revolving Credit Commitments so amended, Extended Revolving Credit Commitments ); provided that (i) any such Extended Revolving Credit Commitments (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreements (to the extent any Intercreditor Agreement is then in effect), (ii) after giving effect to any Extended Revolving Credit
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Commitment under this Section 2.17 and any Extended Term Loans under Section 2.18(a) , there shall be no more than five (5) Classes of Loans and Commitments outstanding at any time and (iii) any such Extended Revolving Credit Commitments shall be offered on the same terms (including as to the proposed interest rates and fees) to each Revolving Credit Lender under the applicable Existing Revolver Tranche on a ratable basis. Promptly after receipt of any Revolving Extension Request, the Administrative Agent shall provide a copy of such request to each of the Revolving Credit Lenders under the applicable Existing Revolver Tranche to be amended, which request shall set forth the proposed terms (which shall be determined in consultation with the Administrative Agent) of the Extended Revolving Credit Commitments to be established. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each applicable Revolving Credit Lender is requested to respond to such request (which shall in no event be less than five (5) Business Days (or such shorter period as may be agreed by the Administrative Agent) from the date of delivery of such notice to such Revolving Credit Lenders) and shall agree to such procedures, if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably, to accomplish the purposes of this Section 2.17 .
(b) Election to Extend . Any Revolving Credit Lender wishing to have all or a portion of its Revolving Credit Commitments under the Existing Revolving Tranche amended into Extended Revolving Credit Commitments (each, an Extending Revolving Credit Lender ) pursuant to a Revolving Extension Request shall notify the Administrative Agent on or prior to the date specified in such Revolving Extension Request of the amount of its Revolving Credit Commitments it has elected to be amended (subject to any minimum denomination requirements imposed by the Administrative Agent). No Revolving Credit Lender shall have any obligation to agree to provide any Extended Revolving Credit Commitment pursuant to any Revolving Extension Request. Any Revolving Credit Lender not responding within such time period shall be deemed to have declined to have its Revolving Credit Commitments under the Existing Revolver Tranche amended into Extended Revolving Credit Commitments. The Administrative Agent shall notify the Borrower and each Revolving Credit Lender under the applicable Existing Revolver Tranche of responses to such Revolving Extension Request. In the event that the aggregate principal amount of existing Revolving Credit Commitments that the Extending Revolving Credit Lenders have elected to amend pursuant to the relevant Revolving Extension Request exceeds the amount of Extended Revolving Credit Commitments requested by the Borrower, the principal amount of Extended Revolving Credit Commitments requested by the Borrower shall be allocated to each Extending Revolving Credit Lender in such manner and in such amounts as may be agreed by Administrative Agent and the Borrower, in their sole discretion.
(c) New Revolving Commitment Lenders . Following any Revolving Extension Request made by the Borrower in accordance with Sections 2.17(a) and 2.17(b) , if the Revolving Credit Lenders under the applicable Existing Revolver Tranche shall have declined to provide the entire amount of Extended Revolving Credit Commitments requested by the Borrower, the Borrower may request that other banks, financial institutions or other institutional lenders or investors who are willing to provide an Extended Revolving Credit Commitment hereunder (each a New Revolving Commitment Lender ) become a Revolving Credit Lender pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent and its counsel; provided that (i) the Extended Revolving Credit Commitments of such New
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Revolving Commitment Lenders with respect to a relevant Revolving Extension Request shall (A) not exceed the amount necessary to achieve the requested amount of Extended Revolving Credit Commitments under such Revolving Extension Request and (B) be on identical terms as those offered to the existing Revolving Credit Lenders under the applicable Existing Revolver Tranche and (ii) prior to the effectiveness of any Extended Revolving Credit Commitment of any New Revolving Commitment Lender, the Administrative Agent, each Issuer and/or the Swing Loan Lender shall have consented (such consent not to be unreasonably withheld) to each New Revolving Commitment Lender if such consent would be required under Section 12.2(b)(iii) for an assignment of Revolving Credit Commitments to such Person. Upon effectiveness of the Revolving Extension Amendment to which each such New Revolving Commitment Lender is a party (a) each Revolving Credit Lender (under the relevant Existing Revolver Tranche) who shall have declined to provide at least its Ratable Portion of the requested Extended Revolving Credit Commitments will be deemed automatically and without any further act to have assigned to the New Revolving Commitment Lenders such portion of its existing Revolving Credit Commitment (including all Revolving Loans, participations in Letters of Credit and Swing Loans related thereto) in a principal amount up to such Ratable Portion it so declined to provide, in each case, as specified in the relevant Revolving Extension Amendment (it being understood that, subject to the foregoing limitations, the final allocation of any such assignment of Revolving Credit Commitments shall be made in such manner and in such amounts as may be agreed by Administrative Agent and the Borrower, in their sole discretion, provided that in no event shall the aggregate amount of Revolving Credit Commitments deemed assigned pursuant to this Section 2.17 exceed the aggregate amount of Extended Revolving Credit Commitments of all New Revolving Commitment Lenders), (b) (i) each New Revolving Commitment Lender shall automatically and without any further act be deemed to have assumed, the existing Revolving Credit Commitments (including all Revolving Loans, participations in Letters of Credit and Swing Loans related thereto) so assigned in an amount equal to its proposed Extended Revolving Credit Commitment and (ii) all such assumed existing Revolving Credit Commitments shall concurrently therewith be amended into Extended Revolving Credit Commitments such that, (x) the Extended Revolving Credit Commitments of New Revolving Commitment Lenders will be incorporated hereunder in the same manner in which Extended Revolving Credit Commitments of the Extending Revolving Credit Lenders are incorporated hereunder pursuant to this Section 2.17 and (y) participations hereunder in Letters of Credit and Swing Loans held by each Revolving Credit Lender of each Class of Revolving Credit Commitments (including each such New Revolving Commitment Lender and its Extended Revolving Credit Commitment) will equal Applicable Percentage represented by such Revolving Credit Lenders Revolving Credit Commitment, and (c) each Revolving Credit Lender that shall be deemed to have assigned any portion of its existing Revolving Credit Commitments to any New Revolving Commitment Lender shall have received payment of an amount equal to the outstanding principal of the Revolving Loans and funded participations in Letter of Credit and Swing Loans so assigned together with accrued interest and fees thereon (including any amounts under Section 3.5 ) from such New Revolving Commitment Lender.
(d) Revolving Extension Amendment . Extended Revolving Credit Commitments shall be established pursuant to an amendment (each, a Revolving Extension Amendment ) to this Agreement among the Borrower, the Administrative Agent and each Extending Revolving Credit Lender and each New Revolving Commitment Lender, if any, providing an Extended Revolving Credit Commitment thereunder, which shall be consistent with the provisions set forth
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in Sections 2.17(a) , (b) , (c) and (e) (but which shall not require the consent of any other Lender). The effectiveness of any Revolving Extension Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Sections 4.2(a) and (b) and compliance with Section 8.5(b) and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) legal opinions, board resolutions and officers certificates substantially consistent with those delivered on the Effective Date and otherwise in form and substance reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that the Extended Revolving Credit Commitments are provided with the benefit of the applicable Loan Documents. The Administrative Agent shall promptly notify each Revolving Credit Lender as to the effectiveness of each Revolving Extension Amendment and the matters specified therein. Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to a Revolving Extension Amendment, without the consent of any other Lender, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Extended Revolving Credit Commitments incurred pursuant thereto, and (ii) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section, in each case, in a manner consistent with the terms of this Section 2.17 and the Requisite Lenders hereby expressly authorize the Administrative Agent to enter into any such Revolving Extension Amendment.
(e) Terms of Extended Revolving Credit Commitments . Except as expressly provided herein, all Extended Revolving Credit Commitments effected pursuant to any Revolving Extension Request and Revolving Extension Amendment shall be subject to the same terms (including, without limitation, borrowing terms, interest terms and payment terms), and shall be subject to the same conditions as the then existing Revolving Credit Commitments (it being understood that customary arrangement or commitment fees payable to one or more Arrangers (or their Affiliates) or one or more Extending Revolving Credit Lenders and/or New Revolving Commitment Lenders, as the case may be, may be different than those paid with respect to the existing Revolving Credit Lenders under the then existing Revolving Credit Commitments on or prior to the Restatement Effective Date or with respect to any other Extending Revolving Credit Lenders and/or New Revolving Commitment Lenders in connection with any other Extended Revolving Credit Commitments effected pursuant to this Section 2.17 ); provided , however , that at the election of the Borrower (in consultation with the Administrative Agent), the Borrower may offer to effect Extended Revolving Credit Commitments with (i) interest and fees at different rates applicable solely with respect to such Extended Revolving Credit Commitments (and related outstandings) and (ii) such other covenants and terms which apply to any period after the Latest Maturity Date that is in effect on the effective date of the Revolving Extension Amendment related thereto (immediately prior to the establishment of such Extended Revolving Credit Commitments). After giving effect to any Extended Revolving Credit Commitment, all borrowings under the Revolving Credit Commitments (including any such Extended Revolving Credit Commitment) and repayments thereunder shall be made on a pro rata basis (except for (x) any payments of interest and fees at different rates on any Revolving Extension Series (and related outstandings) and (y) repayments required upon the applicable Revolving Credit Termination Date of other Revolving Credit Commitments).
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(f) Revolving Extension Series . Any Extended Revolving Credit Commitments effected pursuant to a Revolving Extension Request shall be designated a series (each, a Revolving Extension Series ) of Extended Revolving Credit Commitments for all purposes of this Agreement; provided that any Extended Revolving Credit Commitments effected from an Existing Revolver Tranche may, to the extent provided in the applicable Revolving Extension Amendment, be designated as an increase in any previously established Revolving Extension Series with respect to such Existing Revolver Tranche.
(g) No Prepayment . No conversion of Revolving Loans pursuant to any Revolving Extension Amendment in accordance with this Section 2.17 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.
SECTION 2.18 Extension of Term Loans .
(a) Request for Extended Term Loans . The Borrower may at any time and from time to time, upon written request to and the consent of the Administrative Agent (each, a Term Extension Request ), request that an aggregate principal amount of not less than $20,000,000 of the then existing Term Loans of a given Class (each, an Existing Term Tranche ) be amended to, among other things, extend the applicable Scheduled Termination Date with respect thereto to a date that is no earlier than the then Latest Maturity Date of any other Commitment or Loan hereunder (any such Term Loans so amended, Extended Term Loans ); provided that (i) any such Extended Term Loans (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreement (to the extent the Intercreditor Agreement is then in effect), (ii) after giving effect to any Extended Term Loans under this Section 2.18 and Extended Revolving Credit Commitment under Section 2.17 , there shall be no more than five (5) Classes of Loans and Commitments outstanding at any time and (iii) any such Extended Term Loans shall be offered on the same terms (including as to the proposed interest rates and fees) to each Term Lender under the applicable Existing Term Tranche on a ratable basis. Promptly after receipt of any Term Extension Request, the Administrative Agent shall provide a copy of such request to each of the Term Lenders under the applicable Existing Term Tranche to be amended, which request shall set forth the proposed terms (which shall be determined in consultation with the Administrative Agent) of the Extended Term Loans to be established. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each applicable Term Lender is requested to respond to such request (which shall in no event be less than five (5) Business Days (or such shorter period as may be agreed by the Administrative Agent) from the date of delivery of such notice to such Term Lenders) and shall agree to such procedures, if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably, to accomplish the purposes of this Section 2.18 .
(b) Election to Extend . Any Term Lender wishing to have all or a portion of its Term Loans under the Existing Term Tranche amended into Extended Term Loans (each, an Extending Term Lender ) pursuant to a Term Extension Request shall notify the Administrative Agent on or prior to the date specified in such Term Extension Request of the amount of its Term Loans it has elected to be amended (subject to any minimum denomination requirements imposed by the Administrative Agent). No Term Lender shall have any obligation to agree to provide any Extended Term Loan pursuant to any Term Extension Request. Any Term Lender
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not responding within such time period shall be deemed to have declined to have its Term Loans under the Existing Term Tranche amended into Extended Term Loans. The Administrative Agent shall notify the Borrower and each Term Lender under the applicable Existing Term Tranche of responses to such Term Extension Request. In the event that the aggregate principal amount of existing Term Loans that the Extending Term Lenders have elected to amend pursuant to the relevant Term Extension Request exceeds the amount of Extended Term Loans requested by the Borrower, the principal amount of Extended Term Loans requested by the Borrower shall be allocated to each Extending Term Lender in such manner and in such amounts as may be agreed by Administrative Agent and the Borrower, in their sole discretion.
(c) New Term Lenders . Following any Term Extension Request made by the Borrower in accordance with Sections 2.18(a) and 2.18(b) , if the Term Lenders under the applicable Existing Term Tranche shall have declined to provide the entire amount of Extended Term Loans requested by the Borrower, the Borrower may request that other banks, financial institutions or other institutional lenders or investors who are willing to provide an Extended Term Loans hereunder (each a New Term Lender ) become a Term Lender pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent and its counsel; provided that (i) the Extended Term Loans of such New Term Lenders with respect to a relevant Term Extension Request shall (A) not exceed the amount necessary to achieve the requested amount of Extended Term Loans under such Term Extension Request and (B) be on identical terms as those offered to the existing Term Lenders under the applicable Existing Term Tranche and (ii) prior to the effectiveness of any Extended Term Loans of any New Term Lender, the Administrative Agent, each Issuer and/or the Swing Loan Lender shall have consented (such consent not to be unreasonably withheld) to each New Term Lender if such consent would be required under Section 12.2(b)(iii) for an assignment of Term Loans to such Person. Upon effectiveness of the Term Extension Amendment to which each such New Term Lender is a party (a) each Term Lender (under the relevant Existing Term Tranche) who shall have declined to provide at least its Ratable Portion of the requested Extended Term Loans will be deemed automatically and without any further act to have assigned to the New Term Lenders such portion of its existing Term Loans in a principal amount up to such Ratable Portion it so declined to provide, in each case, as specified in the relevant Term Extension Amendment (it being understood that, subject to the foregoing limitations, the final allocation of any such assignment of Term Loans shall be made in such manner and in such amounts as may be agreed by Administrative Agent and the Borrower, in their sole discretion, provided that in no event shall the aggregate amount of Term Loans deemed assigned pursuant to this Section 2.18 exceed the aggregate amount of Extended Term Loans of all New Term Lenders), (b) (i) each New Term Lender shall automatically and without any further act be deemed to have assumed, the existing Term Loans so assigned in an amount equal to its proposed Extended Term Loans and (ii) all such assumed existing Term Loans shall concurrently therewith be amended into Extended Term Loans such that, the Extended Term Loans of New Term Lenders will be incorporated hereunder in the same manner in which Extended Term Loans of the Extending Term Lenders are incorporated hereunder pursuant to this Section 2.18 , and (c) each Term Lender that shall be deemed to have assigned any portion of its existing Term Loans to any New Term Lender shall have received payment of an amount equal to the outstanding principal of the Term Loans so assigned together with accrued interest and fees, if any, thereon (including any amounts under Section 3.5 ) from such New Term Lender.
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(d) Term Extension Amendment . Extended Term Loans shall be established pursuant to an amendment (each, a Term Extension Amendment ) to this Agreement among the Borrower, the Administrative Agent and each Extending Term Lender and each New Term Lender, if any, providing an Extended Term Loan thereunder, which shall be consistent with the provisions set forth in Sections 2.18(a) , (b) , (c) and (e) (but which shall not require the consent of any other Lender). The effectiveness of any Term Extension Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Sections 4.2(a) and (b) and compliance with Section 8.5(b) and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) legal opinions, board resolutions and officers certificates substantially consistent with those delivered on the Restatement Effective Date and otherwise in form and substance reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that the Extended Term Loans are provided with the benefit of the applicable Loan Documents. The Administrative Agent shall promptly notify each Term Lender as to the effectiveness of each Term Extension Amendment and the matters specified therein. Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to a Term Extension Amendment, without the consent of any other Lender, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Extended Term Loans incurred pursuant thereto, and (ii) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section, in each case, in a manner consistent with the terms of this Section 2.18 and the Requisite Lenders hereby expressly authorize the Administrative Agent to enter into any such Term Extension Amendment.
(e) Terms of Extended Term Loans . Except as expressly provided herein, all Extended Term Loans effected pursuant to any Term Extension Request and Term Extension Amendment shall be subject to the same terms (including, without limitation, interest terms and payment terms), and shall be subject to the same conditions as the then existing Term Loans (it being understood that customary arrangement or upfront fees payable to one or more Arrangers (or their Affiliates) or one or more Extending Term Lenders and/or New Term Lenders, as the case may be, may be different than those paid with respect to the existing Term Lenders under the then existing Term Loans on or prior to the Restatement Effective Date or with respect to any other Extending Term Lenders and/or New Term Lenders in connection with any other Extended Term Loans effected pursuant to this Section 2.18 ); provided , however , that at the election of the Borrower (in consultation with the Administrative Agent), the Borrower may offer to effect Extended Term Loans with (i) interest and fees at different rates applicable solely with respect to such Extended Term Loans and (ii) such other covenants and terms which apply to any period after the Latest Maturity Date that is in effect on the effective date of the Term Extension Amendment related thereto (immediately prior to the establishment of such Extended Term Loans). After giving effect to any Extended Term Loans, all payments on Term Loans shall be made on a pro rata basis (except for (x) any payments of interest and fees at different rates on any Term Extension Series and (y) repayments required upon the applicable Term Loan Termination Date of other Term Loans).
(f) Term Extension Series . Any Extended Term Loans effected pursuant to a Term Extension Request shall be designated a series (each, a Term Extension Series ) of Extended
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Term Loans for all purposes of this Agreement; provided that any Extended Term Loans effected from an Existing Term Tranche may, to the extent provided in the applicable Term Extension Amendment, be designated as an increase in any previously established Term Extension Series with respect to such Existing Term Tranche.
(g) No Prepayment . No conversion of Term Loans pursuant to any Term Extension Amendment in accordance with this Section 2.18 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.
ARTICLE III
TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY
SECTION 3.1 Taxes .
(a) Except as required by law, any and all payments by the Borrower (the term Borrower under this Article III being deemed to include any Subsidiary for whose account a Letter of Credit is issued) or any Guarantor to or for the account of any Agent or any Lender (with the term Lender under this Article III being deemed to include an Issuer) under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges imposed by any Governmental Authority, and all liabilities (including additions to tax, penalties and interest) with respect thereto, excluding, in the case of each Agent and each Lender, (i) taxes imposed on or measured by net income (however denominated, and including branch profits and similar taxes), and franchise or similar taxes, imposed by the United States, the jurisdiction under the laws of which it is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (ii) taxes imposed by reason of any connection between such Agent or Lender and any taxing jurisdiction other than a connection arising solely by executing or entering into any Loan Document, receiving payments thereunder or having been a party to, performed its obligations under, or enforced, any Loan Documents, (iii) subject to Section 3.1(e) , any U.S. federal tax that is (or would be) required to be withheld with respect to amounts payable hereunder in respect of an Eligible Assignee (pursuant to an assignment under Section 12.2 ) on the date it becomes an Eligible Assignee to the extent such tax is in excess of the tax that would have been applicable had such assigning Lender not assigned its interest arising under any Loan Document (unless such assignment is at the express written request of the Borrower), (iv) any U.S. federal withholding taxes imposed as a result of the failure of any Agent or Lender to comply with the provisions of Sections 3.1(b) and 3.1(c) (in the case of any Foreign Lender, as defined below) or the provisions of Section 3.1(d) (in the case of any U.S. Lender, as defined below), (v) any taxes imposed on any amount payable to or for the account of any Agent or Lender as a result of the failure of such recipient to satisfy the applicable requirements under FATCA, to establish that such payment is exempt from withholding under FATCA, (vi) amounts excluded pursuant to Section 3.1(e) hereto, and (vii) additions to tax, penalties and interest on the foregoing amounts in clauses (i) through (vi) (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges and liabilities being hereinafter referred to as Taxes ). If the Borrower or a Guarantor is required to deduct any Taxes or Other Taxes (as defined below) from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (i) the sum payable
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shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.1(a) ), each of such Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or Guarantor shall make such deductions, (iii) the Borrower or Guarantor shall pay the full amount deducted to the relevant taxing authority, and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as practicable thereafter), the Borrower or Guarantor shall furnish to such Agent or Lender (as the case may be) the original or a facsimile copy of a receipt evidencing payment thereof to the extent such a receipt has been made available to the Borrower or Guarantor (or other evidence of payment reasonably satisfactory to the Administrative Agent). If the Borrower or Guarantor fails to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to any Agent or any Lender the required receipts or other required documentary evidence that has been made available to the Borrower or Guarantor, the Borrower or Guarantor shall indemnify such Agent and such Lender for any incremental Taxes that may become payable by such Agent or such Lender arising out of such failure.
(b) To the extent it is legally able to do so, each Agent or Lender (including an Eligible Assignee to which a Lender assigns its interest in accordance with Section 12.2 , unless such Eligible Assignee is already a Lender hereunder) that is not a United States person within the meaning of Section 7701(a)(30) of the Code (each, a Foreign Lender ) agrees to complete and deliver to the Borrower and the Administrative Agent on or prior to the date on which the Foreign Lender becomes a party hereto, two (2) accurate, complete and original signed copies of whichever of the following is applicable: (i) IRS Form W-8BEN-E certifying that it is entitled to benefits under an income tax treaty to which the United States is a party; (ii) IRS Form W-8ECI certifying that the income receivable pursuant to any Loan Document is effectively connected with the conduct of a trade or business in the United States; (iii) if the Foreign Lender is not (A) a bank described in Section 881(c)(3)(A) of the Code, (B) a 10-percent shareholder described in Section 871(h)(3)(B) of the Code, or (C) a controlled foreign corporation related to the Borrower within the meaning of Section 864(d) of the Code, a certificate to that effect in substantially the form attached hereto as Exhibit O (a Non-Bank Certificate ) and an IRS Form W-8BEN-E, certifying that the Foreign Lender is not a United States person; (iv) to the extent a Foreign Lender is not the beneficial owner for U.S. federal income tax purposes, IRS Form W-8IMY (or any successor forms) of the Foreign Lender, accompanied by, as and to the extent applicable, a Form W-8BEN-E, Form W-8ECI, Non-Bank Certificate, Form W-9, Form W-8IMY (or other successor forms) and any other required supporting information from each beneficial owner (it being understood that a Foreign Lender need not provide certificates or supporting documentation from beneficial owners if (x) the Foreign Lender is a qualified intermediary or withholding foreign partnership for U.S. federal income tax purposes and (y) such Foreign Lender is as a result able to establish, and does establish, that payments to such Foreign Lender are, to the extent applicable, entitled to an exemption from or, if an exemption is not available, a reduction in the rate of, U.S. federal withholding taxes without providing such certificates or supporting documentation); or (v) any other form prescribed by applicable requirements of U.S. federal income tax law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable requirements of law to permit the Borrower and the Administrative Agent to determine the withholding or deduction required to be made.
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(c) (i) In addition, each such Foreign Lender shall, to the extent it is legally entitled to do so, (i) promptly submit to the Borrower and the Administrative Agent two (2) accurate, complete and original signed copies of such other or additional forms or certificates (or such successor forms or certificates as shall be adopted from time to time by the relevant taxing authorities) as may then be applicable or available to secure an exemption from or reduction in the rate of U.S. federal withholding tax (A) on or before the date that such Foreign Lenders most recently delivered form, certificate or other evidence expires or becomes obsolete or inaccurate in any material respect, (B) after the occurrence of a change in the Foreign Lenders circumstances requiring a change in the most recent form, certificate or evidence previously delivered by it to the Borrower and the Administrative Agent, and (C) from time to time thereafter if reasonably requested by the Borrower or the Administrative Agent, and (ii) promptly notify the Borrower and the Administrative Agent of any change in the Foreign Lenders circumstances which would modify or render invalid any claimed exemption or reduction. This clause (c)(i) shall not apply to any reporting requirements under FATCA.
(ii) If a payment made to a Foreign Lender under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Foreign Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Foreign Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Foreign Lender has complied with such Foreign Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (ii), FATCA shall include any amendments made to FATCA after the Restatement Effective Date.
(d) Each Agent or Lender that is a United States person (within the meaning of Section 7701(a)(30) of the Code) (each a U.S. Lender) agrees to complete and deliver to the Borrower and the Administrative Agent two (2) original copies of accurate, complete and signed IRS Form W-9 or successor form certifying that such U.S. Lender is not subject to United States backup withholding tax (i) on or prior to the Restatement Effective Date (or on or prior to the date it becomes a party to this Agreement), (ii) on or before the date that such form expires or becomes obsolete or inaccurate in any material respect, (iii) after the occurrence of a change in the U.S. Lenders circumstances requiring a change in the most recent form previously delivered by it to the Borrower and the Administrative Agent, and (iv) from time to time thereafter if reasonably requested by the Borrower or the Administrative Agent.
(e) Notwithstanding anything else herein to the contrary (but subject to the succeeding sentence), if a Lender, Eligible Assignee or Agent is subject to any U.S. federal tax that is (or would be) required to be withheld with respect to amounts payable hereunder at a rate in excess of zero percent at the time such Lender, Eligible Assignee or Agent becomes a party to this Agreement or otherwise acquires an interest in the Loan, or pursuant to a law or other legal requirement in effect at such time (including a law with a delayed effective date), such tax (including additions to tax, penalties and interest imposed with respect to such tax) shall be
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considered excluded from Taxes (unless and until such time as such Lender, Eligible Assignee or Agent subsequently provides forms and certifications that establish to the reasonable satisfaction of Borrower and the Administrative Agent that such Lender, Eligible Assignee or Agent is subject to a lower rate of tax, at which time tax at such lower rate (including additions to tax, penalties and interest imposed with respect to such tax) shall be considered so excluded for periods during which such forms and certifications remain valid and are sufficient, under the law in effect at the time such forms and certifications are provided (including any law with a delayed effective date) to establish that such Lender, Eligible Assignee or Agent is subject to such lower rate of tax) except, in the case of an Eligible Assignee, to the extent the Lenders assignor was entitled to additional amounts or indemnity payments immediately prior to the assignment (unless such assignment is made at the express written request of the Borrower). Further, to the extent that any Lender, Eligible Assignee or Agent becomes subject to taxes subsequent to the Effective Date (or, if later, the date such Lender, Eligible Assignee or Agent becomes a party to this Agreement or otherwise acquires an interest in the Loan) solely as a result of a change in the place of organization or place of doing business of such Lender, Eligible Assignee or Agent (or any applicable beneficial owner), a change in the Lending Office of such Lender or Eligible Assignee (or any applicable beneficial owner) (other than at the written request of the Borrower to change such Lending Office), a change that results in such Lender or Eligible Assignee (or any applicable beneficial owner) being described in clauses (A) , (B) or (C) of Section 3.1(b)(iii) or otherwise as a result of any change in the circumstances of such Lender, Eligible Assignee or Agent, other than a Change in Law, occurring after the date that such Lender, Eligible Assignee or Agent becomes a party to this Agreement or otherwise acquires an interest in the Loan, such tax (including additions to tax, penalties and interest imposed with respect to such tax) shall be considered excluded from Taxes.
(f) The Borrower agrees to pay any and all present or future stamp, excise (in the nature of a documentary or similar tax), court or documentary taxes and any other property, intangible, filing or mortgage recording taxes or charges or similar levies imposed by any Governmental Authority which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (including additions to tax, penalties and interest related thereto) excluding, in each case, such amounts imposed in connection with an Assignment and Assumption, grant of a Participation, transfer or assignment to or designation of a new applicable Lending Office or other office for receiving payments under any Loan Document, except to the extent that any such change is requested in writing by the Borrower (all such non-excluded taxes described in this Section 3.1(f) being hereinafter referred to as Other Taxes ).
(g) If any Taxes or Other Taxes are directly asserted against any Agent or Lender with respect to any payment received by such Agent or Lender in respect of any Loan Document, such Agent or Lender may pay such Taxes or Other Taxes and the Borrower will promptly indemnify and hold harmless such Agent or Lender for the full amount of such Taxes and Other Taxes (and any Taxes and Other Taxes imposed on amounts payable under this Section 3.1 ), and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted. Payments under this Section 3.1(g) shall be made within ten (10) days after the date Borrower receives written demand for payment from such Agent or Lender.
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(h) A Participant shall not be entitled to receive any greater payment under Section 3.1 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent.
(i) If the Borrower determines in good faith that a reasonable basis exists for contesting any taxes for which indemnification has been demanded or additional amounts have been payable hereunder, the relevant Lender or the relevant Agent, as applicable, shall cooperate with the Borrower in a reasonable challenge of such taxes if so requested by the Borrower, provided that (a) such Lender or Agent determines in its reasonable discretion that it would not be prejudiced by cooperating in such challenge, (b) the Borrower pays all related expenses of such Agent or Lender and (c) the Borrower indemnifies such Lender or Agent for any liabilities or other costs incurred by such party in connection with such challenge.
(j) If any Agent or any Lender determines, in its sole discretion, exercised in good faith, that it has received a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or any Guarantor, as the case may be, or with respect to which the Borrower or any Guarantor, as the case may be, has paid additional amounts pursuant to this Section 3.1 , it shall promptly remit such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower or Holdings, as the case may be under this Section 3.1 with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses incurred by the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower or Holdings, as the case may be, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower or Holdings, as the case may be (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. The Administrative Agent or such Lender, as the case may be, shall provide the Borrower with a copy of any notice of assessment or other evidence reasonably available of the requirement to repay such refund received from the relevant Governmental Authority ( provided that such Lender or the Administrative Agent may delete any information therein that such Lender or the Administrative Agent deems confidential or not relevant to such refund in its reasonable discretion). This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it reasonably deems confidential) to the Borrower, any Guarantor or any other Person.
(k) Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 3.1(a) or (g) with respect to such Lender, it will, if requested by the Borrower in writing, use commercially reasonable efforts (subject to legal and regulatory restrictions) to mitigate the effect of any such event, including by designating another Lending Office for any Loan affected by such event and by completing and delivering or filing any tax- related forms which such Lender is legally able to deliver and which would reduce or eliminate any amount of Taxes or Other Taxes required to be deducted or withheld or paid by the Borrower; provided that such efforts are made at the Borrowers expense and on terms that, in the reasonable judgment of such Lender, do not cause such Lender and its Lending Office(s) to suffer any economic, legal or regulatory disadvantage, and provided further that nothing in this
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Section 3.1(k) shall affect or postpone any of the Obligations of the Borrower or the rights of such Lender pursuant to Section 3.1(a) or (g) .
(l) Notwithstanding any other provision of this Agreement, the Borrower and the Administrative Agent may deduct and withhold any taxes required by any Laws to be deducted and withheld from any payment under any of the Loan Documents, subject to the provisions of this Section 3.1 .
(m) With respect to any Lender or Issuers claim for compensation under this Section 3.1 , the Borrower shall not be required to compensate such Lender or Issuer for any amount incurred unless such Lender or Issuer notifies the Borrower of the event that gives rise to such claim following knowledge of such event.
(n) The agreements in this Section 3.1 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(o) For purposes of determining withholding Taxes imposed under the FATCA, from and after the Restatement Effective Date, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Agreement and the Loans as not qualifying as a grandfathered obligation within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
SECTION 3.2 Illegality .
If any Lender reasonably determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurocurrency Rate, or to determine or charge interest rates based upon the Eurocurrency Rate or Adjusted Eurocurrency Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurocurrency Rate Loans or to convert Base Rate Loans to Eurocurrency Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Adjusted Eurocurrency Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Adjusted Eurocurrency Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurocurrency Rate Loans, and shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurocurrency Rate Loans of such Lender to Base Rate Loans (and the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Adjusted Eurocurrency Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or immediately, if
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such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans, and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Adjusted Eurocurrency Rate component of the Base Rate with respect to any Base Rate Loans, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Adjusted Eurocurrency Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Eurocurrency Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
SECTION 3.3 Inability to Determine Rates .
If the Requisite Lenders reasonably determine that for any reason in connection with any request for a Eurocurrency Rate Loan or a conversion to or continuation thereof that (a) deposits in Dollars are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such Eurocurrency Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan or in connection with an existing or proposed Base Rate Loan, or (c) the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurocurrency Rate Loans shall be suspended, and (y) in the event of a determination described in the preceding sentence with respect to the Adjusted Eurocurrency Rate component of the Base Rate, the utilization of the Adjusted Eurocurrency Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (upon the instruction of the Requisite Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurocurrency Rate Loans, or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans, in the amount specified therein.
SECTION 3.4 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans .
(a) Increased Costs Generally . If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender or any Issuer;
(ii) subject any Lender or any Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurocurrency Rate Loan made by it, or change the basis of taxation of payments to such Lender or the Issuer in respect thereof (except, in each case, for Taxes covered by Section 3.1 and any taxes and other amounts described in clauses (i) and (iii) through (vii) of the first sentence of Section 3.1(a) that are imposed with respect to payments for or on
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account of any Agent or any Lender under any Loan Document, and except for Other Taxes); or
(iii) impose on any Lender or any Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurocurrency Rate Loans made by such Lender or any Letter of Credit or participation therein, in each case that is not otherwise accounted for in the definition of Adjusted Eurocurrency Rate or this clause (a) ;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan the interest on which is determined by reference to the Eurocurrency Rate (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or such Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or Issuer hereunder (whether of principal, interest or any other amount) then, from time to time within fifteen (15) days after demand by such Lender or Issuer setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent), the Borrower will pay to such Lender or Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or Issuer, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements . If any Lender or any Issuer reasonably determines that any Change in Law affecting such Lender or such Issuer or any Lending Office of such Lender or such Lenders or such Issuers holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lenders or such Issuers capital or on the capital of such Lenders or such Issuers holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuer, to a level below that which such Lender or such Issuer or such Lenders or such Issuers holding company could have achieved but for such Change in Law (taking into consideration such Lenders or such Issuers policies and the policies of such Lenders or such Issuers holding company with respect to capital adequacy or liquidity requirements), then from time to time upon demand of such Lender or such Issuer setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent), the Borrower will pay to such Lender or such Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuer or such Lenders or such Issuers holding company for any such reduction suffered.
(c) Certificates for Reimbursement . A certificate of a Lender or an Issuer setting forth the amount or amounts necessary to compensate such Lender or such Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section 3.4 and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuer, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.
(d) Delay in Requests . Failure or delay on the part of any Lender or any Issuer to demand compensation pursuant to the foregoing provisions of this Section 3.4 shall not constitute
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a waiver of such Lenders or such Issuers right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or an Issuer pursuant to the foregoing provisions of this Section 3.4 for any increased costs incurred or reductions suffered more than one hundred and eighty (180) days prior to the date that such Lender or such Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders or such Issuers intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof).
(e) Without duplication of any reserves specified in the definition of Eurocurrency Rate, the Borrower shall pay to each Lender, as long as such Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Aggregate Commitments or the funding of the Eurocurrency Rate Loans, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error), which shall be due and payable on each date on which interest is payable on such Loan, provided the Company shall have received at least fifteen (15) days prior notice (with a copy to the Administrative Agent) of such additional costs from such Lender. If a Lender fails to give notice fifteen (15) days prior to the relevant interest payment date, such additional costs shall be due and payable fifteen (15) days from receipt of such notice.
SECTION 3.5 Funding Losses .
Upon written demand of any Lender (with a copy to the Administrative Agent) from time to time, which demand shall set forth in reasonable detail the basis for requesting such amount, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense (other than any costs and expenses representing internal administrative charges of a Lender, to the extent such Lender has not suffered any loss or expense (x) by reason of the liquidation or redeployment of funds obtained by it to maintain an applicable Loan or (y) from fees payable to terminate the deposits from which such funds were obtained with respect to an applicable Loan) incurred by it as a result of:
(a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day prior to the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or
(c) any assignment of a Eurocurrency Rate Loan on a day prior to the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 3.7 ;
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including any loss or expense (excluding loss of anticipated profits or margin) actually incurred by reason of the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.
SECTION 3.6 Matters Applicable to All Requests for Compensation .
(a) Designation of a Different Lending Office . If any Lender requests compensation under Section 3.4 , or the Borrower is required to pay any additional amount to any Lender, any Issuer, or any Governmental Authority for the account of any Lender or any Issuer pursuant to Section 3.1 , or if any Lender gives a notice pursuant to Section 3.2 , then such Lender or such Issuer shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or such Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.1 or 3.4 , as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.2 , as applicable, and (ii) in each case, would not subject such Lender or such Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or such Issuer, as the case may be in any material economic, legal or regulatory respect.
(b) Suspension of Lender Obligations . If any Lender requests compensation by the Borrower under Section 3.4 , the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue Eurocurrency Rate Loans from one Interest Period to another Interest Period, or to convert Base Rate Loans into Eurocurrency Rate Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.6(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.
(c) Conversion of Eurocurrency Rate Loans . If any Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Sections 3.2 , 3.3 or 3.4 hereof that gave rise to the conversion of such Lenders Eurocurrency Rate Loans no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurocurrency Rate Loans made by other Lenders are outstanding, such Lenders Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurocurrency Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans of a given Class held by the Lenders of such Class holding Eurocurrency Rate Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Pro Rata Shares.
SECTION 3.7 Replacement of Lenders under Certain Circumstances .
If (i) any Lender requests compensation under Section 3.4 or ceases to make Eurocurrency Rate Loans as a result of any condition described in Section 3.2 or Section 3.4 , (ii) the Borrower is required to pay any Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.1 , (iii) any Lender
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is a Non-Consenting Lender or (iv) any other circumstance exists hereunder that gives the Borrower the right to replace a Lender as a party hereto, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 12.2 ), all of its interests, rights and obligations under this Agreement and the related Loan Documents to one or more Eligible Assignees that shall assume such obligations (any of which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 12.2(b)(iv) ;
(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.5 ) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(c) such Lender being replaced pursuant to this Section 3.7 shall (i) execute and deliver an Assignment and Assumption with respect to such Lenders Commitment and outstanding Loans, and (ii) deliver any Notes evidencing such Loans to the Borrower or Administrative Agent (or a lost or destroyed note indemnity in lieu thereof); provided that the failure of any such Lender to execute an Assignment and Assumption or deliver such Notes shall not render such sale and purchase (and the corresponding assignment) invalid and such assignment shall be recorded in the Register and the Notes shall be deemed to be canceled upon such failure;
(d) the Eligible Assignee shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification provisions under this Agreement, which shall survive as to such assigning Lender;
(e) in the case of any such assignment resulting from a claim for compensation under Section 3.4 or payments required to be made pursuant to Section 3.1 , such assignment will result in a reduction in such compensation or payments thereafter; and
(f) such assignment does not conflict with applicable Laws.
In the event that (i) the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of each Lender, all affected Lenders or all the Lenders or all affected Lenders with respect to a certain Class or Classes of the Loans and (iii) the Requisite Lenders or the requisite Lenders of the applicable Class or Classes of the Loans, have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a Non-Consenting Lender .
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A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
SECTION 3.8 Survival .
All of the Borrowers obligations under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder and resignation of the Administrative Agent, the Swing Loan Lender or any Issuer.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions Precedent to Restatement Effective Date .
The effectiveness of this Agreement shall be subject to the satisfaction or due waiver in accordance with Section 12.1 of each of the following conditions precedent, except as otherwise agreed between the Borrower and the Administrative Agent (the date on which such conditions are satisfied or waived being herein in accordance with Section 12.1 shall be the Restatement Effective Date ):
(a) The Administrative Agents receipt of the following, each of which shall be originals, facsimiles or copies in .pdf format (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party and each other party thereto, each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:
(i) a Notice of Borrowing in accordance with the requirements hereof;
(ii) executed counterparts of this Agreement and the Guaranty;
(iii) a Note executed by the Borrower in favor of each Lender that has requested a Note at least two (2) Business Days in advance of the Restatement Effective Date;
(iv) each Collateral Document set forth on Schedule 1.1A required to be executed on the Restatement Effective Date as indicated on such schedule, together with:
(A) copies of certificates, if any, representing the Pledged Equity and stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank, in each case, delivered to the First Lien Term Facility Administrative Agent;
(B) [ reserved ] ; and
(C) evidence that all other actions, recordings and filings that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee
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Requirement shall have been taken, completed or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent;
(v) executed release documents with respect to the Released Mortgage Properties, together with evidence that such counterparts have been delivered to the title insurance company insuring such mortgages under the Existing Credit Agreement for recording;
(vi) such certificates of good standing from the applicable secretary of state of the state of organization of each Loan Party, certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party on the Restatement Effective Date;
(vii) an opinion from (A) Latham & Watkins LLP, special New York counsel to the Loan Parties, (B) Feinberg Hanson LLP, special Massachusetts counsel to the Loan Parties, and (C) Venable LLC, special Maryland counsel to the Loan Parties, in each case, addressed to the Administrative Agent and the Lenders;
(viii) a solvency certificate from the chief financial officer of the Borrower (after giving effect to the Transaction) substantially in the form attached hereto as Exhibit M and an officers certificate from a Responsible Officer of the Borrower that (i) the conditions specified in clauses (d), (f), (j) and (k) below are satisfied and (ii) either that (1) no consents, licenses or approvals are required in connection with the execution, delivery and performance by any Loan Party and the validity against each Loan Party of the Loan Documents to which it is a party, or (2) that all such consents, licenses and approvals have been obtained and are in full force and effect;
(ix) certificates of insurance evidencing that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect;
(x) a perfection certificate (in substantially the form of perfection certificated delivered under the Existing Credit Agreement);
(xi) copies of Lien and judgment searches and intellectual property searches with respect to the Loan Parties in each jurisdiction reasonably requested by the Administrative Agent; and
(xii) a Borrowing Base Certificate, certified as complete and correct in all respects, which calculates the Borrowing Base as of the last Business Day of the most recent month ended at least fifteen (15) days prior to the Restatement Effective Date, and demonstrates not less than $325,000,000 of Excess Availability after giving pro forma effect to the Transaction and other extensions of credit outstanding on the Restatement Effective Date.
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(b) All fees and expenses required to be paid hereunder and under the other Loan Documents and invoiced in reasonable detail at least two (2) Business Days before the Restatement Effective Date (except as otherwise reasonably agreed by the Borrower) shall have been paid in full in cash.
(c) [Reserved].
(d) Prior to or substantially simultaneously with the effectiveness of this Agreement on the Restatement Effective Date, the Borrower shall have received (i) at least $1,925,000,000 in gross cash proceeds from borrowings under the First Lien Term Facility and (ii) at least $625,000,000 in gross cash proceeds from borrowings under the Second Lien Term Facility.
(e) The Intercreditor Agreement, the First Lien Term Facility Documentation and the Second Lien Term Facility Documentation, in each case, reasonably satisfactory to the Administrative Agent, shall have been duly executed and delivered by each party thereto, and shall be in full force and effect.
(f) Prior to or substantially simultaneously with the effectiveness of this Agreement on the Restatement Effective Date, the Borrower shall have terminated the Existing Term Loan Facilities and the Administrative Agent shall have received a customary payoff letter in respect thereof, and shall have taken all other necessary actions such that, after giving effect to the Transaction, (i) Holdings, the Borrower and the Restricted Subsidiaries shall have outstanding no material Indebtedness for borrowed money other than (i) the Loans and Letter of Credit Obligations, (ii) borrowings under the First Lien Term Facility and the Second Lien Term Facility, and (iii) Indebtedness permitted by Sections 9.3(b) and 9.3(e) .
(g) [ Reserved ] .
(h) [ Reserved ] .
(i) The Arrangers shall have received at a reasonable time prior to the Restatement Effective Date all documentation and other information relating to the Loan Parties reasonably requested in writing by them at least five (5) Business Days prior to the Restatement Effective Date in order to allow the Arrangers and the Lenders to comply with applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act.
(j) Since January 31, 2016, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect.
(k) All interest, fees, expenses and other amounts, if any, owing or accruing under or in respect of the Existing Credit Agreement for periods prior to the Restatement Effective Date in respect of the Existing Lenders that shall not be Lenders under this Agreement shall be calculated and paid on the Restatement Effective Date (it being understood and agreed that Existing Lenders that shall continue as Lenders under this Agreement shall receive payment of all interest, fees, expenses and other amounts, if any, owing or accruing under or in respect of the Existing Credit Agreement for periods prior to the Restatement Effective Date at the next date payment of interest, fees, expenses or other amounts is or becomes due under this Agreement).
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Without limiting the generality of the provisions of the last paragraph of Section 11.3 , for purposes of determining compliance with the conditions specified in this Section 4.1 , each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Restatement Effective Date specifying its objection thereto.
SECTION 4.2 Conditions Precedent to Each Loan and Letter of Credit .
The obligation of each Lender on any date to make any Loan and of each Issuer on any date to Issue any Letter of Credit is subject to the satisfaction of each of the following conditions precedent:
(a) Request for Borrowing or Issuance of Letter of Credit . With respect to any Loan, the Administrative Agent shall have received a duly executed Notice of Borrowing (or, in the case of Swing Loans, a duly executed Swing Loan Request), and, with respect to any Letter of Credit, the Administrative Agent and the applicable Issuer shall have received a duly executed Letter of Credit Request.
(b) Representations and Warranties; No Defaults . The following statements shall be true on the date of such Loan or Issuance, both immediately before and immediately after giving effect thereto and, in the case of any Loan, giving effect to the application of the proceeds thereof:
(i) The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document shall be true and correct in all material respects on and as of such date of such Credit Extension; provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; provided , further that, any representation and warranty that is qualified as to materiality, Material Adverse Effect or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates; and
(ii) no Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds therefrom.
(c) Borrowing Base . After giving effect to the Loans or Letters of Credit requested to be made or Issued on any such date and the use of proceeds thereof, (i) the Revolving Credit Outstandings shall not exceed the Maximum Revolving Credit at such time and (ii) the sum of Revolving Credit Outstandings and the Term Outstandings shall not exceed the Maximum Credit at such time.
(d) Solvency . In the case of any Borrowing the proceeds of which will be used to fund a Restricted Payment, the Borrower shall represent and warrant in the relevant Notice of Borrowing that it and its Restricted Subsidiaries are Solvent both immediately before and immediately after giving effect thereto and giving effect to the application of the proceeds thereof.
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Each submission by the Borrower to the Administrative Agent of a Notice of Borrowing or a Swing Loan Request and the acceptance by the Borrower of the proceeds of each Loan requested therein, and each submission by the Borrower to an Issuer of a Letter of Credit Request, and the Issuance of each Letter of Credit requested therein, shall be deemed to constitute a representation and warranty by the Borrower that the conditions specified in clause (b) above have been satisfied on and as of the date of the making of such Loan or the Issuance of such Letter of Credit.
SECTION 4.3 Determinations of Restatement Effective Date Borrowing Conditions .
For purposes of determining compliance with the conditions specified in Section 4.1 , each Lender shall be deemed to have consented to, approved, accepted or be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the Borrowing on the Restatement Effective Date, borrowing of Swing Loans or Issuance or deemed Issuance hereunder specifying its objection thereto and, in the case of a Lender, such Lender shall not have made available to the Administrative Agent such Lenders Ratable Portion of such Borrowing or Swing Loans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuers and the Administrative Agent to enter into this Agreement, each of Holdings and the Borrower represents and warrants each of the following to the Lenders, the Issuers, and the Administrative Agent, on and as of the Restatement Effective Date and after giving effect to the making of the Loans and the other financial accommodations on the Restatement Effective Date and on and as of each date as required by Section 4.2(b)(i) :
SECTION 5.1 Existence, Qualification and Power; Compliance with Laws .
Each Loan Party and each of its Restricted Subsidiaries that is a Material Subsidiary (a) is a Person duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization (to the extent such concept exists in such jurisdiction), (b) has all corporate or other organizational power and authority to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and in good standing (to the extent such concept exists) under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all applicable Laws, orders, writs, injunctions and orders and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case referred to in clause (c), (d) or (e), to the extent that failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.2 Authorization; No Contravention .
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(a) The execution, delivery and performance by each Loan Party of each Loan Document to which such Loan Party is a party has been duly authorized by all necessary corporate or other organizational action.
(b) Neither the execution, delivery and performance by each Loan Party of each Loan Document to which such Loan Party is a party nor the consummation of the Transaction will (i) contravene the terms of any of such Loan Partys Constituent Documents, (ii) result in any breach or contravention of, or the creation of any Lien upon any of the property or assets of such Loan Party or any of the Restricted Subsidiaries (other than as permitted by Section 9.1 ) under (A) any Contractual Obligation to which such Loan Party is a party or affecting such Loan Party or the properties of such Loan Party or any of its Subsidiaries or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Loan Party or its property is subject; or (iii) violate any applicable Law; except with respect to any breach, contravention or violation (but not creation of Liens) referred to in clauses (ii) and (iii) , to the extent that such breach, contravention or violation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.3 Governmental Authorization .
No material approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (i) filings necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings that have been duly obtained, taken, given or made and are in full force and effect and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.4 Binding Effect .
This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party hereto or thereto. This Agreement and each other Loan Document constitutes a legal, valid and binding obligation of each Loan Party, enforceable against such Loan Party that is party hereto or thereto in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity and principles of good faith and fair dealing.
SECTION 5.5 Financial Statements; No Material Adverse Effect .
(a) The Annual Financial Statements and the Quarterly Financial Statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries, on a Consolidated basis, as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, (A) except as otherwise expressly noted therein and (B) subject, in the case of the Quarterly
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Financial Statements, to changes resulting from normal year end adjustments and the absence of footnotes.
(b) Since the Restatement Effective Date, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect.
(c) The forecasts of consolidated balance sheets, income statements, cash flow statements and Excess Availability of the Borrower and its Subsidiaries for each Fiscal Year ending after the Restatement Effective Date until the fifth anniversary of the Restatement Effective Date, copies of which have been furnished to the Administrative Agent prior to the Restatement Effective Date, and all Projections delivered pursuant to Section 7.1(d) have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time made, it being understood (i) no forecasts are to be viewed as facts, (ii) any forecasts are subject to significant uncertainties and contingencies, many of which are beyond the control of the Loan Parties or the Sponsors, (iii) no assurance can be given that any particular forecasts will be realized and (iv) actual results may differ and such differences may be material.
SECTION 5.6 Litigation.
There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, overtly threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of the Restricted Subsidiaries that would reasonably be expected to have a Material Adverse Effect.
SECTION 5.7 Labor Matters .
Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (a) there are no strikes or other labor disputes against any of the Borrower or its Restricted Subsidiaries pending or, to the knowledge of the Borrower, threatened and (b) since January 31, 2015, hours worked by and payments made based on hours worked to employees of each of the Borrower or its Restricted Subsidiaries have not been in material violation of the Fair Labor Standards Act or any other applicable Laws dealing with wage and hour matters.
SECTION 5.8 Ownership of Property; Liens .
Each Loan Party and each of its respective Restricted Subsidiaries has good and valid record title in fee simple to, or valid leasehold interests in, or easements or other limited property interests in, all real property necessary in the ordinary conduct of its business, free and clear of all Liens except for Liens permitted by Section 9.1 and except where the failure to have such title or other interest would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.9 Environmental Matters .
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(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) the Borrower, each Subsidiary Guarantor and each of their respective Restricted Subsidiaries is in compliance with all Environmental Laws in all jurisdictions in which the Borrower, each Subsidiary Guarantor and each of their respective Restricted Subsidiaries, as the case may be, is currently doing business (including having obtained all Environmental Permits) and (ii) neither the Borrower, any Subsidiary Guarantor nor any of their respective Restricted Subsidiaries has become subject to any pending, or to the knowledge of the Borrower, threatened Environmental Claim or any other Environmental Liability.
(b) Neither the Borrower, any Subsidiary Guarantor nor any of their respective Restricted Subsidiaries has treated, stored, transported or disposed of Hazardous Materials at or from any currently or formerly operated real estate or facility relating to its business in a manner that would reasonably be expected to have a Material Adverse Effect.
SECTION 5.10 Taxes .
Except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Borrower and its Restricted Subsidiaries have timely filed all Federal and state and other tax returns and reports required to be filed, and have timely paid all Federal and state and other taxes, assessments, fees and other governmental charges (including satisfying its withholding tax obligations) levied or imposed on their properties, income or assets or otherwise due and payable, except those which are being contested in good faith by appropriate actions diligently conducted and for which adequate reserves have been provided in accordance with GAAP.
SECTION 5.11 ERISA Compliance .
(a) Except as set forth in Schedule 5.11(a) or as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other federal or state Laws.
(b) (i) No ERISA Event has occurred within the one-year period prior to the date on which this representation is made or deemed made; (ii) no Pension Plan has failed to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Pension Plan; (iii) neither the Borrower nor any Subsidiary Guarantor nor any of their respective ERISA Affiliates has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 et seq. or 4243 of ERISA with respect to a Multiemployer Plan; (iv) neither the Borrower nor any Subsidiary Guarantor nor any of their respective ERISA Affiliates has engaged in a transaction that is subject to Sections 4069 or 4212(c) of ERISA; and (v) neither the Borrower, any Subsidiary Guarantor nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is insolvent (within the meaning of Section 4245 of ERISA) or has been determined to be in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA) and no such Multiemployer Plan is expected to be insolvent or endangered or critical
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status, except, with respect to each of the foregoing clauses of this Section 5.11(b), as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(c) Except where noncompliance or the incurrence of a material obligation would not reasonably be expected to result in a Material Adverse Effect, each Foreign Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders, and neither the Borrower nor any Restricted Subsidiary has incurred any material obligation in connection with the termination of or withdrawal from any Foreign Plan.
SECTION 5.12 Subsidiaries .
As of the Restatement Effective Date, neither Holdings, the Borrower nor any other Subsidiary Guarantor has any Subsidiaries other than those specifically disclosed in Schedule 5.12 , and all of the outstanding Equity Interests in the Borrower and the Subsidiaries have been validly issued and are fully paid and (if applicable) nonassessable, and all Equity Interests owned by Holdings in the Borrower and by the Borrower or any other Subsidiary Guarantor in any of their respective Subsidiaries are owned free and clear of all Liens of any person except (i) those Liens created under the Collateral Documents, under the First Lien Term Facility Documentation, under the Second Lien Term Facility Documentation and a secured Permitted Refinancing in respect of the Indebtedness under the First Lien Term Facility Documentation or under the Second Lien Term Facility Documentation (in each case, which Liens shall be subject to the Intercreditor Agreement) and (ii) any nonconsensual Lien that is permitted under Section 9.1. As of the Restatement Effective Date, Schedule 5.12 (a) sets forth the name and jurisdiction of each Subsidiary, (b) sets forth the ownership interest of Holdings, the Borrower and any other Subsidiary in each Subsidiary, including the percentage of such ownership and (c) identifies each Subsidiary that is a Subsidiary the Equity Interests of which are required to be pledged on the Restatement Effective Date pursuant to the Collateral and Guarantee Requirement.
SECTION 5.13 Margin Regulations; Investment Company Act .
(a) As of the Restatement Effective Date, none of the Collateral is comprised of any Margin Stock. No Loan Party is engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Federal Reserve Board), or extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Borrowings will be used for any purpose that violates the regulations of the Board of Governors of the Federal Reserve System of the United States of America, including Regulation U and X.
(b) Neither the Borrower nor any Guarantor is an investment company under the Investment Company Act of 1940.
SECTION 5.14 Disclosure .
None of the written information and written data heretofore or contemporaneously furnished in writing by or on behalf of the Borrower or any Subsidiary Guarantor to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as
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modified or supplemented by other information so furnished) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make such written information and written data (taken as a whole), in the light of the circumstances under which it was delivered, not materially misleading; it being understood that for purposes of this Section 5.14, such written information and written data shall not include projections (including the Projections) and pro forma financial information or information of a general economic or general industry nature.
SECTION 5.15 Intellectual Property; Licenses, Etc .
The Borrower and the Restricted Subsidiaries have good and marketable title to, or a valid license or right to use, all patents, patent rights, trademarks, service marks, trade names, copyrights, technology, software, know-how database rights, rights of privacy and publicity, licenses and other intellectual property rights (collectively, IP Rights) that are necessary for the operation of their respective businesses as currently conducted and as proposed to be conducted, except where the failure to have any such rights, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower, the operation of the respective businesses of the Borrower or any of its Restricted Subsidiaries as currently conducted does not infringe upon, misuse, misappropriate or violate any rights held by any Person except for such infringements, misuses, misappropriations or violations individually or in the aggregate, that would not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any IP Rights is pending or, to the knowledge of the Borrower, threatened against the Borrower or any Subsidiary Guarantor or Subsidiary, that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 5.16 Solvency .
On the Restatement Effective Date after giving effect to the Transaction, the Borrower and its Restricted Subsidiaries, on a consolidated basis, are Solvent.
SECTION 5.17 Subordination of Junior Financing .
The Obligations are Designated Senior Debt, Senior Debt, Senior Indebtedness, Guarantor Senior Debt or Senior Secured Financing (or any comparable term) under, and as defined in, any indenture or document governing any applicable Junior Financing. Documentation in respect of Indebtedness that is subordinated in right of payment to the Obligations.
SECTION 5.18 USA PATRIOT Act .
(a) To the extent applicable, each of Holdings and its Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto and (ii) the USA PATRIOT Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in
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order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
(b) None of Holdings, the Borrower or any Restricted Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of Holdings, the Borrower or any Restricted Subsidiary, (i) is a person on the list of Specially Designated Nationals and Blocked Persons or (ii) is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ( OFAC ); and the Borrower will not directly or indirectly use the proceeds of the Loans or the Letters of Credit or otherwise knowingly make available such proceeds to any person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
SECTION 5.19 Collateral Documents .
Except as otherwise contemplated hereby or under any other Loan Documents, the provisions of the Collateral Documents, together with such filings and other actions required to be taken hereby or by the applicable Collateral Documents (including the delivery to the Administrative Agent of any Pledged Debt and any Pledged Equity required to be delivered pursuant to the applicable Collateral Documents), are effective to create in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 9.1 and subject to the Intercreditor Agreement) on all right, title and interest of the respective Loan Parties in the Collateral described therein.
SECTION 5.20 Use of Proceeds .
The Borrower has used the proceeds of the Loans and the Letters of Credit issued hereunder only in compliance with (and not in contravention of) applicable Laws and each Loan Document.
SECTION 5.21. EEA Financial Institutions .
No Loan Party is an EEA Financial Institution.
ARTICLE VI
FINANCIAL COVENANT
So long as any Lender shall have any Revolving Credit Commitment hereunder, any Loan or other Obligation hereunder (other than (i) contingent indemnification obligations as to which no claim has been asserted and (ii) Obligations under Secured Hedge Agreements and Cash Management Obligations) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the Letter of Credit Obligations related thereto has been Cash Collateralized or back-stopped by a letter of credit in form and substance reasonably satisfactory to the Administrative Agent), the Borrower agrees with the Lenders, the Issuers and the Administrative Agent to the following:
SECTION 6.1 Minimum Fixed Charge Coverage Ratio .
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At any time that a Covenant Trigger Event shall be in effect, the Fixed Charge Coverage Ratio of the Borrower and its Restricted Subsidiaries (on a Consolidated basis) for the Test Period ending on the last day of the most recent Fiscal Quarter for which financial statements of the Borrower and its Restricted Subsidiaries were required to have been delivered pursuant to Section 7.1(a) or (b) , as applicable, and each subsequent Test Period during the continuance of such Covenant Trigger Event, shall be not less than 1.00 to 1.00 and the Borrower shall immediately deliver to the Administrative Agent a certificate of the chief financial officer setting forth reasonably detailed calculations of the Fixed Charge Coverage Ratio.
ARTICLE VII
REPORTING COVENANTS
So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder (other than (i) contingent indemnification obligations as to which no claim has been asserted and (ii) Obligations under Secured Hedge Agreements and Cash Management Obligations) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the Letter of Credit Obligations related thereto has been Cash Collateralized or back-stopped by a letter of credit in form and substance reasonably satisfactory to the Administrative Agent), the Borrower shall, and shall (except in the case of the covenants set forth in Sections 7.1 , 7.2 and 7.3 ) cause each of the Restricted Subsidiaries to:
SECTION 7.1 Financial Statements, Etc.
Deliver to the Administrative Agent for prompt further distribution to each Lender each of the following and shall take the following actions:
(a) as soon as available, but in any event within ninety (90) days after the end of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, stockholders equity and cash flows for such Fiscal Year together with related notes thereto and managements discussion and analysis describing results of operations, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of PricewaterhouseCoopers LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit;
(b) as soon as available, but in any event within forty-five (45) days after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the Fiscal Quarter ended April 29, 2017), a condensed consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and the related (i) condensed consolidated statements of income or operations for such Fiscal Quarter and for the portion of the Fiscal Year then ended and (ii) condensed consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of
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the previous Fiscal Year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject to normal year-end adjustments and the absence of footnotes, together with managements discussion and analysis describing results of operations;
(c) beginning on the date that Excess Availability shall have been less than the greater of (x) 12.5% of the Maximum Credit and (y) $60,000,000, and ending on the date Excess Availability shall have been equal to or greater than the greater of (x) 12.5% of the Maximum Credit and (y) $60,000,000, in each case, for thirty (30) consecutive calendar days, as soon as available, but in any event within thirty (30) days after the end of each of the first two (2) months of each Fiscal Quarter of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such month, and the related consolidated statements of income or operations and cash flows, for such month, in the form prepared by management of the Borrower;
(d) promptly after they are available, and in any event within ninety (90) days after the end of each Fiscal Year (beginning with the Fiscal Year ending January 28, 2017, of the Borrower), a reasonably detailed consolidated budget for the following Fiscal Year as customarily prepared by management of the Borrower for its internal use (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following Fiscal Year, the related consolidated statements of projected operations or income and projected cash flow and setting forth the material underlying assumptions applicable thereto), in each case, on a fiscal quarter basis (collectively, the Projections ), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such Projections, it being understood that actual results may vary from such Projections and that such variations may be material;
(e) simultaneously with the delivery of each set of consolidated financial statements referred to in Sections 7.1(a) and 7.1(b) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements; and
(f) quarterly, at a time mutually agreed with the Administrative Agent that is promptly after the delivery of the information required pursuant to clause (a) above and the information delivered pursuant to clause (b) above for each Fiscal Quarter, participate in a conference call for Lenders to discuss the financial condition and results of operations of the Borrower and its Subsidiaries for the most recently-ended period for which financial statements have been delivered, which requirement may be satisfied by including the Lenders and the Administrative Agent on quarterly conference calls with the First Lien Term Facility Lenders or the Second Lien Term Facility Lenders.
Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 7.1 may be satisfied with respect to financial information of the Borrower and its Subsidiaries by furnishing (A) the applicable financial statements of any direct or indirect parent of the Borrower that holds all of the Equity Interests of the Borrower or (B) the Borrowers or
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such entitys Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of clauses (A) and (B), (i) to the extent such information relates to a parent of the Borrower, such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to the Borrower (or such parent), on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand and (ii) to the extent such information is in lieu of information required to be provided under Section 7.1(a) , such materials are accompanied by a report and opinion of PricewaterhouseCoopers LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit.
SECTION 7.2 Certificates; Other Information . Deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) concurrently with the delivery of the financial statements referred to in Section 7.1(a) and Section 7.1(b) , a duly completed Compliance Certificate; provided that if such Compliance Certificate demonstrates an Event of Default of any financial covenant pursuant to Section 6.1 , any of the Permitted Holders may deliver, prior to or together with such Compliance Certificate, a notice of their intent to cure (a Notice of Intent to Cure ) pursuant to Section 10.4 to the extent permitted thereunder;
(b) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports, proxy statements and registration statements which Holdings or the Borrower or any Restricted Subsidiary files with the SEC or with any Governmental Authority that may be substituted therefor or with any national securities exchange, as the case may be (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered to the Administrative Agent), exhibits to any registration statement and, if applicable, any registration statement on Form S-8), and in any case not otherwise required to be delivered to the Administrative Agent pursuant to any other clause of this Section 7.2 ;
(c) promptly after the furnishing thereof, copies of any material statements or material reports furnished to any holder of any class or series of debt securities of any Loan Party having an aggregate outstanding principal amount greater than $35,000,000 or pursuant to the terms of the First Lien Term Facility Credit Agreement or the Second Lien Term Facility Credit Agreement, in each case, so long as the aggregate outstanding principal amount thereunder is greater than $35,000,000 and not otherwise required to be furnished to the Administrative Agent pursuant to any other clause of this Section 7.2 ;
(d) together with the delivery of the financial statements pursuant to Sections 7.1(a ) and 7.1(b) and each Compliance Certificate delivered pursuant to Section 7.2(a) , (i) a report setting forth the information required by Section 3.03(c) of the Security Agreement (or confirming that there has been no change in such information since the Restatement Effective Date or the date of the last such report), (ii) a description of each event, condition or circumstance during the last Fiscal Quarter covered by such Compliance Certificate requiring a
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mandatory prepayment under Section 2.9 and (iii) a list of each Subsidiary of the Borrower that identifies each Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary as of the date of delivery of such Compliance Certificate or a confirmation that there is no change in such information since the later of the Restatement Effective Date and the date of the last such list;
(e) on the date on which the delivery of financial statements is required to be made pursuant to Section 7.1(a) , the Borrower shall furnish to the Administrative Agent a description, in detail reasonably satisfactory to the Administrative Agent, of all material insurance coverage maintained by the Loan Parties, together with evidence thereof;
(f) prior to or concurrent with the making of any Specified Payment, a detailed calculation of the Fixed Charge Coverage Ratio and projected Excess Availability as required pursuant to clauses (b) and (c) of the definition of Payment Conditions or RP Conditions, as applicable, together with a certification that no Event of Default exists or would arise as a result of the making of such subject Specified Payment and, in the case of any Permitted Acquisition, that the requirements of the definition of Permitted Acquisitions shall have been satisfied; and
(g) promptly, such additional information regarding the business, legal, financial or corporate affairs of any Loan Party or any Restricted Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent may from time to time on its own behalf or on behalf of any Lender reasonably request.
Documents required to be delivered pursuant to Section 7.1(a) or (b) or Section 7.2(c) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrowers website on the Internet at the website address listed on Schedule 12.8 ; or (ii) on which such documents are posted on the Borrowers behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.
The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders and the Issuers materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on IntraLinks or another similar electronic system (the Platform ) and (b) certain of the Lenders (each, a Public Lender ) may have personnel who do not wish to receive material non-public information with respect to the Borrower or its Subsidiaries, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons securities. The
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Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (x) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the Issuers and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws ( provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 12.19); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Side Information; and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not designated Public Side Information.
SECTION 7.3 Notices .
Promptly after a Responsible Officer obtains actual knowledge thereof, notify the Administrative Agent:
(a) of the occurrence of any Default;
(b) of (i) any dispute, litigation, investigation or proceeding between any Loan Party or any Subsidiary and any arbitrator or Governmental Authority, (ii) the filing or commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary, including pursuant to any applicable Environmental Laws or in respect of IP Rights, the occurrence of any noncompliance by any Loan Party or any of its Subsidiaries with, or liability under, any Environmental Law or Environmental Permit, (iii) the occurrence of any ERISA Event or (iv) the occurrence of any other event or circumstance that, in any such case referred to in clauses (i) , (ii) , (iii) or (iv) , has resulted or would reasonably be expected to result in a Material Adverse Effect;
(c) of any casualty or condemnation event with respect to Current Asset Collateral having an aggregate fair market value in excess of $2,000,000, together with an update to the Borrowing Base Certificate most recently delivered to the Administrative Agent pursuant to Section 7.04(a) or (b) (as applicable) reflecting the result of such casualty or condemnation event on the calculations of the Borrowing Base and the Term Borrowing Base; or
(d) of any notice of cancellation or termination of any insurance policy received by any Loan Party.
Each notice pursuant to this Section 7.3 shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to this Section 7.3 and (y) setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.
SECTION 7.4 Borrowing Base Certificate .
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(a) Borrower shall provide the Administrative Agent with the following documents in a form and detail reasonably satisfactory to Administrative Agent: as soon as possible after the end of each fiscal month (but in any event within fifteen (15) Business Days after the end thereof) a Borrowing Base Certificate setting forth the calculation of the Borrowing Base, the Term Borrowing Base, the Aggregate Borrowing Base and of Excess Availability as of the last Business Day of the immediately preceding fiscal month, duly completed and executed by a Responsible Officer of the Borrower, together with all schedules required pursuant to the terms of the Borrowing Base Certificate duly completed (such certification, a Monthly Borrowing Base Certificate ); provided that the Borrower may elect, at its option, to deliver more frequent Borrowing Base Certificates, in which case such Borrowing Base Certificates shall be computed in accordance with the requirements of Section 7.4(b) in respect of Borrowing Base Certificates required to be delivered during the continuance of a Weekly Monitoring Event and the Borrower shall continue to deliver Borrowing Base Certificates on a weekly basis until January 15th of the next succeeding calendar year.
(b) At any time during the occurrence and continuation of a Weekly Monitoring Event, the Borrower shall furnish a Borrowing Base Certificate calculated as of the close of business on the last day of the immediately preceding calendar week, on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day).
(c) The Borrower shall also cooperate with (and cause its Subsidiaries to cooperate with) the Administrative Agent, in connection with updates to the most recent inventory appraisal delivered under Section 7.4 of the Existing Credit Agreement that shall be in form and detail and from third-party appraisers reasonably acceptable to the Administrative Agent (the Updated Inventory Appraisal ) for the purpose of determining the amount of the Borrowing Base attributable to Inventory and the Administrative Agent may carry out, at the Borrowers expense, one (1) Updated Inventory Appraisal in any period of 12 consecutive months; provided , however , that notwithstanding the foregoing limitations (x)(i) at any time on or after the date on which Excess Availability has been less than the greater of (A) $60,000,000 and (B) 15% of the Maximum Credit, in each case, for five (5) consecutive Business Days, the Administrative Agent shall, solely to the extent an Updated Inventory Appraisal has not occurred within three (3) months of the relevant date of determination, or may, at any other time, carry out, at the Borrowers expense, two (2) Updated Inventory Appraisals during the following 12 consecutive months, and (ii) at any time during the continuation of a Specified Event of Default, the Administrative Agent may carry out, at the Borrowers expense, Updated Inventory Appraisals as frequently as determined by the Administrative Agent in its reasonable discretion and (y) in addition to the foregoing clause (x) , the Administrative Agent may carry out, at the Lenders expense, one (1) additional Updated Inventory Appraisal in any period of 12 consecutive months. The Borrower shall furnish to the Administrative Agent any information that the Administrative Agent may reasonably request regarding the determination and calculation of the Borrowing Base including correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all Account Debtors in respect of Accounts referred to therein.
(d) The Administrative Agent may carry out investigations and reviews of each Loan Partys property at the reasonable expense of the Borrower (including field audits conducted by the Administrative Agent) ( Field Examination ) and the Administrative Agent may carry out, at
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the Borrowers expense, one (1) Field Examination in any period of 12 consecutive months; provided , however , that notwithstanding the foregoing limitations, (x)(i) at any time on or after the date on which Excess Availability has been less than the greater of (A) $60,000,000 and (B) 15% of the Maximum Credit, in each case, for five (5) consecutive Business Days, the Administrative Agent shall, solely to the extent a Field Examination has not occurred within three (3) months of the relevant date of determination, or may, at any other time, carry out, at the Borrowers expense, two (2) Field Examinations during the following 12 consecutive months, and (ii) at any time during the continuation of a Specified Event of Default, the Administrative Agent shall carry out, at the Borrowers expense, Field Examinations as frequently as determined by the Administrative Agent in its reasonable discretion and (y) in addition to the foregoing clause (x) , the Administrative Agent may carry out, at the Lenders expense, one (1) additional Field Examination in any period of 12 consecutive months. The Borrower shall furnish to the Administrative Agent any information that the Administrative Agent may reasonably request regarding the determination and calculation of the Borrowing Base including correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all Account Debtors in respect of Accounts referred to therein.
ARTICLE VIII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Revolving Credit Commitment hereunder or any Loan or other Obligation hereunder (other than (i) contingent indemnification obligations as to which no claim has been asserted and (ii) Obligations under Secured Hedge Agreements and Cash Management Obligations) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the Letter of Credit Obligations related thereto has been Cash Collateralized or back-stopped by a letter of credit in form and substance reasonably satisfactory to the Administrative Agent), the Borrower shall, and shall cause each of the Restricted Subsidiaries to:
SECTION 8.1 Preservation of Existence, Etc .
(a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization; and
(b) take all reasonable action to obtain, preserve, renew and keep in full force and effect those of its rights (including IP Rights), licenses, permits, privileges, and franchises which are material to the conduct of its business,
except in the case of clause (a) or (b) to the extent (other than with respect to the preservation of the existence of the Borrower) that failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or pursuant to any merger, consolidation, liquidation, dissolution or Disposition permitted by Article IX .
SECTION 8.2 Compliance with Laws, Etc.
Comply in all material respects with its Constituent Documents and the requirements of all Laws and all orders, writs, injunctions and decrees of any Governmental Authority applicable
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to it or to its business or property, except if the failure to comply therewith would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect.
SECTION 8.3 Designation of Subsidiaries .
The board of directors of the Borrower may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Total Leverage Ratio for the Test Period immediately preceding such designation for which financial statements have been, or were required to have been, delivered pursuant to Section 7.1 is less than or equal to 6.00 to 1.00 (calculated on a Pro Forma Basis) (and, as a condition precedent to the effectiveness of any such designation, the Borrower shall deliver to the Administrative Agent a certificate setting forth in reasonable detail the calculations demonstrating satisfaction of such test), (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if such Subsidiary or any of its Subsidiaries owns any Equity Interests of, or owns or holds any Lien on any property of, the Borrower or any other Restricted Subsidiary of the Borrower that is not a Subsidiary of the Subsidiary to be so designated and (iv) no Subsidiary may be designated as an Unrestricted Subsidiary if, after such designation, it would be a Restricted Subsidiary for the purpose of the First Lien Term Facility, the Second Lien Term Facility, or any other Junior Financing or any other Indebtedness of any Loan Party. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by the Borrower therein at the date of designation in an amount equal to the fair market value as determined by the Borrower in good faith of the Borrowers or its Subsidiarys (as applicable) Investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time and a return on any Investment by the Borrower in Unrestricted Subsidiaries pursuant to the preceding sentence in an amount equal to the fair market value as determined by the Borrower in good faith at the date of such designation of the Borrowers or its Subsidiarys (as applicable) Investment in such Subsidiary.
Notwithstanding the foregoing, any Unrestricted Subsidiary that has been re-designated a Restricted Subsidiary may not be subsequently re-designated as an Unrestricted Subsidiary.
SECTION 8.4 Payment of Taxes, Etc.
Timely pay, discharge or otherwise satisfy, as the same shall become due and payable, all of its obligations and liabilities in respect of taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, except, in each case, to the extent (i) any such tax, assessment, charge or levy is being contested in good faith and by appropriate actions for which appropriate reserves have been established in accordance with GAAP or (ii) the failure to pay or discharge the same would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 8.5 Maintenance of Insurance .
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(a) Maintain with insurance companies that the Borrower believes (in the good faith judgment of its management) are financially sound and reputable at the time the relevant coverage is placed or renewed or with a Captive Insurance Subsidiary that is financially sound, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Borrower and the Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons, and will furnish to the Lenders, upon reasonable written request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. Each such policy of insurance shall, as appropriate, (i) name the Administrative Agent, on behalf of the Lenders, as an additional insured thereunder as its interests may appear and/or (ii) in the case of each applicable property and casualty insurance policy, contain a loss payable clause or endorsement that names the Administrative Agent, on behalf of the Lenders, as the loss payee thereunder. If any portion of any real property that is subject to a Mortgage is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a Special Flood Hazard Area, then the Administrative Agent shall, and the Lenders hereby authorize the Administrative Agent to, as soon as reasonably possible release the Mortgage with respect to such real property.
(b) Any increase, extension or renewal of any Facility shall be subject to due diligence with respect to flood insurance requirements for any Mortgaged Properties and evidence of compliance with the flood insurance requirements set forth in the Loan Document that is reasonably satisfactory to the Administrative Agent and the Lenders.
SECTION 8.6 Inspection Rights .
In addition to the requirements pursuant to Section 7.4 , permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such accountants customary policies and procedures), all at the reasonable expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 8.6 and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year absent the existence of an Event of Default and only one (1) such time shall be at the Borrowers expense; provided further that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent and the Lenders shall give the Borrower the opportunity to participate in any discussions with the Borrowers independent public accountants. Notwithstanding anything to the contrary in this Section 8.6 , none of the Borrower or any of the Restricted Subsidiaries will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of,
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any document, information or other matter that (a) constitutes non-financial trade secrets or non-financial proprietary information (other than inspections, examinations or making copies or abstracts of, or discussions of, any document, information or other matter in connection with any evaluation of the Collateral, including in connection with any field examinations, appraisals or collateral audits, or the exercise of any rights or remedies), (b) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by Law or any bona fide arms length third party contract or (c) is subject to attorney-client or similar privilege or constitutes attorney work product.
SECTION 8.7 Books and Records .
Maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with GAAP shall be made of all material financial transactions and matters involving the assets and business of Holdings, the Borrower or such Restricted Subsidiary, as the case may be.
SECTION 8.8 Maintenance of Properties .
Except if the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, maintain, preserve and protect all of its material properties and equipment used in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted.
SECTION 8.9 Use of Proceeds .
The proceeds of the Loans made hereunder, and the issuance of Letters of Credit issued hereunder, will be used on and after the Restatement Effective Date, for working capital needs and other general corporate purposes of the Borrower (including, (i) on (or within twenty (20) days of) the Restatement Effective Date, to fund a portion of the Restatement Effective Date Dividend, (ii) to finance Permitted Acquisitions and (iii) other transactions not prohibited by the Loan Documents).
SECTION 8.10 Compliance with Environmental Laws .
Except, in each case, to the extent that the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) comply, and take all reasonable actions to cause any lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and Environmental Permits; (b) obtain and renew all Environmental Permits necessary for its operations and properties; and, (c) in each case to the extent required by applicable Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all applicable Environmental Laws.
SECTION 8.11 Covenant to Guarantee Obligations and Give Security .
At the Borrowers expense, subject to the provisions of the Collateral and Guarantee Requirement and any applicable limitation in any Collateral Document, take all action necessary
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or reasonably requested by the Administrative Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied, including:
(a) (x) upon the formation or acquisition of any new direct or indirect Wholly-Owned Subsidiary that is a Material Domestic Subsidiary (in each case, other than an Unrestricted Subsidiary or an Excluded Subsidiary) by any Loan Party, the designation in accordance with Section 8.3, of any existing direct or indirect Wholly-Owned Subsidiary that is a Material Domestic Subsidiary as a Restricted Subsidiary or any Subsidiary becoming a Wholly-Owned Subsidiary that is a Material Domestic Subsidiary, (y) upon the acquisition of any material assets by the Borrower or any Subsidiary Guarantor or (z) with respect to any Subsidiary at the time it becomes a Loan Party, for any material assets held by such Subsidiary (in each case, other than assets constituting Collateral under a Collateral Document that becomes subject to the Lien created by such Collateral Document upon acquisition thereof (without limitation of the obligations to perfect such Lien)):
(i) within forty-five (45) days (or such greater number of days specified below) after such formation, acquisition or designation or, in each case, such longer period as the Administrative Agent may agree in its reasonable discretion:
(A) cause each such Material Domestic Subsidiary that is required to become a Subsidiary Guarantor under the Collateral and Guarantee Requirement to furnish to the Administrative Agent a description of the Material Real Properties owned by such Material Domestic Subsidiary in detail reasonably satisfactory to the Administrative Agent;
(B) within forty-five (45) days (or within one hundred and eighty (180) days (or such longer period as the Administrative Agent may agree in its reasonable discretion) in in the case of Mortgages and related documents specified in Section 8.13(b) ) after such formation, acquisition or designation, cause each such Material Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement to duly execute and deliver to the Administrative Agent Security Agreement Supplements, Intellectual Property Security Agreements and other security agreements and documents (including, the documents listed in Section 8.13(b) with respect to Mortgages of any Material Real Property), as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgages, Security Agreement, Intellectual Property Security Agreements and other Collateral Documents in effect on the Restatement Effective Date), in each case granting Liens required by the Collateral and Guarantee Requirement;
(C) cause each such Material Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement to deliver any and all certificates representing Equity Interests (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank (or any other documents customary under local law) and instruments evidencing the intercompany Indebtedness held by such Material Domestic Subsidiary and required to be pledged pursuant to the Collateral Documents, indorsed in blank to the Administrative Agent;
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(D) within forty-five (45) days (or within one hundred and eighty (180) days (or such longer period as the Administrative Agent may agree in its reasonable discretion) in the case of Mortgages and related documents specified in Section 8.13(b) ) after such formation, acquisition or designation, (1) take and cause the applicable Material Domestic Subsidiary and each direct or indirect parent of the applicable Material Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement to take whatever action (including the recording of Mortgages, the filing of UCC financing statements and delivery of stock and membership interest certificates to the extent certificated) may be necessary in the reasonable opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid first priority (subject to the Intercreditor Agreement) perfected Liens required by the Collateral and Guarantee Requirement, enforceable against all third parties in accordance with their terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity (regardless of whether enforcement is sought in equity or at law) and (2) comply with the requirements of Section 8.12 with respect to all Deposit Accounts; and
(ii) within forty-five (45) days (or within one hundred and eighty (180) days (or such longer period as the Administrative Agent may agree in its reasonable discretion) in the case of Mortgages and related documents specified in Section 8.13(b) ) after the request therefor by the Administrative Agent (or such longer period as the Administrative Agent may agree in its reasonable discretion), deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this Section 8.11(a) as the Administrative Agent may reasonably request; and
(iii) as promptly as practicable after the reasonable request therefor by the Administrative Agent, deliver to the Administrative Agent with respect to each Material Real Property, title reports, surveys and environmental assessment reports and appraisals (if required under FIRREA), flood certifications under Regulation H of the Federal Reserve Board, provided that the Administrative Agent may in its reasonable discretion accept any such existing report or survey to the extent prepared as of a date reasonably satisfactory to the Administrative Agent; provided, however , that there shall be no obligation to deliver to the Administrative Agent any environmental assessment report whose disclosure to the Administrative Agent would require the consent of a Person other than the Borrower or one of its Subsidiaries, where, despite the commercially reasonable efforts of the Borrower to obtain such consent, such consent cannot be obtained; and
(b) (i) the Borrower shall obtain the security interests and Guarantees set forth on Schedule 1.1A on or prior to the dates corresponding to such security interests and Guarantees set forth on Schedule 1.1A ; and (ii) after the Restatement Effective Date, promptly after the acquisition of any Material Real Property by the Borrower or any Loan Party, and such Material Real Property shall not already be subject to a perfected Lien pursuant to the Collateral and Guarantee Requirement, the Borrower shall give notice thereof to the Administrative Agent and will take, or cause the relevant Loan Party, to take, the actions referred to in Section 8.13(b) .
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(c) Notwithstanding anything to the contrary contained herein, no assets (x) of any entity that becomes a Loan Party as a result of a Permitted Acquisition or (y) acquired from a third party by a Loan Party outside the ordinary course of business, in each case, which were not included in the analysis under the most recent Updated Inventory Appraisal or Field Examination and which is otherwise eligible for inclusion in the calculation of the Borrowing Base or the Term Borrowing Base, may be included in the calculation of the Borrowing Base or the Term Borrowing Base unless and until the Administrative Agent has completed or received, in any case at the expense of the Borrower (without regard to, or counting against, any limitations on expense reimbursement or the number of Field Examinations or Inventory appraisals that may be conducted during any period, as contained in Section 7.4 ) (A) Inventory appraisals and Field Examinations, as may be reasonably required by the Administrative Agent, from appraisers and examiners reasonably satisfactory to the Administrative Agent and (B) such other due diligence with respect to such assets as the Administrative Agent may require in its Permitted Discretion, all of the results of the foregoing to be satisfactory to the Administrative Agent in its Permitted Discretion.
SECTION 8.12 Cash Receipts .
(a) Maintain an effective account control agreement (a Deposit Account Control Agreement ) with each Approved Account Bank, in each case, in form and substance reasonably satisfactory to the Administrative Agent, with respect to each Deposit Account in which funds of any of the Loan Parties are deposited (including those existing as of the Restatement Effective Date and listed on Schedule 8.12 attached hereto, and excluding, for the avoidance of doubt, the Asset Sale Proceeds Pledged Account, lottery, petty cash, payroll, trust and tax withholding accounts) (collectively, the Material Bank Accounts ); provided that each Loan Party may maintain credit balances in Store Accounts or other accounts, in each case that are not Approved Deposit Accounts, so long as the aggregate balance in all such Store Accounts and other accounts does not exceed $7,500,000 (such amount, the Excluded Amount ). Notwithstanding anything in this section to the contrary, the provisions of this Section 8.12(a) shall not apply to any Deposit Account acquired by a Loan Party in connection with a Permitted Acquisition prior to the date that is ninety (90) days (or such later date as the Administrative Agent may agree) following the consummation of such Permitted Acquisition.
(b) Each Loan Party shall (i) instruct each Account Debtor or other Person obligated to make a payment to any of them under any Account or Credit Card Receivable to make payment, or to continue to make payment, to an Approved Deposit Account, (ii) deposit in an Approved Deposit Account promptly upon receipt all Cash Receipts (as defined below) received by any Loan Party from any other Person, (iii) deliver to the Administrative Agent Credit Card Notifications and (iv) instruct each depository institution for a Deposit Account to cause all amounts on deposit and available at the close of each Business Day in such Deposit Account (other than balances constituting the Excluded Amount) to be swept to one of the Loan Parties concentration accounts no less frequently than on a daily basis, such instructions to be irrevocable unless otherwise agreed to by the Administrative Agent.
(c) Each Credit Card Notification, Deposit Account Control Agreement (and, in the case of clause (iii) below, Securities Account Control Agreement) shall require (in each case, without further consent of the Loan Parties), and the Loan Parties shall cause, after the
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occurrence and during the continuance of a Cash Dominion Period and subject to the Intercreditor Agreement, the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the concentration account maintained by, in the name of and under the sole dominion and control of the Administrative Agent at the Administrative Agent (the Concentration Account ), of all cash receipts and collections, including the following (collectively, the Cash Receipts ):
(i) all available cash receipts from the sale of Inventory and other Current Asset Collateral (and, after the repayment of the First Lien Term Facility, all other Collateral) or casualty insurance proceeds arising from any of the foregoing;
(ii) all proceeds of collections of Accounts and Credit Card Receivables;
(iii) the then contents of each Approved Deposit Account and each Approved Securities Account (in each case, net of any minimum balance as may be required to be kept in the subject Deposit Account or Securities Account, as the case may be, by the institution at which such Deposit Account or Securities Account, as applicable, is maintained); and
(iv) the cash proceeds of all credit card charges.
(d) The Concentration Account shall at all times be under the sole dominion and control of the Administrative Agent. The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall at all times be collateral security for all of the Obligations and (iii) the funds on deposit in the Concentration Account shall be applied as provided in this Agreement. In the event that, notwithstanding the provisions of this Section, during the continuation of any Cash Dominion Period, any Loan Party receives or otherwise has dominion and control of any such proceeds or collections, such proceeds and collections shall be held in trust by such Loan Party for the Administrative Agent, shall not be commingled with any of such Loan Partys other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Concentration Account or dealt with in such other fashion as such Loan Party may be instructed by the Administrative Agent.
(e) So long as no Cash Dominion Period is continuing, the Loan Parties may direct, and shall have sole control over, the manner of disposition of funds in the Approved Securities Accounts (other than with respect to any Qualified Cash Securities Account) and Approved Deposit Accounts.
(f) Any amounts received in the Concentration Account at any time when no Cash Dominion Period is continuing or all of the Obligations have been paid in full shall be remitted to the operating account of the Loan Parties maintained with the Administrative Agent or to an operating account otherwise designated by the Borrower.
(g) Upon the written request of the Borrower, the Administrative Agent shall promptly (but in any event within two (2) Business Day after such request) furnish written notice to each Approved Account Bank of any termination of a Cash Dominion Period.
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(h) The Borrower may from time to time provide a written request to the Administrative Agent requesting that the Administrative Agent permit the withdrawal of a requested amount of Qualified Cash from any Qualified Cash Securities Account and, within two (2) Business Days of such written request, the Administrative Agent shall permit (or, if the relevant Qualified Cash Securities Account is not held with the Administrative Agent, shall instruct the relevant depositary bank or securities intermediary to so permit) the withdrawal of the requested amount of Qualified Cash in accordance with the written instructions of the Borrower so long as (i) no Default has occurred and is continuing or would result from such withdrawal of the requested amount of Qualified Cash in accordance with such written instructions of the Borrower, (ii) after giving effect to such withdrawal, the Revolving Credit Outstandings shall not exceed the Borrowing Base (it being agreed that, immediately upon such withdrawal, without any further act of any Person, the Borrowing Base shall be calculated excluding the amount of Qualified Cash so withdrawn), and (iii) the Borrower shall have provided an update to the Borrowing Base Certificate most recently delivered to the Administrative Agent pursuant to Section 7.4(a) or (b) (as applicable) reflecting the result of such withdrawal on the calculation of the Borrowing Base.
SECTION 8.13 Further Assurances .
Subject to the provisions of the Collateral and Guarantee Requirement and any applicable limitations in any Collateral Document and in each case at the expense of the Loan Parties:
(a) Promptly upon reasonable request by the Administrative Agent or as may be required by applicable Laws (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of any Collateral Document or other document or instrument relating to any Collateral, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent may reasonably request from time to time in order to carry out more effectively the purposes of the Collateral Documents.
(b) In the case of any Material Real Property, provide the Administrative Agent with Mortgages with respect to such Material Real Property owned by any Loan Party within one hundred and eighty (180) days (or such longer period as the Administrative Agent may agree in its sole discretion) of the acquisition of such Material Real Property in each case together with:
(i) evidence that counterparts of the Mortgages have been duly executed, acknowledged and delivered and are in form suitable for filing or recording in all filing or recording offices that the Administrative Agent may deem reasonably necessary or desirable in order to create a valid and subsisting perfected Lien on such Material Real Property in favor of the Administrative Agent for the benefit of the Secured Parties and that all filing and recording taxes and fees have been paid or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent;
(ii) fully paid American Land Title Association Lenders Extended Coverage title insurance policies or the equivalent or other form available in each applicable jurisdiction (the Mortgage Policies ) in form and substance, with endorsements available in the applicable jurisdiction and in amount, reasonably acceptable to the
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Administrative Agent (not to exceed the value of the real properties covered thereby), issued, coinsured and reinsured by title insurers reasonably acceptable to the Administrative Agent, insuring the Mortgages to be valid subsisting Liens on the property described therein, subject only to Liens permitted by Section 9.1 , and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents) and such coinsurance and direct access reinsurance as the Administrative Agent may reasonably request and is available in the applicable jurisdiction;
(iii) opinions of local counsel for the Loan Parties in states in which such Material Real Property is located, with respect to the enforceability and perfection of the Mortgages and any related fixture filings in form and substance reasonably satisfactory to the Administrative Agent; and
(iv) title reports, surveys and environmental assessment reports and appraisals (if required under FIRREA), flood certifications under Regulation H of the Federal Reserve Board, provided that the Administrative Agent may in its reasonable discretion accept any such existing report or survey to the extent prepared as of a date reasonably satisfactory to the Administrative Agent; provided, however , that there shall be no obligation to deliver to the Administrative Agent any environmental assessment report whose disclosure to the Administrative Agent would require the consent of a Person other than the Borrower or one of its Subsidiaries, where, despite the commercially reasonable efforts of the Borrower to obtain such consent, such consent cannot be obtained; and
(v) such other evidence that all other actions that the Administrative Agent may reasonably deem necessary or desirable in order to create valid and subsisting Liens on the property described in the Mortgages has been taken,
provided that the Borrower will provide at least forty-five (45) days prior written notice to the Administrative Agent and the Lenders prior to delivering a Mortgage with respect to any Material Real Property and shall not execute and deliver any Mortgage with respect to any Material Real Property prior to written confirmation from the Administrative Agent and the Lenders of the completion of due diligence with respect to flood insurance requirements for such Material Real Property and receipt of evidence of compliance with flood insurance requirements set forth in the Loan Documents that is reasonably satisfactory thereto.
Notwithstanding the foregoing and anything to the contrary in this Agreement, the Borrower agrees that it shall not, nor permit any Restricted Subsidiary to, grant any deed of trust, trust deed, hypothec or mortgage in any real property owned by any Restricted Subsidiary (other than a Loan Party) with a fair market value in excess of $5,000,000, in each case, other than a Mortgage in favor of the Administrative Agent, the First Lien Term Facility Administrative Agent and the Second Lien Term Facility Administrative Agent.
SECTION 8.14 Physical Inventories.
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Cause not less than one (1) cycle count of Inventory to be undertaken, at the expense of the Loan Parties on a monthly basis in accordance with the Borrowers usual business practices, conducted using methodology routinely used by such Loan Parties in their ordinary course of business with respect to such Inventory counts or as otherwise consistent with standard and customary business practices, and shall post such results to the Loan Parties stock ledgers and general ledgers, as applicable and, following the completion of such Inventory count, deliver a summary, in a form routinely used by such Loan Parties in their ordinary course of business with respect to such Inventory counts or as otherwise consistent with standard and customary business practices, of the results of such cycle count to the Administrative Agent.
SECTION 8.15 Post-Closing Matters.
(a) Not later than the 60 days after the Restatement Effective Date (or such longer period as the Administrative Agent may agree in its sole discretion), the Borrower shall deliver Deposit Account Control Agreement or amendments thereto to, in each case, in form and substance reasonably satisfactory to the Administrative Agent, with respect to any Deposit Account required to be subject to a Deposit Account Control Agreement under Section 8.12 hereof.
(b) Not later than the 60 days after the Restatement Effective Date (or such longer period as the Administrative Agent may agree in its sole discretion), the Borrower shall deliver endorsements with respect to the identity of the Administrative Agent for each Mortgage Policy with respect to the Material Real Property listed on Schedule 1.1D , in form and substance reasonably acceptable to the Administrative Agent.
(c) Not later than the 60 days after the Restatement Effective Date (or such longer period as the Administrative Agent may agree in its sole discretion), the Borrower shall deliver evidence that all endorsements to the insurance policies required by Section 8.5, evidencing the addition of the Administrative Agent, on behalf of the Lenders, as additional insured and/or lender loss payee under insurance policy (as applicable), in form and substance reasonably acceptable to the Administrative Agent.
ARTICLE IX
NEGATIVE COVENANTS
So long as any Lender shall have any Revolving Credit Commitment hereunder or any Loan or other Obligation hereunder (other than (i) contingent indemnification obligations as to which no claim has been asserted and (ii) Obligations under Secured Hedge Agreements and Cash Management Obligations) shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the Letter of Credit Obligations related thereto has been Cash Collateralized or back-stopped by a letter of credit in form and substance reasonably satisfactory to the Administrative Agent), the Borrower shall not (and, with respect to Section 9.15 , only Holdings shall not), nor shall the Borrower permit any Restricted Subsidiary to:
SECTION 9.1 Liens .
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Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:
(a) Liens created pursuant to any Loan Document;
(b) Liens existing on the Restatement Effective Date and set forth on Schedule 9.1(b) ;
(c) Liens for taxes, assessments or governmental charges that are not overdue for a period of more than thirty (30) days or that are being contested in good faith and by appropriate actions for which appropriate reserves have been established in accordance with GAAP;
(d) statutory or common law Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens or other customary Liens (other than in respect of Indebtedness) in favor of landlords, so long as, in each case, such Liens arise in the ordinary course of business that secure amounts not overdue for a period of more than thirty (30) days or, if more than thirty (30) days overdue, are unfiled and no other action has been taken to enforce such Lien or that are being contested in good faith and by appropriate actions, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
(e) (i) pledges or deposits in the ordinary course of business in connection with workers compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Holdings, the Borrower or any Restricted Subsidiaries;
(f) deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions (including zoning restrictions), encroachments, protrusions and other similar encumbrances and title defects affecting real property that, in the aggregate, do not in any case materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries taken as a whole, or the use of the property for its intended purpose, and any other exceptions to title on the Mortgage Policies accepted by the Administrative Agent in accordance with this Agreement;
(h) Liens arising from judgments or orders for the payment of money not constituting an Event of Default under Section 10.1(g) ;
(i) (i) Liens securing obligations in respect of Indebtedness permitted under Section 9.3(e) ; provided that (A) such Liens attach concurrently with or within two hundred and seventy (270) days after completion of the acquisition, construction, repair, replacement or improvement (as applicable) of the property subject to such Liens, (B) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, replacements
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thereof and additions and accessions to such property and the proceeds and the products thereof and customary security deposits and (C) such Liens do not at any time extend to or cover any assets (except for additions and accessions to such assets, replacements and products thereof and customary security deposits) other than the assets subject to, or acquired, constructed, repaired, replaced or improved with the proceeds of such Indebtedness; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender and (ii) Liens on assets of Restricted Subsidiaries that are Non-Loan Parties securing Indebtedness of such Restricted Subsidiaries permitted pursuant to Section 9.3(l) ;
(j) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Borrower and its Subsidiaries, taken as a whole, or (ii) secure any Indebtedness;
(k) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(l) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
(m) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Section 9.2(i) or Section 9.2(m) to be applied against the purchase price for such Investment or (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 9.5 , in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;
(n) Liens on property of any Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary incurred pursuant to Sections 9.3(b) , (l) , (r) or (v) ;
(o) Liens in favor of the Borrower or a Restricted Subsidiary securing Indebtedness permitted under Section 9.3(d) ;
(p) Liens existing on property (other than Current Asset Collateral unless the Liens thereon are subordinated to the Lien of the Administrative Agent in a manner consistent with the terms of the Intercreditor Agreement) at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to Section 8.3 ), in each case after the Restatement Effective Date (other than Liens on the Equity Interests of any Person that becomes a Restricted Subsidiary); provided that (i) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property of such acquired Restricted Subsidiary), and (ii) the Indebtedness secured thereby is permitted under Section 9.3(e) or (v) ;
(q) any interest or title of a lessor, sublessor, licensor or sublicensor or secured by a lessors, sublessors, licensors or sublicensors interest under leases (other than Capitalized
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Leases) or licenses entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business;
(r) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business;
(s) Liens deemed to exist in connection with Investments in repurchase agreements under Section 9.2 and reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts maintained in the ordinary course of business and not for speculative purposes;
(t) Liens solely on any cash earnest money deposits made by the Borrower or any of the Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(u) ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located;
(v) purported Liens evidenced by the filing of precautionary UCC financing statements or similar public filings;
(w) Liens securing obligations in respect of Indebtedness permitted under Section 9.3(p)(i) and Specified Hedge Obligations and any Cash Management Obligations (in each case, as defined in the First Lien Term Facility Credit Agreement) permitted under Section 9.3(p)(ii) (or, in each case, any Permitted Refinancing in respect thereof, and subject to the Intercreditor Agreement or, in the case of any Permitted Refinancing thereof, another intercreditor agreement containing terms that are at least as favorable to the Secured Parties as those contained in the Intercreditor Agreement);
(x) Liens securing obligations in respect of Indebtedness permitted under Section 9.3(q) (or, in each case, any Permitted Refinancing in respect thereof, and subject to the Intercreditor Agreement or, in the case of any Permitted Refinancing thereof, another intercreditor agreement containing terms that are at least as favorable to the Secured Parties as those contained in the Intercreditor Agreement);
(y) Liens (i) of a collection bank arising under Section 4-208 of the UCC on the items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business and not for speculative purposes and (iii) in favor of a banking or other financial institution arising as a matter of law encumbering deposits or other funds maintained with a financial institution (including the right of set off) and that are within the general parameters customary in the banking industry;
(z) any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries, taken as a whole;
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(aa) the modification, replacement, renewal or extension of any Lien permitted by clauses (b), (i) and (p) of this Section 9.1 ; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 9.3(e) , and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 9.3 ;
(bb) rights of set-off against credit balances of the Borrower or any of its Subsidiaries with Credit Card Issuers or Credit Card Processors or amounts owing by such Credit Card Issuers or Credit Card Processors to the Borrower or any of its Subsidiaries in the ordinary course of business, but not rights of set-off against any other property or assets of the Borrower or any of its Subsidiaries pursuant to the Credit Card Agreements (as in effect on the Effective Date) to secure the obligations of the Borrower or any of its Subsidiaries to the Credit Card Issuers or Credit Card Processors as a result of fees and chargebacks;
(cc) without duplication of, or aggregation with, any other Lien permitted under any other clause of this Section 9.1 , other Liens (not covering Current Asset Collateral unless the Liens thereon are subordinated to the Lien of the Administrative Agent in a manner consistent with the terms of the Intercreditor Agreement) securing Indebtedness outstanding in an aggregate principal amount not to exceed the greater of (x) $50,000,000 and (y) 1.50% of Total Assets at any time outstanding, in each case determined as of the date of incurrence;
(dd) deposits of cash with the owner or lessor of premises leased and operated by the Borrower or any of its Subsidiaries in the ordinary course of business of the Borrower and such Subsidiary to secure the performance of the Borrowers or such Subsidiarys obligations under the terms of the lease for such premises; and
(ee) Liens that are customary contractual rights of setoff (i) relating to the establishment of depository relations with banks or other deposit-taking financial institutions in the ordinary course of business and not given in connection with the issuance of Indebtedness or (ii) relating to pooled deposit or sweep accounts of Holdings, the Borrower or any of the Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of Holdings, the Borrower and the Restricted Subsidiaries.
SECTION 9.2 Investments .
Make or hold any Investments, except:
(a) Investments by the Borrower or any of the Restricted Subsidiaries in assets that are Cash Equivalents;
(b) loans or advances to officers, directors and employees of Holdings (or any direct or indirect parent thereof), the Borrower or any of the Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such Persons purchase of Equity Interests of Holdings (or any direct or indirect parent thereof; provided that, to the extent such loans or advances are made in cash, the amount of such loans and advances used to acquire such Equity Interests shall be contributed to Holdings in cash) and (iii) for any other purpose, in an aggregate principal amount
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outstanding under clauses (i) through (iii) not to exceed $20,000,000 at any time; provided , further , that the aggregate principal amount outstanding under clause (iii) shall not exceed $10,000,000 at any time;
(c) Investments (i) by the Borrower or any Restricted Subsidiary that is a Loan Party in the Borrower or any Restricted Subsidiary that is a Loan Party, (ii) by any Non-Loan Party in any other Non-Loan Party that is a Restricted Subsidiary, (iii) by any Non-Loan Party in the Borrower or any Restricted Subsidiary that is a Loan Party and (iv) without duplication of any other clauses of this Section 9.2 , by any Loan Party in any Non-Loan Party that is a Restricted Subsidiary; provided that (A) any such Investments made pursuant to this clause (iv) in the form of intercompany loans shall be evidenced by notes that have been pledged (individually or pursuant to a global note) to the Administrative Agent for the benefit of the Lenders in accordance with the requirements of the Security Agreement and (B) the aggregate amount of Investments made pursuant to this clause (iv) shall not exceed $37,500,000 at any time outstanding;
(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;
(e) Investments consisting of Liens, Indebtedness, fundamental changes, Dispositions and Restricted Payments permitted under Sections 9.1 , 9.3 (other than 9.3(c)(ii) or (d) ), 9.4 (other than 9.4(c)(ii) , (d) or (f) ), 9.5 (other than 9.5(d)(ii) or (e) ) and 9.6 (other than 9.6(d) or (g)(iv) ), respectively;
(f) Investments existing on the Restatement Effective Date or made pursuant to legally binding written contracts in existence on the Restatement Effective Date, in each case, set forth on Schedule 9.2(f) and any modification, replacement, renewal, reinvestment or extension of any of the foregoing; provided that the amount of any Investment permitted pursuant to this Section 9.2(f) is not increased from the amount of such Investment on the Restatement Effective Date except pursuant to the terms of such Investment as of the Restatement Effective Date or as otherwise permitted by another clause of this Section 9.2 ;
(g) Investments in Swap Contracts permitted under Section 9.3 ;
(h) promissory notes and other non-cash consideration that is permitted to be received in connection with Dispositions permitted by Section 9.5 ;
(i) Permitted Acquisitions;
(j) [Reserved];
(k) Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment;
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(l) loans and advances to Holdings (or any direct or indirect parent thereof) in lieu of, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), Restricted Payments to the extent permitted to be made to Holdings (or such direct or indirect parent) in accordance with Section 9.6(f) or (g) ;
(m) without duplication of any other clauses of this Section 9.2 , other Investments that do not exceed $50,000,000 in the aggregate at any time outstanding, determined as of the date of such Investment;
(n) advances of payroll payments to employees in the ordinary course of business;
(o) Investments to the extent that payment for such Investments is made solely with Qualified Equity Interests of Holdings (or any direct or indirect parent thereof);
(p) Investments held by a Restricted Subsidiary acquired after the Effective Date or of a Person merged into the Borrower or merged or consolidated with a Restricted Subsidiary in accordance with Section 9.4 after the Effective Date (other than existing Investments in subsidiaries of such Subsidiary or Person, which must comply with the requirements of Sections 9.2(i) or (m) ) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
(q) Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and Article 4 customary trade arrangements with customers consistent with past practices;
(r) without duplication of, or aggregation with, any Investment made under any other clause of this Section 9.2 , the Borrower and its Restricted Subsidiaries may make other Investments as long as the Payment Conditions are satisfied after giving effect thereto;
(s) Investments made by any Restricted Subsidiary that is not a Loan Party to the extent such Investments are financed with the proceeds received by such Restricted Subsidiary from an Investment made pursuant to clauses (c)(iv), (i) or (m) of this Section 9.2 ; and
(t) Guarantees by the Borrower or any of the Restricted Subsidiaries of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business.
SECTION 9.3 Indebtedness .
Create, incur, assume or suffer to exist any Indebtedness or issue any Disqualified Equity Interest, other than:
(a) Indebtedness under the Loan Documents;
(b) (i) Indebtedness existing on the Restatement Effective Date set forth on Schedule 9.3(b) and any Permitted Refinancing thereof and (ii) intercompany Indebtedness outstanding on
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the Restatement Effective Date; provided that all such Indebtedness of any Loan Party owed to any Non-Loan Party shall be subject to the Intercompany Subordination Agreement;
(c) (i) Guarantees by the Borrower and the Restricted Subsidiaries in respect of Indebtedness of the Borrower or any of the Restricted Subsidiaries otherwise permitted hereunder (except that a Restricted Subsidiary that is not a Loan Party may not, by virtue of this Section 9.3(c) , Guarantee Indebtedness that such Restricted Subsidiary could not otherwise incur under this Section 9.3 ); provided that (A) no Guarantee by any Restricted Subsidiary of any Junior Financing shall be permitted unless such Restricted Subsidiary shall have also provided a Guarantee of the Obligations substantially on the terms set forth in the Guaranty, and (B) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Guaranty on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness, and (ii) any Guarantee by the Borrower or any Subsidiary Guarantor of Indebtedness of a Restricted Subsidiary that would have been permitted as an Investment by the Borrower or such Subsidiary Guarantor in such Restricted Subsidiary under Section 9.2(c) ;
(d) Indebtedness of the Borrower or any of the Restricted Subsidiaries owing to the Borrower or any other Restricted Subsidiary to the extent constituting an Investment permitted by Section 9.2 ; provided that (i) all such Indebtedness of any Loan Party owed to any Person that is not a Loan Party shall be subject to the Intercompany Subordination Agreement and (ii) in the event of any such Indebtedness in respect of the sale, transfer or assignment of Current Asset Collateral, such Indebtedness shall be duly noted on the books and records of the Loan Parties as being owing in respect of Current Asset Collateral;
(e) (i) Attributable Indebtedness relating to any transaction and other Indebtedness (including Capitalized Leases) of the Borrower and the Restricted Subsidiaries financing the acquisition, construction, repair, replacement or improvement of fixed or capital assets; provided that such Indebtedness is incurred concurrently with or within two hundred and seventy (270) days after the applicable acquisition, construction, repair, replacement or improvement, and (ii) any Permitted Refinancing thereof; provided that the aggregate principal amount of Indebtedness (including Attributable Indebtedness) at any one time outstanding incurred pursuant to this clause (e) shall not exceed the greater of $200,000,000 and 3.00% of Total Assets, in each case determined at the time of incurrence; provided, further, that for the purposes of determining compliance with this Section 9.3(e) , Attributable Indebtedness shall not be deemed to arise from a sale leaseback transaction with respect to real property comprising a Store or distribution center that is originally treated under GAAP as an operating lease at the time such sale leaseback transaction is consummated but is subsequently treated under GAAP as a Capitalized Lease as the result of a change in GAAP (or interpretations thereof) after the Restatement Effective Date;
(f) Indebtedness in respect of Swap Contracts designed to hedge against Holdings, the Borrowers or any Restricted Subsidiarys exposure to interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes and Guarantees thereof;
(g) Indebtedness representing deferred compensation to employees of the Borrower and its Subsidiaries incurred in the ordinary course of business;
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(h) Indebtedness to current or former officers, directors, managers, consultants and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings (or any direct or indirect parent thereof) permitted by Section 9.6 ;
(i) Indebtedness incurred by the Borrower or any of the Restricted Subsidiaries in a Permitted Acquisition, any other Investment expressly permitted hereunder or any Disposition, in each case to the extent constituting indemnification obligations or obligations in respect of purchase price (including earn-outs) or other similar adjustments;
(j) Indebtedness consisting of obligations of the Borrower and the Restricted Subsidiaries under deferred compensation or other similar arrangements with employees incurred by such Person in connection with Permitted Acquisitions or any other Investment expressly permitted hereunder;
(k) Cash Management Obligations and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections, employee credit card programs and other cash management and similar arrangements in the ordinary course of business and any Guarantees thereof;
(l) Indebtedness of the Borrower and the Restricted Subsidiaries in an aggregate principal amount at any time outstanding not to exceed the greater of $100,000,000 and 2.75% of Total Assets, in each case determined at the time of incurrence; provided that a maximum of the greater of $25,000,000 and 1.00% of Total Assets in aggregate principal amount of such Indebtedness may be incurred by Non-Loan Parties, in each case determined at the time of incurrence;
(m) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(n) Indebtedness incurred by the Borrower or any of the Restricted Subsidiaries in respect of letters of credit, bank guarantees, bankers acceptances, warehouse receipts or similar instruments issued or created in the ordinary course of business consistent with past practice in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims;
(o) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any of the Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;
(p) (i) Indebtedness in an aggregate principal amount not to exceed the sum of (A) $1,925,000,000 plus (B) an amount equal to result of (x) $475,000,000 less (y) the aggregate principal amount of any incremental indebtedness incurred in reliance of Section 2.18(3) of the Second Lien Term Facility Credit Agreement (as in effect on the Restatement Effective Date), at
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any time outstanding under the First Lien Term Facility or under any document governing Incremental Equivalent Term Debt (as such term is defined in the First Lien Term Facility Credit Agreement (as in effect on the Restatement Effective Date)) and (ii) the amount of obligations in respect of (A) Specified Hedge Obligations and (B) Cash Management Obligations (in the case of each of the foregoing clauses (A) and (B) , as defined in the First Lien Term Facility Credit Agreement (as in effect on the Restatement Effective Date)) at any time outstanding and not incurred in violation of Section 9.3(f) , in each case and, in respect of clauses (i) and (ii) , any Permitted Refinancing thereof, provided that, for the avoidance of doubt , the aggregate principal amount of incremental Indebtedness incurred pursuant to Section 9.3(p)(i)(b) and 9.3(q)(B) shall not exceed $475,000,000;
(q) Indebtedness in an aggregate principal amount not to exceed the sum of (A) $625,000,000 plus (B) an amount equal to the result of (x) $475,000,000 less (y) the aggregate principal amount of any incremental indebtedness incurred in reliance of Section 2.18(3) of the First Lien Term Facility Credit Agreement (as in effect on the Restatement Effective Date), at any time outstanding under the Second Lien Term Facility or under any document governing Incremental Equivalent Term Debt (as such term is defined in the Second Lien Term Facility Credit Agreement (as in effect on the Restatement Effective Date)), and any Permitted Refinancing thereof, provided that , for the avoidance of doubt, the aggregate principal amount of incremental Indebtedness incurred pursuant to Sections 9.3(p)(i)(b) and 9.3(q)(B) shall not exceed $475,000,000;
(r) Indebtedness incurred by a Foreign Subsidiary which, when aggregated with the principal amount of all other Indebtedness incurred pursuant to this clause (r) and then outstanding, does not exceed $25,000,000;
(s) (i) other unsecured Indebtedness of the Borrower or any Restricted Subsidiary, so long as (A) the Payment Conditions shall have been satisfied after giving effect thereto and (B) the maturity date and Weighted Average Life to Maturity of such Indebtedness is at least six (6) months after the Latest Maturity Date at the time of incurrence of such Indebtedness and (ii) other Indebtedness that is secured and subordinated, provided that such Indebtedness (A) is not secured by any Current Asset Collateral, (B) is subject to an intercreditor agreement containing terms that are at least as favorable to the Secured Parties as those contained in the Intercreditor Agreement and (C) has a maturity date and Weighted Average Life to Maturity that is at least six (6) months after the Latest Maturity Date at the time of incurrence of such Indebtedness (and any Permitted Refinancing thereof);
(t) [ reserved ] ;
(u) Indebtedness in respect of letters of credit issued for the account of any of the Subsidiaries of Holdings to finance the purchase of Inventory so long as (x) such Indebtedness is unsecured and (y) the aggregate face amount of such letters of credit does not exceed $100,000,000 at any time;
(v) Indebtedness (i) of any Person that becomes a Restricted Subsidiary after the Restatement Effective Date, which Indebtedness is existing at the time such Person becomes a Restricted Subsidiary and is not incurred in contemplation of such Person becoming a Restricted
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Subsidiary that is non-recourse to the Borrower, Holdings or any other Restricted Subsidiary (other than any Subsidiary of such Person that is a Subsidiary on the date such Person becomes a Restricted Subsidiary after the Restatement Effective Date) and is either (A) unsecured or (B) secured only by the assets of such Restricted Subsidiary by Liens permitted under Section 9.1(p) and, in each case, any Permitted Refinancing thereof, and (ii) of the Borrower or any Restricted Subsidiary incurred or assumed in connection with any Permitted Acquisition that is secured only by Liens permitted under Section 9.1(p) (and any Permitted Refinancing of the foregoing) and so long as the aggregate principal amount of such Indebtedness and all Indebtedness resulting from any Permitted Refinancing thereof at any time outstanding pursuant to clause (v)(ii) does not exceed $50,000,000; provided that Indebtedness incurred under clause (i)(B) or clause (ii) of this paragraph (v) that is secured by assets of a type that would otherwise constitute Current Asset Collateral shall not exceed an aggregate amount outstanding of $25,000,000 and any such assets shall have been and at all times be segregated from, and not commingled with, Current Asset Collateral, with reasonably satisfactory evidence of compliance with the foregoing to be provided to the Administrative Agent promptly upon request; and
(w) all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (v) above.
Notwithstanding the foregoing, no Restricted Subsidiary that is a Non-Loan Party will guarantee any Indebtedness for borrowed money of a Loan Party unless such Restricted Subsidiary becomes a Guarantor.
For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Indebtedness, the Dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to extend, replace, refund, refinance, renew or defease other Indebtedness denominated in a foreign currency, and such extension, replacement, refunding, refinancing, renewal or defeasance would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such extension, replacement, refunding, refinancing, renewal or defeasance, such Dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased, plus the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing.
The accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness shall not be deemed to be an incurrence of Indebtedness for purposes of this Section 9.3 . The principal amount of any non-interest bearing Indebtedness or other discount security constituting Indebtedness at any date shall be the principal amount thereof that would be shown on a balance sheet of the Borrower dated such date prepared in accordance with GAAP.
SECTION 9.4 Fundamental Changes .
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Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that:
(a) Holdings or any Restricted Subsidiary may merge or consolidate with the Borrower (including a merger, the purpose of which is to reorganize the Borrower into a new jurisdiction); provided that (x) the Borrower shall be the continuing or surviving Person, (y) such merger or consolidation does not result in the Borrower ceasing to be organized under the Laws of the United States, any state thereof or the District of Columbia and (z) in the case of a merger or consolidation of Holdings with and into the Borrower, Holdings shall not be an obligor in respect of any Qualified Holding Company Debt or other Indebtedness that is not permitted to be Indebtedness of the Borrower under this Agreement, shall have no direct Subsidiaries at the time of such merger or consolidation other than the Borrower and, after giving effect to such merger or consolidation, the direct parent of the Borrower shall expressly assume all the obligations of Holdings under this Agreement and the other Loan Documents to which Holdings is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent;
(b) (i) any Restricted Subsidiary that is not a Loan Party may merge or consolidate with or into any other Restricted Subsidiary of the Borrower that is not a Loan Party, (ii) any Restricted Subsidiary may merge or consolidate with or into any other Restricted Subsidiary of the Borrower that is a Loan Party, (iii) any merger the sole purpose of which is to reincorporate or reorganize a Loan Party in another jurisdiction in the United States shall be permitted and (iv) any Restricted Subsidiary may liquidate or dissolve or change its legal form if the Borrower determines in good faith that such action is in the best interests of the Borrower and its Restricted Subsidiaries and is not materially disadvantageous to the Lenders; provided , that (x) in the case of clauses (ii) through (iv) of this paragraph (b) , (A) no Event of Default shall result therefrom, (B) no Change of Control shall result therefrom and (C) the surviving Person (or, with respect to clause (iv) , the Person who receives the assets of such dissolving or liquidated Restricted Subsidiary that is a Guarantor) shall be a Loan Party and (y) in the case of clause (iii) of this paragraph (b) , the Borrower shall provide not less than ten (10) days prior written notice to the Administrative Agent of such proposed change;
(c) any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or another Restricted Subsidiary; provided that if the transferor in such a transaction is a Loan Party, then (i) the transferee must be a Loan Party or (ii) such Investment must be a permitted Investment in a Restricted Subsidiary which is not a Loan Party in accordance with Section 9.2 (other than clause (e) thereof) and must be a permitted Disposition in accordance with Section 9.5 ;
(d) so long as no Default exists or would result therefrom, the Borrower may merge or consolidate with any other Person; provided that (i) the Borrower shall be the continuing or surviving corporation or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the Successor Borrower ), (A) the Successor Borrower shall be an entity organized or existing under the laws of the United States, any state thereof or the District of Columbia, (B) the Successor Borrower shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to
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which the Borrower is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Guaranty confirmed that its Guarantee of the Obligations shall apply to the Successor Borrowers obligations under this Agreement, (D) each Loan Party, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement confirmed that its obligations thereunder shall apply to the Successor Borrowers obligations under this Agreement, (E) each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage (or other instrument reasonably satisfactory to the Administrative Agent) confirmed that its obligations thereunder shall apply to the Successor Borrowers obligations under this Agreement, (F) the Administrative Agent shall have made such filings and received such documents and agreements as may be reasonably required by the Administrative Agent to continue the perfection of its Liens on the Collateral in accordance with the Loan Documents and (G) the Borrower shall have delivered to the Administrative Agent an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement and providing for other customary opinions reasonably requested by the Administrative Agent; provided , further , that if the foregoing are satisfied, the Successor Borrower will succeed to, and be substituted for, the Borrower under this Agreement;
(e) so long as no Default exists or would result therefrom, Holdings may merge or consolidate with any other Person; provided that (A) Holdings shall be the continuing or surviving Person or (B) if the Person formed by or surviving any such merger, amalgamation or consolidation is not Holdings or is a Person into which Holdings has been liquidated (any such Person, the Successor Holdings ) (A) the Successor Holdings shall be an entity organized or existing under the laws of the United States, any state thereof, or the District of Columbia, (B) the Successor Holdings shall expressly assume all the obligations of Holdings under this Agreement and the other Loan Documents to which Holdings is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent and (C) the Borrower shall have delivered to the Administrative Agent an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement; provided , further , that if the foregoing are satisfied, the Successor Holdings will succeed to, and be substituted for, Holdings under this Agreement;
(f) so long as no Default exists or would result therefrom, any Restricted Subsidiary may merge or consolidate with any other Person in order to effect an Investment permitted pursuant to Section 9.2 (other than Section 9.2(e) ); provided that the continuing or surviving Person shall be the Borrower or a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the applicable requirements of Sections 8.11, 8.12 and 8.13 ;
(g) [reserved]; and
(h) so long as no Default exists or would result therefrom, a merger, dissolution, liquidation, consolidation or Disposition, the purpose of which is to effect a Disposition permitted pursuant to Section 9.5 (other than Section 9.5(e) ).
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SECTION 9.5 Dispositions .
Make any Disposition or enter into any agreement to make any Disposition, except:
(a) Dispositions of obsolete, worn out, used or surplus property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions of property no longer used or useful in the conduct of the business of the Borrower and the Restricted Subsidiaries;
(b) Dispositions of inventory and goods held for sale in the ordinary course of business;
(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property; provided that to the extent the property being transferred constitutes Current Asset Collateral, such replacement property shall constitute Current Asset Collateral;
(d) Dispositions of property to the Borrower or a Restricted Subsidiary; provided that if the transferor of such property is a Loan Party (i) the transferee thereof must be a Loan Party, (ii) such Investment must be a permitted Investment in a Restricted Subsidiary that is not a Loan Party in accordance with Section 9.2 (other than Section 9.2(e) ) or (iii) to the extent constituting a Disposition to a Restricted Subsidiary that is not a Loan Party, such Disposition is for fair value and any promissory note or other non-cash consideration received in respect thereof is a permitted investment in a Restricted Subsidiary that is not a Loan Party in accordance with Section 9.2 (other than Section 9.2(e) ); provided that no Disposition of Current Asset Collateral (other than Cash and Cash Equivalents) shall be permitted pursuant to this clause (d) unless (A) upon the occurrence and continuation of an Event of Default, such Disposition is made for cash and (B) the Borrower shall have (1) in respect of any Disposition pursuant to this clause (d) of property with an aggregate fair market value in excess of $2,000,000, delivered to the Administrative Agent written notice of such disposition in reasonable detail and (2) if requested by the Administrative Agent, delivered to the Administrative Agent an updated Borrowing Base Certificate; provided further that Dispositions of Intellectual Property pursuant to this Section 9.5(d) shall comply with the terms of Section 9.5(j)(iv) ;
(e) Dispositions permitted by Sections 9.2 (other than Section 9.2(e) ), 9.4 (other than Section 9.4(h) ) and 9.6 (other than Section 9.6(d) ) and Liens permitted by Section 9.1 (other than Section 9.1(m)(ii) );
(f) so long as no Event of Default exists or would result therefrom, (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Event of Default exists), Dispositions of other real property pursuant to sale-leaseback transactions, provided that the applicable net proceeds thereof are applied in accordance with the terms of the First Lien Term Facility Credit Agreement, the Second Lien Term Facility Credit Agreement or the documentation relating to any Permitted Refinancing of the First Lien Term Facility Credit Agreement or the Second Lien Term Facility Credit Agreement (as applicable);
(g) any issuance or sale of Equity Interests in, or sale of Indebtedness or other securities of, an Unrestricted Subsidiary;
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(h) leases, subleases, licenses or sublicenses (including the provision of software under an open source license), in each case in the ordinary course of business and which do not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
(i) [Reserved];
(j) Dispositions of property (other than Current Asset Collateral) not otherwise permitted under this Section 9.5 ; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Default exists), no Default shall exist or would result from such Disposition; (ii) with respect to any Disposition pursuant to this clause (j) for a purchase price in excess of $15,000,000, the Borrower or any of the Restricted Subsidiaries shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received, other than nonconsensual Liens permitted by Section 9.1 and Liens permitted by Sections 9.1(a) , (m) , (s) , (t) , (w) , (x), (y) and (ee) ); provided , however , that for the purposes of this clause (ii), (A) any liabilities (as shown on the Borrowers or such Restricted Subsidiarys most recent balance sheet provided hereunder or in the footnotes thereto) of the Borrower or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Borrower and all of the Restricted Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by such Restricted Subsidiary from such transferee that are converted by such Restricted Subsidiary into cash (to the extent of the cash received) within one hundred and eighty (180) days following the closing of the applicable Disposition and (C) any Designated Non-Cash Consideration received in respect of such Disposition having an aggregate fair market value as determined by the Borrower in good faith, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (C) that is at that time outstanding, not in excess of the greater of $25,000,000 and 1.00% of Total Assets at the time of the receipt of such Designated Non-Cash Consideration, with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value, shall be deemed to be cash; (iii) proceeds of such Dispositions are applied in accordance with the First Lien Term Facility Credit Agreement and the Second Lien Term Facility Credit Agreement; and (iv) in the event of a Disposition of Intellectual Property used or useful in connection with the Current Asset Collateral, the purchaser, assignee or other transferee thereof agrees in writing to be bound by a non-exclusive royalty-free worldwide license of such Intellectual Property in favor of the Administrative Agent for use in connection with the exercise of the rights and remedies of the Secured Parties, which license shall be in form and substance reasonably satisfactory to the Administrative Agent, and provided further that in the case of a Disposition of Intellectual Property licensed by the Borrower or one of its Restricted Subsidiaries from a third party, the transferee thereof shall be required to provide such a license only to the extent to which the applicable license gives it a right to do so;
(k) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;
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(l) bulk sales or other Dispositions of the Inventory of a Loan Party in connection with Store closings, at arms length, provided that (i) all Net Cash Proceeds received in connection therewith are applied to the Obligations if then required in accordance with Section 2.9 hereof and (ii) such store closures and related Inventory dispositions shall not exceed in any transaction or series of related transactions, ten percent (10%) of the number of the Loan Parties stores as of the date of such bulk sale or other Disposition, unless the Borrower shall have delivered to the Administrative Agent an updated Borrowing Base Certificate; provided further that in connection with any store closures which exceed fifteen percent (15%) in the aggregate during any twelve-month period of the number of the Loan Parties stores in existence at the beginning of such period (net of new store openings), (x) the Borrower shall have delivered immediately prior to such event written notice of such Disposition in reasonable detail, (y) if requested by the Administrative Agent, the Borrower shall permit an updated Inventory appraisal in form and detail and from an appraiser reasonably satisfactory to the Administrative Agent and (z) such store closures shall be made by a liquidator or under the supervision of a consultant (such liquidator or consultant shall be reasonably acceptable to the Administrative Agent) and pursuant to liquidation or consulting arrangements reasonably acceptable to the Administrative Agent;
(m) [ reserved ] ;
(n) the unwinding of any Swap Contract;
(o) the lapse or abandonment in the ordinary course of business of any registrations or applications for registration of any immaterial IP Rights;
(p) to the extent allowable under Section 1031 of the Code (or comparable or successor provision), any exchange of like property not constituting Current Asset Collateral (excluding any boot thereon permitted by such provision) for use in any business conducted by the Borrower or any of its Restricted Subsidiaries that is not in contravention of Section 9.7 ;
(q) Dispositions of accounts receivable in connection with the collection or compromise thereof, provided that no disposition of Eligible Accounts shall be permitted pursuant to this clause (q) unless the Borrower shall have (i) delivered to the Administrative Agent written notice of such disposition in reasonable detail and (ii) if requested by the Administrative Agent, delivered to the Administrative Agent an updated Borrowing Base Certificate;
(r) sales or other dispositions by the Borrower or any Restricted Subsidiary of assets in connection with the closing or sale of a Store permitted under clause (l) of this Section 9.5 which consist of leasehold interests in the premises of such Store, the equipment and fixtures located at such premises and the books and records relating exclusively and directly to the operations of such Store; provided that as to each and all such sales and closings, (A) no Event of Default shall result therefrom and (B) such sale shall be on commercially reasonable prices and terms in a bona fide arms length transaction;
(s) so long as no Event of Default exists or would arise as a result of the transaction, sales of a Subsidiary or any business segment which is a Non-Core Business Segment, or any
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portion thereof, (i) to any Person other than a Loan Party or a Subsidiary or a Sponsor, for fair market value and so long as the consideration received for such sale or transfer is at least 85% cash or Cash Equivalents, or (ii) to a Subsidiary or Sponsor, if the Payment Conditions are satisfied, such sale or transfer is for fair market value and the entire consideration received for such sale or transfer is paid in cash or Cash Equivalents, provided that, in each case, such sale shall be in an amount at least equal to the greater of the amounts advanced or available to be advanced against the assets included in the sale under the Borrowing Base, and further provided that all Net Cash Proceeds, if any, received in connection with any such sales are applied to prepay the Loans pursuant to, and to the extent required by, Section 2.9(b) ; and
(t) Dispositions of Cash Equivalents;
provided that any Disposition of any property pursuant to this Section 9.5 (except pursuant to Sections 9.5(e) , (i) , (k) , (n) , and (o) and except for Dispositions from the Borrower or a Restricted Subsidiary that is a Loan Party to the Borrower or a Restricted Subsidiary that is a Loan Party), shall be for no less than the fair market value of such property at the time of such Disposition as determined by the Borrower in good faith. To the extent any Collateral is Disposed of as expressly permitted by this Section 9.5 to any Person other than a Loan Party, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and, if requested by the Administrative Agent, upon the certification by the Borrower that such Disposition is permitted by this Agreement, the Administrative Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing.
SECTION 9.6 Restricted Payments .
Declare or make, directly or indirectly, any Restricted Payment, except:
(a) each Restricted Subsidiary may make Restricted Payments to the Borrower and to its other Restricted Subsidiaries (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Borrower and any of its other Restricted Subsidiaries and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests);
(b) the Borrower and each of its Restricted Subsidiaries may declare and make dividend payments or other distributions payable solely in the Equity Interests (other than Disqualified Equity Interests not otherwise permitted by Section 9.3 ) of such Person;
(c) [Reserved];
(d) to the extent constituting Restricted Payments, the Borrower and the Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Section 9.2 (other than Section 9.2(e) ), 9.4 (other than a merger or consolidation of Holdings and the Borrower) or 9.8 (other than Section 9.8(a) , (j) or (k) );
(e) repurchases of Equity Interests in Holdings, the Borrower or any of the Restricted Subsidiaries deemed to occur upon exercise of stock options or warrants or similar rights if such Equity Interests represent a portion of the exercise price of such options or warrants or similar rights;
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(f) the Borrower may pay (or make Restricted Payments to allow Holdings or any direct or indirect parent thereof to pay) for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of Holdings (or of any direct or indirect parent thereof) held by any future, present or former employee, director, consultant or distributor (or any spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) of the Borrower (or any direct or indirect parent of the Borrower) or any of its Subsidiaries upon the death, disability, retirement or termination of service or employment of any such Person or otherwise pursuant to any employee or director equity plan, employee or director stock option plan or any other employee or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee, director, consultant or distributor of the Borrower (or any direct or indirect parent of the Borrower) or any of its Subsidiaries in an aggregate amount after the Restatement Effective Date together with the aggregate amount of loans and advances to Holdings made pursuant to Section 9.2(l) in lieu of Restricted Payments permitted by this clause (f) not to exceed $15,000,000 in any calendar year with unused amounts in any calendar year being carried over to the next two succeeding calendar years; provided , that such amount in any calendar year may be increased by an amount not to exceed the cash proceeds of key man life insurance policies received by the Borrower or its Restricted Subsidiaries after the Restatement Effective Date;
(g) the Borrower may make Restricted Payments to Holdings or to any direct or indirect parent of Holdings:
(i) the proceeds of which will be used to pay (or make Restricted Payments to allow any direct or indirect corporate parent (or entity treated as a corporation for tax purposes) thereof to pay) the tax liability (including estimated tax payments) to each foreign, federal, state or local jurisdiction in respect of which a consolidated, combined, unitary or affiliated return is filed by Holdings (or such direct or indirect corporate parent) that includes the Borrower and/or any of its Subsidiaries, to the extent such tax liability does not exceed the lesser of (A) the taxes (including estimated tax payments) that would have been payable by the Borrower and/or its Subsidiaries as a stand-alone consolidated, combined, unitary or affiliated group and (B) the actual tax liability (including estimated tax payments) of Holdings consolidated, combined, unitary or affiliated group (or, if Holdings is not the parent of the actual group, the taxes that would have been paid by Holdings, the Borrower and/or the Borrowers Subsidiaries as a stand-alone group), reduced in the case of clauses (A) and (B) by any such taxes paid or to be paid directly by the Borrower or its Subsidiaries;
(ii) the proceeds of which shall be used to pay (or make Restricted Payments to allow any direct or indirect parent thereof to pay) operating costs and expenses of Holdings or its direct or indirect parents thereof which do not own other Subsidiaries besides Holdings, its Subsidiaries and any other direct or indirect parents of Holdings incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal, accounting and similar expenses provided by third parties), which are reasonable and customary and incurred in the ordinary course of business, attributable to the ownership or operations of the Borrower and its Subsidiaries;
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(iii) the proceeds of which shall be used to pay (or make Restricted Payments to allow any direct or indirect parent thereof which does not own other Subsidiaries besides Holdings, its Subsidiaries and any direct or indirect corporate parent (or entity treated as a corporation for tax purposes) of Holdings to pay) franchise taxes and other fees, taxes and expenses required to maintain its (or any of such direct or indirect parents) corporate or legal existence;
(iv) to finance any Investment permitted to be made pursuant to Section 9.2 ; provided that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (B) Holdings and the Borrower shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or a Restricted Subsidiary or (2) the merger (to the extent permitted in Section 9.4 ) of the Person formed or acquired into the Borrower or a Restricted Subsidiary in order to consummate such Permitted Acquisition, in each case, in accordance with the requirements of Sections 8.11 , 8.12 and 9.2 ;
(v) the proceeds of which shall be used to pay (or make Restricted Payments to allow any direct or indirect parent thereof to pay) costs, fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering permitted by this Agreement; and
(vi) the proceeds of which (A) shall be used to pay customary salary, bonus and other benefits payable to officers and employees of Holdings or any direct or indirect parent company of Holdings to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries or (B) shall be used to make payments permitted under Sections 9.8(e) , (h) , (k) and (p) (but only to the extent such payments have not been and are not expected to be made by the Borrower or a Restricted Subsidiary);
(h) the Borrower or any of the Restricted Subsidiaries may pay cash in lieu of fractional Equity Interests in connection with any dividend, split or combination thereof or any Permitted Acquisition;
(i) the declaration and payment of dividends on the Borrowers common stock following the first public offering of the Borrowers common stock or the common stock of any of its direct or indirect parents after the Restatement Effective Date, of up to 6.00% per annum of the net proceeds received by or contributed to the Borrower in or from any such public offering, other than public offerings with respect to the Borrowers common stock registered on Form S-4 or Form S-8;
(j) repurchases of Equity Interests (i) deemed to occur on the exercise of options by the delivery of Equity Interests in satisfaction of the exercise price of such options or (ii) in consideration of withholding or similar taxes payable by any future, present or former employee, director, manager or consultant (or any spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees of any of the foregoing), including deemed repurchases in connection with the exercise of stock options;
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(k) each of Holdings and the Borrower may make the Restatement Effective Date Dividend;
(l) without duplication of any other clauses of this Section 9.6 , other Restricted Payments that do not exceed $25,000,000 in the aggregate at any time outstanding, so long as the Payment Conditions shall have been satisfied after giving effect thereto; and
(m) Restricted Payments so long as the RP Conditions shall have been satisfied.
SECTION 9.7 Change in Nature of Business .
Engage in any material line of business substantially different from those lines of business conducted by the Borrower and the Restricted Subsidiaries on the Restatement Effective Date or any business reasonably related or ancillary thereto.
SECTION 9.8 Transactions with Affiliates .
Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than:
(a) transactions between or among the Borrower or any of the Restricted Subsidiaries or any entity that becomes a Restricted Subsidiary as a result of such transaction;
(b) transactions on terms substantially as favorable to the Borrower or such Restricted Subsidiary as would be obtainable by the Borrower or such Restricted Subsidiary at the time in a comparable arms-length transaction with a Person other than an Affiliate;
(c) the Transaction and the payment of fees and expenses (including the Transaction Expenses) related to the Transaction;
(d) [Reserved];
(e) the payment of management, consulting, monitoring, advisory and other fees, indemnities and expenses to the Sponsor pursuant to the Sponsor Management Agreement (plus any unpaid management, consulting, monitoring, advisory and other fees, indemnities and expenses accrued in any prior year) and any Sponsor Termination Fees pursuant to the Sponsor Management Agreement;
(f) employment, severance and other similar arrangements between Holdings, the Borrower and the Restricted Subsidiaries and their respective officers and employees in the ordinary course of business and transactions pursuant to stock option plans and employee benefit plans and arrangements;
(g) the non-exclusive licensing of trademarks, copyrights or other IP Rights in the ordinary course of business to permit the commercial exploitation of IP Rights between or among Affiliates and Subsidiaries of the Borrower;
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(h) the payment of customary fees and reasonable out-of-pocket costs to, and indemnities provided on behalf of, directors, officers and employees of Holdings and the Restricted Subsidiaries or any direct or indirect parent of Holdings in the ordinary course of business to the extent attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries;
(i) any agreement, instrument or arrangement as in effect as of the Restatement Effective Date and set forth on Schedule 9.8 , or any amendment thereto (so long as any such amendment is not adverse to the Lenders in any material respect as compared to the applicable agreement as in effect on the Restatement Effective Date);
(j) Restricted Payments permitted under Section 9.6 ;
(k) customary payments by the Borrower and any of the Restricted Subsidiaries to the Sponsor made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by the majority of the members of the board of directors or a majority of the disinterested members of the board of directors of Holdings in good faith;
(l) transactions in which the Borrower or any of the Restricted Subsidiaries, as the case may be, delivers to the Administrative Agent a letter from an Independent Financial Advisor stating that such transaction is fair to the Borrower or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (b) of this Section 9.8 ;
(m) the issuance or transfer of Equity Interests (other than Disqualified Equity Interests) of Holdings to any Permitted Holder or to any former, current or future director, manager, officer, employee or consultant (or any spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) of the Borrower, any of its Subsidiaries or any direct or indirect parent thereof to the extent otherwise permitted by this Agreement and to the extent such issuance or transfer would not give rise to a Change of Control;
(n) investments by the Sponsor or the Co-Investors in securities of Holdings, the Borrower or any of the Restricted Subsidiaries so long as (A) the investment is being offered generally to other investors on the same or more favorable terms and (B) the investment constitutes less than 5.00% of the proposed or outstanding issue amount of such class of securities;
(o) payments to or from, and transactions with, Joint Ventures (to the extent any such Joint Venture is only an Affiliate as a result of Investments by the Borrower and the Restricted Subsidiary in such Joint Venture) in the ordinary course of business to the extent otherwise permitted under Section 9.2 ;
(p) the payment of reasonable out-of-pocket costs and expenses relating to registration rights and indemnities provided to shareholders of Holdings or any direct or indirect parent thereof pursuant to the stockholders agreement or the registration and participation rights agreement entered into on the Effective Date in connection therewith; and
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(q) the payment of any dividend or distribution within sixty (60) days after the date of declaration thereof, if at the date of declaration (i) such payment would have complied with the provisions of this Agreement and (ii) no Event of Default occurred and was continuing.
SECTION 9.9 Burdensome Agreements .
Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that prohibits, restricts, imposes any condition on or limits the ability of (a) any Restricted Subsidiary that is not a Loan Party to make Restricted Payments to (directly or indirectly) or to make or repay loans or advances to any Loan Party or to Guarantee the Obligations of any Loan Party under the Loan Documents or (b) any Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Lenders with respect to the Facility and the Obligations under the Loan Documents; provided that the foregoing clauses (a) and (b) shall not apply to Contractual Obligations that:
(i) (x) exist on the Restatement Effective Date and (to the extent not otherwise permitted by this Section 9.9 ) are listed on Schedule 9.9 hereto and (y) to the extent Contractual Obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted modification, replacement, renewal, extension or refinancing of such Indebtedness so long as such modification, replacement, renewal, extension or refinancing does not expand the scope of such Contractual Obligation,
(ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary, so long as such Contractual Obligations were not entered into in contemplation of such Person becoming a Restricted Subsidiary;
(iii) represent Indebtedness of a Restricted Subsidiary that is not a Loan Party that is permitted by Section 9.3 ;
(iv) are customary restrictions that arise in connection with (x) any Lien permitted by Sections 9.1(a) , (m) , (s) , (t) , (w) , (x) , (y) , (dd) and (ee) and relate to the property subject to such Lien or (y) any Disposition permitted by Section 9.5 applicable pending such Disposition solely to the assets subject to such Disposition;
(v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 9.2 and applicable solely to such joint venture entered into in the ordinary course of business;
(vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under Section 9.3 but solely to the extent any negative pledge relates to the property financed by or the subject of such Indebtedness (and excluding in any event any Indebtedness constituting any Junior Financing) and the proceeds and products thereof and, in the case of the First Lien Term Facility, the Second Lien Term Facility and any Permitted Refinancing thereof, permit the Liens securing the Obligations without restriction (subject to the Intercreditor Agreement);
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(vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto;
(viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Sections 9.3(e) , (m)(i) , (r) or (v) to the extent that such restrictions apply only to the property or assets securing such Indebtedness;
(ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of any Restricted Subsidiary;
(x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business;
(xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business;
(xii) are customary restrictions contained in the First Lien Term Facility Credit Agreement, the First Lien Term Facility Documentation, the Second Lien Term Facility Credit Agreement, the Second Lien Term Facility Documentation and any Permitted Refinancing of any of the foregoing;
(xiii) arise in connection with cash or other deposits permitted under Section 9.1 ;
(xiv) comprise restrictions imposed by any agreement governing Indebtedness entered into after the Restatement Effective Date and permitted under Section 9.3 that are, taken as a whole, in the good faith judgment of the Borrower, no more restrictive with respect to the Borrower or any Restricted Subsidiary than customary market terms for Indebtedness of such type (and, in any event, are no more restrictive than the restrictions contained in this Agreement), so long as the Borrower shall have determined in good faith that such restrictions will not affect its obligation or ability to make any payments required hereunder; or
(xv) apply by reason of any applicable Law, rule, regulation or order or are required by any Governmental Authority having jurisdiction over any Restricted Subsidiarys status (or the status of any Subsidiary of such Restricted Subsidiary) as a Captive Insurance Subsidiary.
SECTION 9.10 [ Reserved ] .
SECTION 9.11 Fiscal Year .
Make any change in Fiscal Year; provided , however , that the Borrower may, upon written notice to the Administrative Agent, change its Fiscal Year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.
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SECTION 9.12 Prepayments, Etc. of Indebtedness .
Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner (it being understood that payments of regularly scheduled principal and interest and mandatory prepayments of principal and interest shall be permitted) any Indebtedness, except (i) so long as the RP Conditions are satisfied after giving effect thereto, any prepayment, redemption, purchase, defeasance or other satisfaction of Indebtedness; (ii) the refinancing of any Indebtedness with the Net Cash Proceeds of, or in exchange for, any Permitted Refinancing, to the extent not required to be applied to prepayments pursuant to the First Lien Term Facility or the Second Lien Term Facility; (iii) the conversion (or exchange) of any Indebtedness to Equity Interests (other than Disqualified Equity Interests) or Indebtedness of Holdings or any of its direct or indirect parents; (iv) the prepayment of Indebtedness of the Borrower or any Restricted Subsidiary owed to Holdings, the Borrower or a Restricted Subsidiary or the prepayment of any Indebtedness with the proceeds of any other Indebtedness otherwise permitted by Section 9.3 ; (v) any Permitted Refinancing of any Indebtedness; (vi) any prepayment, redemption, purchase, defeasance or other satisfaction with the Net Cash Proceeds of any Permitted Equity Issuance; and (vii) the prepayment of Indebtedness incurred pursuant to clauses (e) , (f) , (h) , (k) and (v) of Section 9.3 ;
SECTION 9.13 [ Reserved ] .
SECTION 9.14 Modification of Debt Agreements .
Amend, modify or change in any manner materially adverse to the interest of the Lenders any term or condition of (i) any Material Indebtedness (other than as a result of a Permitted Refinancing thereof and in any event excluding the First Lien Term Facility, the Second Lien Term Facility and any Permitted Refinancing thereof and any Indebtedness hereunder) without the consent of the Administrative Agent (not to be unreasonably withheld or delayed) or (ii) the First Lien Term Facility, the Second Lien Term Facility or any refinancing Indebtedness in respect thereof that would (A) shorten the maturity date of the First Lien Term Facility, the Second Lien Term Facility or such refinancing Indebtedness (as the case may be) to a date which is prior to ninety-one (91) days after the Latest Maturity Date or (B) shorten the date scheduled for any principal payment or increase the amount of any required principal payment, the result of which would be to require principal payments on account thereof in excess of the amounts previously required over the twenty-four (24) months following such amendment, modification or waiver.
SECTION 9.15 Holdings .
In the case of Holdings, conduct, transact or otherwise engage in any business or operations other than the following (and activities incidental thereto): (i) its ownership of the Equity Interests of the Borrower, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Loan Documents, the First Lien Term Facility, the Second Lien Term Facility, any Qualified Holding Company Debt, (iv) any public offering of its common stock or any other issuance of its Equity Interests (including Qualified Equity Interests), (v) any transaction permitted under Section 9.4 , (vi) the making of payments or restricted payments (x)
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to the extent otherwise permitted under this Section 9.15 and (y) with any amounts received in any transaction permitted under Section 9.6 , (vii) the incurrence of Qualified Holding Company Debt, (viii) making contributions to the capital of its Subsidiaries, (ix) guaranteeing the obligations of the Borrower and its Subsidiaries solely to the extent such obligations of the Borrower and its Subsidiaries are not prohibited hereunder, (x) participating in tax, accounting and other administrative matters as a member of the consolidated group of Holdings and the Borrower, (xi) holding any cash or property received in connection with Restricted Payments made by the Borrower in accordance with Section 9.6 pending application thereof by Holdings, (xii) providing indemnification to officers and directors, (xiii) the making of Investments in assets that are Cash Equivalents and (xiv) activities incidental to the businesses or activities described in clauses (i) to (xiii) of this Section 9.15 .
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1 Events of Default .
Each of the events referred to in clauses (a) through (l) of this Section 10.1 shall constitute an Event of Default :
(a) Non-Payment . The Borrower fails to (i) pay when and as required to be paid herein, any amount of principal of any Loan or any Reimbursement Obligation or deliver any cash collateral or letter of credit required to be delivered pursuant to Section 2.4(b) , or (ii) pay within five (5) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document; or
(b) Specific Covenants .
(i) The Borrower, any Restricted Subsidiary or, in the case of Section 9.15 , Holdings, fails to perform or observe any term, covenant or agreement contained in (A) Article VI ; provided , that, any failure to comply with Article VI shall be subject to cure to the extent provided in Section 10.4 , (B) Section 7.2(a) , (C) Section 7.3(a), (D) Section 8.1(a) (solely with respect to the Borrower), (E) Section 8.9 or (F) Article IX ; or
(ii) during the continuation of any Cash Dominion Period the Borrower or any Subsidiary Guarantor fails to perform or observe (or to cause to be performed or observed) any covenant or agreement contained in Section 8.12 ; or
(iii) the Borrower or any Subsidiary Guarantor fails to perform or observe (or to cause to be performed or observed) any covenant or agreement contained in (x) Section 7.4(a) and such failure continues for five (5) Business Days or (y) Section 7.4(b) and such failure continues for three (3) Business Days; or
(iv) the Borrower or any Subsidiary Guarantor fails to perform or observe (or to cause to be performed or observed) any covenant or agreement contained in Section 8.5 in respect of any insurance covering Current Asset Collateral and such failure continues for ten (10) Business Days; or
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(c) Other Defaults . Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 10.1(a) or (b) above and, for the purpose of clarity, including any failure to perform or observe any covenant or agreement contained in (x) Section 8.12 other than during the continuation of any Cash Dominion Period or (y) Section 8.5 other than with respect to insurance covering Current Asset Collateral) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after the earlier of (x) the date that the Borrower becomes aware of any such failure and (y) receipt by the Borrower of written notice thereof from the Administrative Agent; or
(d) Representations and Warranties . Any representation, warranty, certification or statement of fact made or deemed made by any Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be untrue in any material respect when made or deemed made; or
(e) Cross-Default . Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period, if any, whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise, in respect of any Indebtedness (other than Indebtedness hereunder) having an aggregate outstanding principal amount (individually or in the aggregate with all other Indebtedness as to which such a failure shall exist) of not less than $35,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness, or any other event occurs (other than, with respect to Indebtedness consisting of Swap Contracts, termination events or equivalent events pursuant to the terms of such Swap Contracts and not as a result of any default thereunder by the Borrower or any Subsidiary Guarantor) the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; provided further that such failure is unremedied and is not waived by the holders of such Indebtedness prior to any termination of the Aggregate Commitments or acceleration of the Loans pursuant to Section 10.2 ; provided that (I) no such event under the First Lien Term Facility (other than a payment default or any default relating to insolvency or any proceeding under any Debtor Relief Law) shall constitute an Event of Default under this Section 8.1(e) until the earliest to occur of (x) the date that is thirty (30) days after such event or circumstance (but only if such event or circumstance has not been waived or cured), (y) the acceleration of the Indebtedness under the First Lien Term Facility and (z) the exercise of any remedies by the First Lien Term Facility Administrative Agent or collateral agent or any lenders under the First Lien Term Facility in respect of any Collateral and (II) no such event under the Second Lien Term Facility (other than a payment default or any default relating to insolvency or any proceeding under any Debtor Relief Law) shall constitute an Event of Default under this Section 8.1(e) until the earliest to occur of (x) the date that is thirty (30) days after such event or circumstance (but only if such event or circumstance has not been waived or cured), (y) the acceleration of the Indebtedness under the Second Lien Term Facility and (z) the exercise of any
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remedies by the Second Lien Term Facility Administrative Agent or collateral agent or any lenders under the Second Lien Term Facility in respect of any Collateral; or
(f) Insolvency Proceedings, Etc. Holdings, the Borrower or any Material Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or
(g) Judgments . There is entered against Holdings, the Borrower, any Subsidiary Guarantor or any Restricted Subsidiary a final judgment or order for the payment of money in an aggregate amount exceeding $35,000,000 (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied or failed to acknowledge coverage thereof) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of sixty (60) consecutive days; or
(h) ERISA . (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or would reasonably be expected to result in liability of the Borrower or any Subsidiary Guarantor or their respective ERISA Affiliates under Title IV of ERISA in an aggregate amount which would reasonably be expected to result in a Material Adverse Effect, (ii) the Borrower or any Subsidiary Guarantor or any of their respective ERISA Affiliates fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its Withdrawal Liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which would reasonably be expected to result in a Material Adverse Effect, or (iii) with respect to a Foreign Plan, a termination, withdrawal or noncompliance with applicable law or plan terms that would reasonably be expected to result in a Material Adverse Effect; or
(i) Invalidity of Loan Documents . Any material provision of any Loan Document at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under Section 9.4 or 9.5 ) or the satisfaction in full of all the Obligations (or, to the extent not satisfied, arrangements satisfactory to the applicable Secured Party have been made in accordance with Section 11.11(a) ), ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of the Loan Documents, taken as a whole; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Aggregate Commitments), or purports in writing to revoke or rescind any Loan Document; or
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(j) Collateral Documents . Any Collateral Document after delivery thereof pursuant to Section 4.1 or 8.11 shall for any reason (other than pursuant to the terms hereof or thereof including as a result of a transaction permitted under Section 9.4 or 9.5 ) cease to create, or any Lien purported to be created by any Collateral Document shall be asserted in writing by any Loan Party not to be, a valid and perfected lien, with the priority required by the Collateral Documents (or other security purported to be created on the applicable Collateral) on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 9.1 , except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file UCC continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lenders title insurance policy and such insurer has not denied coverage; or
(k) Junior Financing Documentation . (i) Any of the Obligations of the Loan Parties under the Loan Documents for any reason shall cease to be Senior Indebtedness (or any comparable term) or Senior Secured Financing (or any comparable term) under, and as defined in any Junior Financing Documentation governing Junior Financing subordinated in right of payment to the Obligations under the Loan Documents with an aggregate principal amount of not less than $35,000,000 or (ii) the subordination provisions set forth in any Junior Financing Documentation governing Junior Financing subordinated in right of payment to the Obligations under the Loan Documents with an aggregate principal amount of not less than $35,000,000 shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against the holders of any such Junior Financing, if applicable; or
(l) Change of Control . There occurs any Change of Control.
SECTION 10.2 Remedies upon Event of Default .
(a) If any Event of Default occurs and is continuing, the Administrative Agent may, and shall at the request of, the Requisite Lenders take any or all of the following actions:
(i) declare the Commitments of each Lender and any obligation of the Issuers to Issue Letters of Credit to be terminated, whereupon such Commitments and obligation shall be terminated;
(ii) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;
(iii) require that the Borrower Cash Collateralize the Letter of Credit Obligations (in an amount equal to 101% of the then Outstanding Amount thereof); and
(iv) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;
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provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the Commitments of each Lender and any obligation of the Issuers to Issue Letters of Credit shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the Letter of Credit Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
(b) Without limitation of the rights of the Agents or Secured Parties under Section 8.12 and the definitions of Qualified Cash and Qualified Cash Securities Account, the Borrower hereby irrevocably waives the right to direct the application of any and all payments in respect of the Obligations and any proceeds of Collateral after the occurrence and during the continuance of an Event of Default and agrees that during the continuance of an Event of Default, and notwithstanding Section 2.13(f) above, the Administrative Agent may in its sole discretion, and, upon either (A) the written direction of the Requisite Lenders or (B) the acceleration of the Obligations pursuant to Section 10.2(a) , deliver a notice to each Approved Account Bank instructing them to cease complying with any instructions from the Borrower or any Subsidiary Guarantor and to transfer all funds therein to the Administrative Agent and the Administrative Agent shall apply all payments in respect of any Obligations and all funds on deposit in the Concentration Account and all other proceeds of Collateral in the order specified in Section 10.3 hereof.
(c) Notwithstanding anything to the contrary, if the only Events of Default then having occurred and continuing are the failure to comply with Section 6.1 with respect to the Test Period most recently ended, then the Administrative Agent may not take any of the actions set forth in subclauses (i) , (ii) , (iii) and (iv) of Section 10.2(a) during the period commencing on the date that the Administrative Agent receives a Notice of Intent to Cure and ending on the Cure Expiration Date with respect thereto in accordance with and to the extent permitted by Section 10.4.
SECTION 10.3 Application of Funds .
After the exercise of remedies provided for in Section 10.2 (or after the Loans have automatically become immediately due and payable and the Letter of Credit Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 10.2 ), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:
First , ratably, to pay any fees, indemnities, or expense reimbursements then due to the Administrative Agent or any Issuer from the Borrower (other than in connection with Cash Management Obligations or Obligations in respect of Secured Hedge Agreements);
Second , ratably, to pay any fees then due to the Revolving Credit Lenders and expense reimbursements then due to the Lenders from the Borrower (other than in connection with Cash Management Obligations or Obligations in respect of Secured Hedge Agreements);
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Third , to pay interest due and payable in respect of any Revolving Loans (including any Swing Loans) and any Protective Advances, ratably;
Fourth , to pay the principal of the Swing Loans and the Protective Advances, ratably;
Fifth, to pay principal on the Revolving Loans (other than the Protective Advances and Swing Loans) and unreimbursed Letter of Credit Borrowings and to pay any amounts owing with respect to Obligations in respect of Secured Hedge Agreements (exclusive of Specified Secured Hedge Obligations and the Obligations in respect of any other Secured Hedge Agreements to the extent that an Availability Reserve has not been taken by the Administrative Agent in respect thereof), ratably;
Sixth , to pay an amount to the Administrative Agent equal to 101% of the Letter of Credit Obligations on such date, to be held in the Concentration Account as cash collateral for such Obligations;
Seventh , to pay any fees then due to the Term Lenders (other than in connection with Cash Management Obligations or Obligations in respect of Secured Hedge Agreements);
Eighth , to pay interest due and payable in respect of any Term Loans;
Ninth , to pay principal on the Term Loans;
Tenth , to pay any amounts owing with respect to Cash Management Obligations;
Eleventh , to pay any amounts owing with respect to any Specified Secured Hedge Obligations and any Obligations in respect of any other Secured Hedge Obligations not paid pursuant to clause Fifth above, ratably;
Twelfth , to the payment of any other Obligation due to the Administrative Agent or any Lender by the Borrower;
Thirteenth , as provided for under the Intercreditor Agreement; and
Fourteenth , after all of the Obligations have been paid in full, to the Borrower or as the Borrower shall direct or as otherwise required by Law.
Subject to Sections 2.4 , 2.16 , 8.12 and 10.5 , amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Sixth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as cash collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above and, if no Obligations remain outstanding, to the Borrower.
Notwithstanding the foregoing, if sufficient funds are not available to fund all payments to be made in respect of any Obligation described in any of clauses First through Thirteenth above, the available funds being applied with respect to any such Obligation (unless otherwise specified in such clause) shall be allocated to the payment of such Obligation ratably, based on
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the proportion of the Administrative Agents and each Lenders or Issuers interest in the aggregate outstanding Obligations described in such clauses; provided , however , that payments that would otherwise be allocated to the Lenders shall be allocated first to repay Protective Advances and Swing Loans pro rata until such Protective Advances and Swing Loans are paid in full and then to repay the Loans. The order of priority set forth in clauses First through Eleventh above may at any time and from time to time be changed by the agreement of all Lenders without necessity of notice to or consent of or approval by the Borrower, any Secured Party that is not a Lender or Issuer or by any other Person that is not a Lender or Issuer. The order of priority set forth in clauses First through Twelfth above may be changed only with the prior written consent of the Administrative Agent in addition to that of all Lenders.
Notwithstanding anything to the contrary in this Agreement or any other Loan Document, in no circumstances shall proceeds of any Collateral constituting an asset of a Loan Party or a Limited Guarantor, in each case, which is not an eligible contract participant as defined in the Commodity Exchange Act be applied towards the payment of any Obligations under Secured Hedge Agreements if, and to the extent that, such application is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof).
SECTION 10.4 Borrowers Right to Cure .
(a) Notwithstanding anything to the contrary contained in Section 10.1 , in the event of any Event of Default under any covenant set forth in Article VI and until the expiration of the tenth (10th) Business Day after the date on which the Fixed Charge Coverage Ratio calculation would be required to be delivered pursuant to Section 6.1 or Section 7.2(a) (such date, the Cure Expiration Date ), following delivery of a Notice of Intent to Cure in accordance herewith, the Borrower may designate any portion of the Net Cash Proceeds of any issuance of common (or, if reasonably acceptable to the Administrative Agent, preferred) Equity Interests of the Borrower or any cash capital contribution to the common or preferred equity of the Borrower as an increase to Consolidated EBITDA with respect to such applicable quarter; provided that all such Net Cash Proceeds to be so designated (i) are actually received by the Borrower as cash common or preferred equity (including through capital contribution of such Net Cash Proceeds to the Borrower) after the date of such notice and before the Cure Expiration Date and (ii) the aggregate amount of such Net Cash Proceeds or cash capital contribution that are so designated shall not exceed 100% of the aggregate amount necessary to cure such Event of Default under Article VI for any applicable period.
(b) Upon receipt by the Borrower of any such designated Net Cash Proceeds or cash capital contribution (the Cure Amount ) in accordance with this Section 10.4 , Consolidated EBITDA for any period of calculation which includes the last Fiscal Quarter of the Test Period ending immediately prior to the date on which such Cure Amount was received shall be increased, solely for the purpose of calculating any financial ratio set forth in Article VI , by an amount equal to the Cure Amount. The resulting increase to Consolidated EBITDA from designation of a Cure Amount shall not result in any adjustment to Consolidated EBITDA or any other financial definition for any purpose under this Agreement other than for purposes of calculating the financial ratio set forth in Article VI and for additional clarification shall not adjust the calculation of Consolidated EBITDA for purposes of determining the Fixed Charge
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Coverage Ratio (other than for purposes of actual compliance with Article VI as of the end of any applicable Test Period), and any reduction in Indebtedness, if applicable, from the Cure Amount shall not reduce Fixed Charges for purpose of calculating the Fixed Charge Coverage Ratio and shall not result in any adjustment to any other financial definition for any purpose under this Agreement.
(c) If, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with the requirements of Article VI , the Borrower shall be deemed to have satisfied the requirements of Article VI as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable existing breach or default of Article VI shall be deemed cured for this purpose of the Agreement.
(d) In each period of four Fiscal Quarters, there shall be at least two (2) Fiscal Quarters for which Consolidated EBITDA is not increased by exercise of a cure pursuant to Section 10.4(a) .
(e) Consolidated EBITDA shall not be increased by exercise of a cure pursuant to Section 10.4(a) more than four (4) times during the term of this Agreement.
SECTION 10.5 Actions in Respect of Letters of Credit; Cash Collateral .
(a) At any time (i) upon the Revolving Credit Termination Date, (ii) after the Revolving Credit Termination Date when the aggregate funds on deposit in the Concentration Account to Cash Collateralize Letter of Credit Obligations shall be less than 101% of the Letter of Credit Obligations and (iii) as may be required by Section 2.9 or Section 2.16 , the Borrower shall pay to the Administrative Agent in Same Day Funds at the Administrative Agents office referred to in Section 12.8 , for deposit in the Concentration Account, (x) in the case of clauses (i) and (ii) above, the amount required to that, after such payment, the aggregate funds on deposit in the Concentration Account counts equals or exceeds 101% of the sum of all outstanding Letter of Credit Obligations and (y) in the case of clause (iii) above, the amount required by Section 2.9 . The Administrative Agent may, from time to time after funds are deposited in the Concentration Account, apply funds then held in the Concentration Account to the payment of any amounts, in accordance with Section 2.9 and Section 10.2(b) , as shall have become or shall become due and payable by the Borrower to the Issuers or Lenders in respect of the Letter of Credit Obligations. The Administrative Agent shall promptly give written notice of any such application; provided , however , that the failure to give such written notice shall not invalidate any such application. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent as herein provided, or that the total amount of such Cash Collateral is less than the applicable Fronting Exposure and other obligations secured thereby, the Borrower or the relevant Defaulting Lender will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency.
(b) Application . Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 10.5 or Sections 2.4 , 2.9 , 2.12 , 2.16 or 10.2 in respect of Letters of Credit or Swing Loans shall be held and applied to the satisfaction of the specific Letter of Credit Obligations, Swing Loans, obligations to fund
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participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may be provided for herein.
(c) Release . Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender or, as appropriate, its assignee following compliance with Section 12.2(b)(vi) ) or (ii) the Administrative Agents good faith determination that there exists excess Cash Collateral; provided , however , (x) that Cash Collateral furnished by or on behalf of a Loan Party shall not be released during the continuance of a Default (and following application as provided in this Section 10.5 may be otherwise applied in accordance with Section 10.3 ), and (y) the Person providing Cash Collateral and the applicable Issuer or Swing Loan Lender, as applicable, may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1 Appointment and Authorization .
(a) Each of the Lenders and the Issuers hereby irrevocably appoints Wells Fargo to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article XI (other than Sections 11.6 and 11.11 ) are solely for the benefit of the Administrative Agent, the Lenders and the Issuers, and the Borrower shall not have rights as a third party beneficiary of any such provision.
(b) The Administrative Agent shall also act as the collateral agent under the Loan Documents, and each of the Lenders (including in its capacities as a potential Hedge Bank and/or Cash Management Bank) and the Issuers hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of (and to hold any security interest created by the Collateral Documents for and on behalf of or in trust for) such Lender and such Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Administrative Agent, as collateral agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 11.5 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent, shall be entitled to the benefits of all provisions of this Article XI and Article XII (including Sections 11.3 , 11.14 , 12.3 , 12.4 and 12.5 , as though such co-agents, sub-agents and attorneys-in-fact were the collateral agent under the Loan Documents) as if set forth in full herein with respect thereto. Without limiting the generality of the foregoing, the Lenders hereby expressly authorize the Administrative Agent
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to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto (including the Intercreditor Agreement), as contemplated by and in accordance with the provisions of this Agreement and the Collateral Documents and acknowledge and agree that any such action by the Administrative Agent shall bind the Lenders.
SECTION 11.2 Rights as a Lender .
Any Person serving as an Agent (including as Administrative Agent) hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include each Person serving as an Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not an Agent hereunder and without any duty to account therefor to the Lenders. The Lenders acknowledge that, pursuant to such activities, any Agent or its Affiliates may receive information regarding any Loan Party or any of its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that no Agent shall be under any obligation to provide such information to them.
SECTION 11.3 Exculpatory Provisions .
Neither the Administrative Agent nor any other Agent shall have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, an Agent (including the Administrative Agent):
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing and without limiting the generality of the foregoing, the use of the term agent herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law and instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that such Agent is required to exercise as directed in writing by the Requisite Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that no Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Laws; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information
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relating to the Borrower or any of its Affiliates that is communicated to or obtained by any Person serving as an Agent or any of its Affiliates in any capacity.
No Agent shall be liable for any action taken or not taken by it (i) with the consent or at the request of the Requisite Lenders (or such other number or percentage of the Lenders as shall be necessary, or as such Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 12.1 and 12.2 ) or (ii) in the absence of its own gross negligence or willful misconduct as determined by the final and non-appealable judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein. The Agents shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or an Issuer.
No Agent-Related Person shall be responsible for or have any duty to ascertain or inquire into (i) any recital statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Collateral Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent, or (vii) to inspect the properties, books or records of any Loan Party or any Affiliate thereof.
SECTION 11.4 Reliance by the Agents .
The Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the applicable Issuer, each Agent may presume that such condition is satisfactory to such Lender or such Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or such Issuer prior to the making of such Loan or the issuance of such Letter of Credit. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Each Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Requisite Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking
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or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Requisite Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders; provided that the Agents shall not be required to take any action that, in their opinion or in the opinion of their counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Law.
SECTION 11.5 Delegation of Duties .
Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Documents by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Agent-Related Persons. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Agent- Related Persons of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Agents.
SECTION 11.6 Resignation of Administrative Agent .
(a) The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuers and the Borrower. Upon receipt of any such notice of resignation, the Requisite Lenders shall have the right, with the consent of the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed), to appoint a successor, which shall be a Lender or a bank with an office in the United States, or an Affiliate of any such Lender or bank with an office in the United States. If no such successor shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the Issuers, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuers under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor of such Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and each Issuer directly, until such time as the Requisite Lenders appoint a successor Administrative Agent as provided for above in this Section 11.6 . Upon the acceptance of a successors appointment as Administrative Agent hereunder and upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Requisite Lenders may request, in order to (i) continue the perfection of the Liens granted or purported to be granted by the Collateral Documents or (ii) otherwise ensure
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that the Collateral and Guarantee Requirement is satisfied, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Agents resignation hereunder and under the other Loan Documents, the provisions of this Article and Sections 12.3 , 12.4 and 12.5 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Agent-Related Persons in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Administrative Agent.
(b) Any resignation by Wells Fargo (or any other entity appointed as the Administrative Agent under this Section 11.6 ) as Administrative Agent pursuant to this Section shall also constitute its resignation as an Issuer (to the extent Wells Fargo (or such other entity) is an Issuer at such time) and as Swing Loan Lender, as applicable. Upon the acceptance of a successors appointment as Administrative Agent hereunder, (i) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Issuer and Swing Loan Lender, (ii) the retiring Issuer and Swing Loan Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (iii) the successor Issuer shall issue letters of credit in substitution for the Letters of Credit issued by the retiring Issuer, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring Issuer to effectively assume the obligations of the retiring Issuer with respect to such Letters of Credit.
SECTION 11.7 Non-Reliance on Agents and Other Lenders; Disclosure of Information by Agents .
Each Lender and each Issuer acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent- Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to each Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower and the other Loan Parties hereunder. Each Lender and each Issuer also represents that it will, independently and without reliance upon any Agent or any other Lender or any of their Agent-Related Persons and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices,
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reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person.
SECTION 11.8 No Other Duties; Other Agents, Arrangers, Managers, Etc.
Each of the Co-Syndication Agents is hereby appointed a Co-Syndication Agent hereunder, and each Lender hereby authorizes each of the Co-Syndication Agents to act as a Co-Syndication Agent in accordance with the terms hereof and the other Loan Documents. Each of the Co-Documentation Agents is hereby appointed as a Co-Documentation Agent hereunder, and each Lender hereby authorizes each of the Co-Documentation Agents to act as a Co-Documentation Agent in accordance with the terms hereof and the other Loan Documents. Each Agent hereby agrees to act in its capacity as such upon the express conditions contained herein and the other Loan Documents, as applicable. Anything herein to the contrary notwithstanding, none of the Joint Bookrunners, Arrangers, Co-Documentation Agents or Co-Syndication Agents shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder, and such Persons shall have the benefit of this Article XI . Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any agency or fiduciary or trust relationship with any Lender, Holdings, the Borrower or any of their respective Subsidiaries. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. Each Co-Syndication Agent and each Co-Documentation Agent, without consent of or notice to any party hereto, may assign any and all of its rights or obligations hereunder to any of its Affiliates. Each of the Co-Syndication Agents and Co-Documentation Agents and any other Agent may resign from such role at any time, with immediate effect, by giving prior written notice thereof to the Administrative Agent and Borrower.
SECTION 11.9 Intercreditor Agreement .
The Administrative Agent is authorized to enter into the Intercreditor Agreement, and the parties hereto acknowledge that the Intercreditor Agreement is binding upon them. Each Lender (a) hereby consents to the subordination of the Liens on the Collateral other than the Current Asset Collateral securing the Obligations on the terms set forth in the Intercreditor Agreement, (b) hereby agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement and (c) hereby authorizes and instructs the Administrative Agent to enter into the Intercreditor Agreement and to subject the Liens on the Collateral securing the Obligations to the provisions thereof. The foregoing provisions are intended as an inducement to the Secured Parties to extend credit to the Borrower and such Secured Parties are intended third-party beneficiaries of such provisions and the provisions of the Intercreditor Agreement.
SECTION 11.10 Administrative Agent May File Proofs of Claim .
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In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or Letter of Credit Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letter of Credit Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuers and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuers and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuers and the Administrative Agent under Sections 2.12 , 12.3 and 12.4 ) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and each Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuers, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Administrative Agent under Sections 2.12 , 12.3 and 12.4 .
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or any Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or any Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or any Issuer in any such proceeding.
SECTION 11.11 Collateral and Guaranty Matters .
Each of the Lenders (including in its capacities as a potential Cash Management Bank and a potential Hedge Bank) and the Issuers irrevocably authorizes the Administrative Agent , and the Administrative Agent agrees that it will:
(a) release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (x) obligations and liabilities under Secured Hedge Agreements as to which arrangements satisfactory to the applicable Hedge Bank (or, with respect to any Secured Hedge Agreement provided or arranged by Wells Fargo or an Affiliate of Wells Fargo, Wells Fargo) shall have been made, (y) Cash Management Obligations as to which arrangements satisfactory to the applicable Cash Management Bank shall have been made and (z) contingent indemnification obligations not yet accrued and payable) and the expiration or termination of all
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Letters of Credit (other than Letters of Credit as to which other arrangements reasonably satisfactory to the Administrative Agent and each applicable Issuer shall have been made, provided that the provision by the Borrower of (i) Cash Collateral (which, with the consent of the Administrative Agent, may be pledged directly to the applicable Issuer) or (ii) a backstop letter of credit from a financial institution acceptable to the applicable Issuer, in each case, in an aggregate amount equal to 101% of the maximum face amount of any such Letters of Credit shall be deemed to be an arrangement reasonably satisfactory to the Administrative Agent and the applicable Issuer), (ii) at the time the property subject to such Lien is transferred or to be transferred as part of or in connection with any transfer permitted hereunder or under any other Loan Document to any Person other than Holdings, the Borrower or any of its Domestic Subsidiaries that are Guarantors, (iii) subject to Section 12.1 , if the release of such Lien is approved, authorized or ratified in writing by the Requisite Lenders (or by each Lender, if required by Section 12.1(e) ), (iv) if the property subject to such Lien is owned by a Guarantor, upon release of such Guarantor from its obligations under its Guaranty pursuant to clause (c) below or (v) in accordance with the last sentence of Section 8.5(a) ;
(b) release or subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 9.1(i) ;
(c) release any Guarantor from its obligations under the Guaranty if (i) in the case of any Subsidiary, such Person ceases to be a Restricted Subsidiary as a result of a transaction or designation permitted hereunder or (ii) in the case of Holdings, as a result of a transaction permitted hereunder; provided that no such release shall occur if such Guarantor continues to be a guarantor in respect of the First Lien Term Facility, Second Lien Term Facility or any Junior Financing; and
(d) if any Guarantor shall cease to be a Material Subsidiary (as certified in writing by a Responsible Officer), and the Borrower notifies the Administrative Agent in writing that it wishes such Guarantor to be released from its obligations under the Guaranty and provides the Administrative Agent such certifications or documents as the Administrative Agent shall reasonably request, (i) release such Subsidiary from its obligations under the Guaranty and (ii) release any Liens granted by such Subsidiary or Liens on the Equity Interests of such Subsidiary; provided that no such release shall occur if such Subsidiary continues to be a guarantor in respect of the First Lien Term Facility, the Second Lien Term Facility or any other Junior Financing.
Upon request by the Administrative Agent at any time, the Requisite Lenders will confirm in writing the Administrative Agents authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 11.11 . In each case as specified in this Section 11.11 , the Administrative Agent will (and each Lender irrevocably authorizes the Administrative Agent to), at the Borrowers expense, execute and deliver to the applicable Loan Party such documents and take all other actions as such Loan Party may reasonably request to evidence the release or subordination of such item of Collateral from the assignment and security interest granted under the Collateral Documents, or to evidence the release of such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 11.11 .
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SECTION 11.12 [Reserved] .
SECTION 11.13 Secured Cash Management Agreements and Secured Hedge Agreements .
(a) Except as otherwise expressly set forth herein or in any Guaranty or any Collateral Document, no Cash Management Bank or Hedge Bank that obtains the benefits of Section 10.3 , any Guaranty or any Collateral by virtue of the provisions hereof or of any Guaranty or any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral or any Guaranty (including the release or impairment of any Collateral or Guaranty) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article XI to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements unless the Administrative Agent has received written notice of such Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.
(b) Each Lender (for itself and on behalf of its Affiliates that are Secured Parties) hereby agrees (i) that, after the occurrence and during the continuance of a Cash Dominion Period (and thereafter at such frequency as the Administrative Agent may reasonably request in writing), it will provide to the Administrative Agent, promptly upon the written request of the Administrative Agent, a summary of all Obligations owing to it under this Agreement and (ii) that the benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not an Administrative Agent, a Lender or an Issuing Bank party hereto as long as, by accepting such benefits, such Secured Party agrees, as among the Administrative Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by the Administrative Agent, shall confirm such agreement in a writing in form and substance reasonably acceptable to Agent) this Article XI and Sections 3.1 , Sections 12.4 , 12.6 , 12.19 , 12.23 and 12.26 and the Intercreditor Agreement, and the decisions and actions of the Administrative Agent and the Requisite Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders or other parties hereto as required herein) to the same extent a Lender is bound; provided , however , that, notwithstanding the foregoing clause (ii), (x) such Secured Party shall be bound by Sections 12.3 , 12.4 and 12.5 only to the extent of liabilities, reimbursement obligations, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements with respect to or otherwise relating to the Liens and Collateral held for the benefit of such Secured Party, in which case the obligations of such Secured Party thereunder shall not be limited by any concept of pro rata share or similar concept, (y) each of the Administrative Agent, the Lenders and the Issuers party hereto shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (z) such Secured Party
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shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.
SECTION 11.14 Indemnification of Agents .
Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agents and each other Agent-Related Person (solely to the extent any such Agent-Related Person was performing services on behalf of any Agent) (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata in accordance with their Applicable Percentage of the aggregate of the Term Facility and the Revolving Credit Facility, and hold harmless the Agents and each other Agent-Related Person (solely to the extent any such Agent-Related Person was performing services on behalf of any Agent) from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Agent-Related Persons own gross negligence or willful misconduct, as determined by the final and non-appealable judgment of a court of competent jurisdiction; provided that no action taken in accordance with the directions of the Requisite Lenders (or such other number or percentage of the Lenders as shall be required by the Loan Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 11.14 . In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 11.14 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person. Without limitation of the foregoing, each Lender shall reimburse each Agent upon demand for its ratable share (determined by reference to its Applicable Percentage of the aggregate of the Term Facility and the Revolving Credit Facility) of any costs or out-of-pocket expenses (including Attorney Costs) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that such Agent is not reimbursed for such expenses by or on behalf of the Borrower, provided that such reimbursement by the Lenders shall not affect the Borrowers continuing reimbursement obligations with respect thereto, provided further that the failure of any Lender to indemnify or reimburse such Agent shall not relieve any other Lender of its obligation in respect thereof. The undertaking in this Section 11.14 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent, the Swing Loan Lender or any Issuer.
SECTION 11.15 Notice of Transfer .
The Administrative Agent may deem and treat a Lender party to this Agreement as the owner of such Lenders portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Acceptance shall have become effective as set forth in Section 12.02 .
SECTION 11.16 Reports and Financial Statements .
By signing this Agreement, each Lender:
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(a) agrees to furnish the Administrative Agent (and thereafter at such frequency as the Administrative Agent may reasonably request) with a summary of all obligations arising out of Secured Hedge Agreements and Cash Management Obligations due or to become due to such Lender. In connection with any distributions to be made hereunder, the Administrative Agent shall be entitled to assume that no amounts are due to any Lender on account of such obligations unless the Administrative Agent has received written notice thereof from such Lender;
(b) is deemed to have requested that the Administrative Agent furnish such Lender, promptly after they become available, copies of all Borrowing Base Certificates and financial statements required to be delivered by the Borrower hereunder and all commercial finance examinations and appraisals of the Collateral received by the Administrative Agent (collectively, the Reports );
(c) expressly agrees and acknowledges that the Administrative Agent makes no representation or warranty as to the accuracy of the Reports, and shall not be liable for any information contained in any Report;
(d) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Administrative Agent or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties books and records, as well as on representations of the Loan Parties personnel;
(e) agrees to keep all Reports confidential in accordance with the provisions of Section 12.19 hereof; and
(f) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Administrative Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lenders participation in, or the indemnifying Lenders purchase of, a Loan or Loans; and (ii) to pay and protect, and indemnify, defend, and hold the Administrative Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Administrative Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender as a consequence of such Lenders breach of Section 11.16(e) above.
SECTION 11.17 Agency for Perfection .
Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens for the benefit of the Administrative Agent and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other applicable Law of the United States can be perfected only by possession. Should any Lender (other than the Administrative Agent) obtain possession of any such Collateral, such Lender shall notify the Administrative Agent thereof, and, promptly upon the Administrative Agents request therefor shall deliver such Collateral to the
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Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agents instructions.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Amendments, Etc.
Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Requisite Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:
(a) extend or increase any Commitment of any Lender without the written consent of such Lender directly adversely affected thereby (it being understood that (i) a waiver of any condition precedent set forth in Section 4.2 and (ii) the waiver of any Default, mandatory prepayment or mandatory reduction of the Revolving Credit Commitments shall not constitute an extension or increase of any Commitment of any Lender);
(b) postpone any date scheduled for, or reduce the amount of, any payment of principal or interest under Section 2.6 or 2.10 without the written consent of each Lender directly adversely affected thereby, it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of the Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest;
(c) reduce the principal of, or the rate of interest specified herein on, any Loan or Letter of Credit Borrowing, or (subject to clause (iii) of the second proviso to this Section 12.1 ) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby (it being understood that any change to any component of Excess Availability shall not constitute a reduction in the rate of interest); provided that only the consent of the Requisite Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrower to pay interest at the Default Rate;
(d) change any provision of this Section 12.1 , the definition of Requisite Lenders, Requisite Class Lenders, Supermajority Lenders or any other provision specifying the number of Lenders or portion of the Loans or Commitments required to take any action under the Loan Documents, without the written consent of each Lender affected thereby;
(e) other than in a transaction permitted under Section 9.4 or 9.5 , release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;
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(f) other than in a transaction permitted under Section 9.4 or 9.5 , release all or substantially all of the aggregate value of the Guaranty or all or substantially all of the Guarantors, without the written consent of each Lender;
(g) change the definition of the term Borrowing Base, Term Borrowing Base or any component definition thereof, but excluding the definitions of Revolving Eligible Accounts Advance Rate, Revolving Credit Card Advance Rate, or Revolving Inventory Advance Rate, Term Eligible Accounts Advance Rate, Term Credit Card Advance Rate, or Term Inventory Advance Rate or the numerical percentage of Qualified Cash in the definition of Borrowing Base, in each case the amendment or modifications of which shall be subject to clause (h) below, if as a result thereof the amounts available to be borrowed by the Borrower would be increased, without the written consent of the Supermajority Lenders and the Requisite Class Lenders under the Term Facility, provided that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Availability Reserves, Inventory Reserves or Shrink Reserves without the consent of any Lenders;
(h) increase the numerical percentage contained in Revolving Eligible Accounts Advance Rate, Revolving Credit Card Advance Rate, or Revolving Inventory Advance Rate, Term Eligible Accounts Advance Rate, Term Credit Card Advance Rate, or Term Inventory Advance Rate or the numerical percentage of Qualified Cash in the definition of Borrowing Base without the written consent of each Lender; provided that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Availability Reserves, Inventory Reserves or Shrink Reserves without the consent of any Lenders;
(i) without the prior written consent of all Lenders directly affected thereby, (i) subordinate the Obligations hereunder to any other Indebtedness, or (ii) except as provided by operation of applicable Law or in the Intercreditor Agreement, subordinate the Liens granted hereunder or under the other Loan Documents to any other Lien; or
(j) change the order of the application of funds specified in Section 10.3 without the written consent of each Lender directly affected thereby;
and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by each Issuer in addition to the Lenders required above, affect the rights or duties of an Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Loan Lender in addition to the Lenders required above, affect the rights or duties of the Swing Loan Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent under this Agreement or any other Loan Document; (iv) [reserved]; (v) Section 12.2(g) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; (vi) the consent of Requisite Class Lenders shall be required with respect to any amendment that by its terms directly adversely affects the rights of such Class in respect of payments hereunder in a manner different than such amendment affects other Classes; and (vii)
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no Lender or Issuer consent is required to effect any amendment or supplement to the Intercreditor Agreement, (A) that is for the purpose of adding the holders of Indebtedness incurred or issued pursuant to a Permitted Refinancing of the First Lien Term Facility or the Second Lien Term Facility (or any agent or trustee of such holders) as parties thereto, as expressly contemplated by the terms of the Intercreditor Agreement and permitted under Section 9.3(p) and Section 9.3(q) (it being understood that any such amendment or supplement may make such other changes to the Intercreditor Agreement as, in the good faith determination of the Administrative Agent, are required to effectuate the foregoing and provided that such other changes are not adverse, in any material respect, to the interests of the Lenders) or (B) that is expressly contemplated by Sections 5.2(d) or 7.4 of the Intercreditor Agreement with respect to a Permitted Refinancing of the First Lien Term Facility or the Second Lien Term Facility, as applicable, under Section 9.3(p) or Section 9.3(q) (or the comparable provisions, if any, of any successor intercreditor agreement with respect to a Permitted Refinancing of the First Lien Term Facility or the Second Lien Term Facility permitted, as applicable, under Section 9.3(p) or Section 9.3(q) ); provided further that no such agreement shall, pursuant to this clause (vii) , amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders, the Requisite Lenders, the Requisite Class Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Revolving Credit Commitment of any Defaulting Lender may not be increased or extended without the consent of such Defaulting Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.
Notwithstanding anything to the contrary contained in this Section 12.1 and for so long as an Availability Reserve is maintained with respect to Obligations arising under Secured Hedge Agreements, no amendment, modification or waiver of this Agreement or any Loan Document altering the ratable treatment of Obligations arising under Secured Hedge Agreements resulting in such Obligations being junior in right of payment to principal on the Revolving Loans or resulting in Obligations owing to any Hedge Bank becoming unsecured (other than releases of Liens permitted in accordance with the terms hereof), in each case in a manner materially adverse to any Hedge Bank, shall be effective without the written consent of such Hedge Bank.
Notwithstanding anything to the contrary contained in Section 12.1 , the Guaranty, Collateral Documents and related documents executed by Subsidiaries in connection with this Agreement and the other Loan Documents may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause such Guaranty, Collateral Document or other document to be consistent with this Agreement and the other Loan Documents.
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If any Lender does not consent to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender or each affected Lender (including any of the matters expressly set forth in this Section 12.1 ) and that has been approved by the Requisite Lenders or Requisite Class Lenders (as applicable), the Borrower may replace such non-consenting Lender in accordance with Section 3.7 ; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).
SECTION 12.2 Successors and Assigns .
(a) Successors and Assigns Generally . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither Holdings nor the Borrower may, except as permitted by Section 9.4 , assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section, or (iv) to an SPC in accordance with the provisions of subsection (g) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuers and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders . Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans (including for purposes of this subsection (b), participations in Letter of Credit Obligations and in Swing Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts .
(A) in the case of an assignment of the entire remaining amount of the assigning Lenders Commitment of any Class and the Loans of any Class at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate unused amount of the Commitment of any Class (plus the principal outstanding balance of the Loans of any Class) or, if the Commitment of such Class is not then in effect, the principal outstanding balance of the Loans of such Class the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if Trade Date is
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specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default under Section 10.1(a) or (f) , solely with respect to the Borrower, has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided , however , that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;
(ii) Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not apply to rights in respect of the Swing Loan Lenders rights and obligations in respect of Swing Loans;
(iii) Required Consents . No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A) the consent of the Borrower (such consent not to be unreasonably withheld) shall be required unless (1) an Event of Default under Section 10.1(a) or, solely with respect to the Borrower or any Guarantor, Section 10.1(f) , has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender;
(C) the consent of the Issuers (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding); and
(D) the consent of the Swing Loan Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment;
provided that the consent of an Issuer or Swing Loan Lender shall not be required in any circumstances with respect to the assignment by a Term Lender of any or all of its rights or obligations under the Term Facility;
(iv) Assignment and Assumption . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided , however , that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The Eligible Assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
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(v) No Assignment to Certain Persons . No such assignment shall be made (A) to Holdings, the Borrower or any of the Borrowers Affiliates or Subsidiaries, or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural person.
(vi) Certain Additional Payments . In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Loans in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to clause (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.1 , 3.4 , 3.5 , 12.3 , 12.4 and 12.5 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, and the surrender by the assigning Lender of its Note, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
(c) Register . The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at the Administrative Agents Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Loans and Letter of Credit Obligations owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be
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conclusive absent manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. In addition, the Administrative Agent shall maintain on the Register information regarding the designation, and revocation of designation, of any Lender as a Defaulting Lender. The Register shall be available for inspection by the Borrower, any Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice. This Section 12.2(c) and Section 2.7 shall be construed so that all Loans and drawn Letters of Credit are at all times maintained in registered form within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any other relevant or successor provisions of the Code or of such Treasury regulations).
(d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person, a Defaulting Lender or the Borrower or any of the Borrowers Affiliates or Subsidiaries) (each, a Participant ) in all or a portion of such Lenders rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lenders participations in Letter of Credit Obligations and/or Swing Loans) owing to it); provided that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents, the other Lenders and the Issuers shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 12.1 (other than clause (d) thereof) that directly affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.1 (subject to the requirements of Sections 3.1(b) , (c) or (d) , as applicable), Section 3.4 and Section 3.5 (through the applicable Lender) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 12.6 as though it were a Lender, provided such Participant agrees to be subject to Section 12.7 as though it were a Lender.
(e) Limitations upon Participant Rights . A Participant shall not be entitled to receive any greater payment under Section 3.1 , 3.4 or 3.5 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent. A Participant shall not be entitled to the benefits of Section 3.1 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply and does in fact comply with Section 3.1 as though it were a Lender. Each Lender that sells a participation shall (acting solely for this purpose as a non-fiduciary agent of
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the Borrower) maintain a register complying with the requirements of Sections 163(f), 871(h) and 881(c)(2) of the Code and the Treasury regulations issued thereunder relating to the exemption from withholding for portfolio interest on which is entered the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Loans or other obligations under this Agreement (the Participant Register ). A Lender shall not be obligated to disclose the Participant Register to any Person except to the extent such disclosure is necessary to establish that any Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.
(f) Any Lender may, at any time, pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any other central bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g) Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender ) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an SPC ) the option to provide all or any part of any Revolving Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Revolving Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Revolving Loan, the Granting Lender shall be obligated to make such Revolving Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to the Administrative Agent as is required under Section 2.13(e) . Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Loan Parties under any Loan Document (including the Borrowers obligations under Sections 3.1 , 3.4 and 3.5 ), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Revolving Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Revolving Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500 (which processing fee may be waived by the Administrative Agent in its sole discretion), assign all or any portion of its right to receive payment with respect to any Revolving Loan to the
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Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Revolving Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.
(h) Resignation as Issuer or Swing Loan Lender after Assignment . Notwithstanding anything to the contrary contained herein, if at any time Wells Fargo or any other Issuer assigns all of its Revolving Credit Commitment and Revolving Loans pursuant to subsection (b) above, Wells Fargo or the applicable Issuer may, (i) upon thirty (30) days notice to the Borrower and the Lenders, resign as Issuer and/or (ii) if applicable, upon thirty (30) days notice to the Borrower, resign as Swing Loan Lender. In the event of any such resignation as Issuer or Swing Loan Lender, the Borrower shall be entitled to appoint from among the Lenders a successor Issuer or Swing Loan Lender hereunder; provided , however , that no failure by the Borrower to appoint any such successor shall affect the resignation of Wells Fargo or the applicable Issuer as Issuer or (as applicable) Swing Loan Lender, as the case may be. If Wells Fargo or the applicable Issuer resigns as Issuer, it shall retain all the rights, powers, privileges and duties of an Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as Issuer and all Letter of Credit Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in unreimbursed amounts under Letters of Credit pursuant to Section 2.4 ). If Wells Fargo resigns as Swing Loan Lender, it shall retain all the rights of the Swing Loan Lender provided for hereunder with respect to Swing Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Loans pursuant to Section 2.3 . Upon the appointment of a successor Issuer and/or Swing Loan Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Issuer or Swing Loan Lender, as the case may be, and (b) the successor Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Wells Fargo or the applicable Issuer to effectively assume the obligations of Wells Fargo or the applicable Issuer with respect to such Letters of Credit.
SECTION 12.3 Costs and Expenses .
The Borrower agrees (a) to pay or reimburse the Administrative Agent and the Arrangers for all reasonable and documented (in reasonable detail) out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby and thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs of (i) Morgan, Lewis & Bockius LLP (as counsel to the Administrative Agent and the Arrangers, taken as a whole), (ii) [reserved] and (iii) if reasonably necessary, one local counsel for the Administrative Agent and the Arrangers taken as a whole in each relevant jurisdiction material to the interests of the Agents, the Issuers and the Lenders (which, where reasonably practicable, may be a single law firm acting as local counsel in multiple relevant jurisdictions), and (b) to pay or reimburse the Administrative Agent, the Issuers and the Lenders for all reasonable and documented in reasonable detail out-of-pocket costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such
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costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all Attorney Costs of one counsel to the Administrative Agent, the Issuers and the Lenders taken as a whole (and, if reasonably necessary, one local counsel to the Administrative Agent, the Issuers and the Lenders in any relevant jurisdiction material to the interests of the Agents, the Issuers and the Lenders (which, where reasonably practicable, may be a single law firm acting as local counsel in multiple relevant jurisdictions) and, in the event of any conflict of interest between any of the Administrative Agent, the Issuers and the Lenders (where the Person affected by such conflict of interest has informed the Borrower of such conflict), one additional counsel in each relevant jurisdiction to each group of affected Lenders and/or Issuers similarly situated taken as a whole)). The agreements in this Section 12.3 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 12.3 shall be paid promptly following receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail. If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion. The Borrower and each other Loan Party hereby acknowledge that the Administrative Agent, any Issuer and/or any Lender may receive a benefit, including a discount, credit or other accommodation, from any of such counsel based on the fees such counsel may receive on account of their relationship with the Administrative Agent, such Issuer, and/or such Lender, including fees paid pursuant to this Agreement or any other Loan Document.
SECTION 12.4 Indemnities .
The Borrower shall indemnify and hold harmless the Administrative Agent, each Lender, each Issuer, the Arrangers and their respective Affiliates, directors, officers, employees, agents, partners, trustees or advisors and other representatives (collectively the Indemnitees ) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (but limited, in the case of legal fees and expenses, to the reasonable and documented out-of-pocket fees, disbursements and other charges of one counsel to all Indemnitees taken as a whole and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interest of such Indemnitees, and solely in the case of a conflict of interest between Indemnitees (where the Indemnitee affected by such conflict has informed the Borrower of such conflict), one additional counsel in each relevant jurisdiction to each group of affected Indemnitees similarly situated taken as a whole) (i) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby (including, without limitation, the reliance in good faith by any Indemnitee on any notice purportedly given by or on behalf of the Borrower), (ii) the Transaction, (iii) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iv) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or
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operated by the Borrower, any Subsidiary or any other Loan Party, or any Environmental Liabilities arising out of the activities or operations of the Borrower, any Subsidiary or any other Loan Party, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Indemnified Liabilities ); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements (A) resulted from (x) the gross negligence, bad faith or willful misconduct of such Indemnitee or of any Related Indemnified Person of such Indemnitee as determined by a final, non-appealable judgment of a court of competent jurisdiction or (y) a material breach of any obligations under any Loan Document by such Indemnitee or of any Related Indemnified Person of such Indemnitee, in each case as determined by a final, non appealable judgment of a court of competent jurisdiction or (z) any dispute solely among Indemnitees other than any claims against an Indemnitee in its capacity or in fulfilling its role as an administrative agent, collateral agent, co-collateral agent, arranger, bookrunner or any similar role under the Facilities and other than any claims arising out of any act or omission of the Borrower or any of its Affiliates or (B) have been settled pursuant to any settlement arrangement entered into by the applicable Indemnitee or any Related Indemnified Persons of such Indemnitee, in each case, without the Borrowers prior written consent (such consent not to be unreasonably withheld or delayed). To the extent that the undertakings to indemnify and hold harmless set forth in this Section 12.4 may be unenforceable in whole or in part because they are violative of any applicable law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, nor shall any Indemnitee or any Loan Party have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Effective Date) (other than, in the case of any Loan Party, in respect of any such damages incurred or paid by an Indemnitee to a third party). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 12.4 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. All amounts due under this Section 12.4 (after the determination of a court of competent jurisdiction, if required pursuant to the terms of this Section 12.4 ), shall be paid within twenty (20) Business Days after written demand therefor. The agreements in this Section 12.4 shall survive the resignation of the Administrative Agent, the Swing Loan Lender or any Issuer, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. This Section 12.4 shall not apply to Taxes, Other Taxes, taxes covered by Section 3.4 or amounts excluded from the definition of Taxes pursuant to clauses (i) through (vii) of the first sentence of Section 3.1(a) , which shall be governed by Section 3.1 or Section 3.4 , except it
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shall apply to any taxes (other than taxes imposed on or measured by net income (however denominated, and including branch profits and similar taxes), and franchise or similar taxes) that represent losses, claims, damages, etc. arising from a non-tax claim (including a value added tax or similar tax charged with respect to the supply of legal or other services).
SECTION 12.5 Limitation of Liability .
The Loan Parties agree that no Indemnitee shall have any liability (whether in contract, tort or otherwise) to any Loan Party or any of their respective Subsidiaries or any of their respective equity holders or creditors for or in connection with the transactions contemplated hereby and in the other Loan Documents, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnitees gross negligence or willful misconduct or bad faith or breach by such Indemnitee of its material obligations under this Agreement. In no event, shall any party hereto or any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). Each party hereto hereby waives, releases and agrees (each for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.
SECTION 12.6 Right of Setoff .
If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such other Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.16 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.
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SECTION 12.7 Sharing of Payments .
If, other than as expressly provided elsewhere herein, any Lender shall obtain payment in respect of any principal of or interest on account of the Loans made by it, or the participations in Letter of Credit Obligations and Swing Loans held by it (in each case, whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in Letter of Credit Obligations or Swing Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment of principal of or interest on such Loans or such participations, as the case may be, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 12.15 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lenders ratable share (according to the proportion of (i) the amount of such paying Lenders required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. The provisions of this Section shall not be construed to apply to the application of Cash Collateral provided for in Sections 10.3 and 10.5 . For avoidance of doubt, the provisions of this paragraph shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement as in effect from time to time or (B) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant permitted hereunder. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by applicable Law, exercise all its rights of payment (including the right of set-off, but subject to Section 12.6 ) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 12.7 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 12.7 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.
SECTION 12.8 Notices and Other Communications; Facsimile Copies .
(a) General . Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
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(i) if to Holdings, the Borrower, the Administrative Agent, an Issuer or the Swing Loan Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 12.8 ; and
(ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below shall be effective as provided in such subsection (b) .
(b) Electronic Communications . Notices and other communications to the Lenders and the Issuers hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or Issuer pursuant to Article II if such Lender or Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
(c) Receipt . Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(d) The Platform . THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative
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Agent or any of its Agent-Related Persons or any Arranger (collectively, the Agent Parties ) have any liability to Holdings, the Borrower, any Lender, any Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrowers or the Administrative Agents transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however , that in no event shall any Agent Party have any liability to Holdings, the Borrower, any Lender, any Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(e) Change of Address . Each of Holdings, the Borrower, the Administrative Agent, each Issuer and the Swing Loan Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent, each Issuer and the Swing Loan Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the Private Side Information or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lenders compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the Public Side Information portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.
(f) Reliance by Administrative Agent, Issuers and Lenders . The Administrative Agent, the Issuers and the Lenders shall be entitled to rely and act upon any notices (including telephonic Notices of Borrowing or Swing Loan Requests) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
SECTION 12.9 No Waiver; Cumulative Remedies .
No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
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privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.
SECTION 12.10 [ Reserved ] .
SECTION 12.11 [ Reserved ] .
SECTION 12.12 [ Reserved ] .
SECTION 12.13 Governing Law; Submission to Jurisdiction; Service of Process .
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT THE AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE OF ANY RIGHTS UNDER ANY COLLATERAL DOCUMENT OR THE ENFORCEMENT OF ANY JUDGMENT.
(c) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
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(d) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 12.8. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
SECTION 12.14 Waiver of Jury Trial .
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 12.15 Marshaling; Payments Set Aside .
None of the Administrative Agent, any Lender, or any Issuer shall be under any obligation to marshal any assets in favor of the Loan Parties or any other party or against or in payment of any or all of the Obligations. To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect.
SECTION 12.16 Acknowledgement and Consent to Bail-In of EEA Financial Institutions .
Solely to the extent any Lender or Issuer that is an EEA Financial Institution is a party to this Agreement and notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender or Issuer that is an EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the
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write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender or Issuer that is an EEA Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
SECTION 12.17 Execution in Counterparts .
This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging (including .pdf) means shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 12.18 Electronic Execution of Assignments and Certain Other Documents .
The words execution, signed, signature, and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
SECTION 12.19 Confidentiality .
Each of the Administrative Agent, the Arrangers, the Lenders and the Issuers agrees to maintain the confidentiality of the Information in accordance with its customary procedures (as set forth below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates respective partners, directors, officers, employees, agents, trustees, advisors and
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representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential and in no event shall such disclosure be made to any direct competitor of the Borrower pursuant to this clause (a)), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, provided that the Administrative Agent, such Arranger or such Lender, as applicable, agrees that it will notify the Borrower as soon as practicable in the event of any such disclosure by such Person (other than at the request of a regulatory authority) unless such notification is prohibited by law, rule or regulation, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions at least as restrictive as those of this Section 12.19 (it being understood that in no event shall such disclosure be made to any direct competitor of the Borrower pursuant to this clause (f)), to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or any Eligible Assignee invited to be an Additional Revolving Credit Lender or (ii) any actual or prospective direct or indirect counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower; (h) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender); or (i) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any Arranger, any Issuer, any Lender, or any of their respective Affiliates on a nonconfidential basis from a source other than Holdings, the Borrower or any Subsidiary thereof, and which source is not known by such Person to be subject to a confidentiality restriction in respect thereof in favor of the Borrower or any Affiliate of the Borrower.
For purposes of this Section, Information means all information received from any Loan Party or any Subsidiary thereof relating to any Loan Party or any Subsidiary thereof or their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Loan Party or any Subsidiary thereof, it being understood that all information received from Holdings, the Borrower or any Subsidiary after the Restatement Effective Date shall be deemed confidential unless such information is clearly identified at the time of delivery as not being confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so in accordance with its customary procedures if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Each of the Administrative Agent, Arrangers and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.
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SECTION 12.20 Use of Name, Logo, etc.
Each Loan Party consents to the publication in the ordinary course by Administrative Agent or the Arrangers of customary advertising material relating to the financing transactions contemplated by this Agreement using such Loan Partys name, product photographs, logo or trademark. Such consent shall remain effective until revoked by such Loan Party in writing to the Administrative Agent and the Arrangers.
SECTION 12.21 USA PATRIOT Act Notice .
Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the USA PATRIOT Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act.
SECTION 12.22 Outstanding Obligations.
Upon the satisfaction of the conditions precedent set forth in Section 4.1 hereof, all Existing Revolving Loans and Existing Term Loans outstanding under the Existing Credit Agreement shall remain outstanding as part of the initial Borrowing of Loans under this Agreement. On the Restatement Effective Date, the Lenders each agree to make such purchases and sales of interests in the outstanding Loans and interests in outstanding Letters of Credit between themselves so that each Lender is then holding its Applicable Percentage of outstanding Loans and Letter of Credit Obligations. Such purchases and sales shall be arranged by and through the Administrative Agent, and each Lender hereby agrees to execute such further instruments and documents, if any, as the Administrative Agent may reasonably request in connection therewith.
SECTION 12.23 No Advisory or Fiduciary Responsibility .
In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of the Borrower and Holdings acknowledges and agrees, and acknowledges its Affiliates understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Agents and the Arrangers are arms-length commercial transactions between the Borrower, Holdings and their respective Affiliates, on the one hand, and the Agents and the Arrangers, on the other hand, (B) each of the Borrower and Holdings has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Borrower and Holdings is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents;
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(ii) (A) the Agents, the Arrangers and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower, Holdings or any of their respective Affiliates, or any other Person and (B) none of the Agents, the Arrangers nor any Lender has any obligation to the Borrower, Holdings or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Agents, the Arrangers, the Lender and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, Holdings their respective Affiliates, and none of the Agents, the Arrangers nor any Lender has any obligation to disclose any of such interests to the Borrower, Holdings or any of their respective Affiliates. To the fullest extent permitted by law, each of the Borrower and Holdings hereby waives and releases any claims that it may have against the Agents, the Arrangers nor any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
SECTION 12.24 Severability .
If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 12.24 , if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the applicable Issuer or the Swing Loan Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
SECTION 12.25 Survival of Representations and Warranties .
All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent, each Issuer and each Lender, regardless of any investigation made by the Administrative Agent, any Issuer or any Lender or on their behalf and notwithstanding that the Administrative Agent, any Issuer or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
SECTION 12.26 Lender Action .
Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party under any of the Loan Documents or the Secured Hedge Agreements (including the exercise of any right of set-off, rights on
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account of any bankers lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, without the prior written consent of the Administrative Agent (which shall not be withheld in contravention of Section 11.4 ). The provision of this Section 12.26 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.
SECTION 12.27 Interest Rate Limitation .
Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate ). If any Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by an Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
SECTION 12.28 Amendment and Restatement of Existing Credit Agreement .
On the Restatement Effective Date, this Agreement shall amend, restate and supersede the Existing Credit Agreement in its entirety, except as provided in this Section 12.28 . On the Restatement Effective Date, the rights and obligations of the parties evidenced by the Existing Credit Agreement shall be evidenced by this Agreement and the other Loan Documents and the grant of security interest in the Collateral by the Loan Parties under the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) shall continue under, but as amended by this Agreement and the other Loan Documents, and shall not in any event be terminated, extinguished or annulled but shall hereafter be governed by this Agreement and the other Loan Documents. This Agreement represents a modification, and not a novation, of the credit facility under the Existing Credit Agreement and nothing contained herein shall be construed as a novation of the Obligations outstanding under, and as defined in, the Existing Credit Agreement, which shall remain in full force and effect, except as modified hereby. In the event that any payment made by any Loan Party under the Existing Credit Agreement must be disgorged or otherwise returned by any Secured Party, such Secured Party shall be entitled to the benefits of the Existing Credit Agreement and the Loan Parties shall unconditionally be obligated to repay the same along with any applicable interest and fees. The Loan Parties acknowledge, represent and warrant that they have no claims, defenses or offsets with respect to the Existing Credit Agreement or any of the Loan Documents (as defined therein) related thereto and that immediately prior to the effectiveness of this Agreement, the Existing Credit Agreement and such other loan and collateral documents are valid, binding and enforceable in accordance with the terms thereof. Except as provided herein, this Agreement shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Existing Credit Agreement or any other Loan Document, or (ii) operate as a waiver or otherwise prejudice any right, power or remedy that any Secured Party may now
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have or may have in the future under or in connection with the Existing Credit Agreement or any other Loan Document, except as specifically set forth herein. Upon the effectiveness of this Agreement, each reference in the Loan Documents to the Credit Agreement shall mean this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
BEACON HOLDING INC. , as Holdings | ||
By: |
/s/ Christopher J. Baldwin
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Name: | Christopher J. Baldwin | |
Title: | President | |
BJS WHOLESALE CLUB, INC. | ||
By: |
/s/ Christopher J. Baldwin |
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Name: | Christopher J. Baldwin | |
Title: | President, Chief Executive Officer |
LENDERS : | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION , as Administrative Agent, a Lender and an Issuer | ||
By: |
/s/ Joseph Burt |
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Name: | Joseph Burt | |
Title: | Director |
BANK OF AMERICA, N.A. , as a Lender and an Issuer | ||
By: |
/s/ Brian Lindblom |
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Name: | Brian Lindblom | |
Title: | Director |
Deutsche Bank AG New York Branch | ||
By: |
/s/ Dusan Lazarov |
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Name: | Dusan Lazarov | |
Title: | Director | |
By: |
/s/ Peter Cucchiara |
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Name: | Peter Cucchiara | |
Title: | Vice President |
U.S. BANK NATIONAL ASSOCIATION as a Co-Documentation Agent and a Lender | ||
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||
By: |
/s/ Nicole Manies |
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Name: | Nicole Manies | |
Title: | Vice President |
TD BANK, N.A. | ||
By: |
/s/ Jang Kim |
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Name: | Jang Kim | |
Title: | Vice President |
BMO Harris Bank N.A. | ||
By: |
/s/ Craig Thistlethwaite
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Name: | Craig Thistlethwaite | |
Title: | Managing Director |
NYCB SPECIALTY FINANCE COMPANY, LLC, a wholly owned subsidiary of New York Community Bank, as a Lender | ||
By: |
/s/ Willard D. Dickerson, Jr. |
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Name: | Willard D. Dickerson, Jr. | |
Title: | Senior Vice President |
Capital One, National Association | ||
By: |
/s/ Jon Oldham |
|
Name: | Jon Oldham | |
Title: | VP, Managing Underwriter |
ING CAPITAL LLC , as a Lender | ||
By: |
/s/ Doug S. Clarida |
|
Name: | Doug S. Clarida | |
Title: | Director | |
By: |
/s/ Jerry L. McDonald |
|
Name: | Jerry L. McDonald | |
Title: | Director |
|
||
PNC BANK, NATIONAL ASSOCIATION, as a Lender |
||
By: |
/s/ Eugene A. Leary |
|
Name: | Eugene A. Leary | |
Title: | Senior Vice President |
CITY NATIONAL BANK, A NATIONAL BANKING ASSOCIATION | ||
By: |
/s/ Catherine Chiavetta |
|
Name: | Catherine Chiavetta | |
Title: | Senior Vice President |
The Huntington National Bank | ||
By: |
/s/ Roger F. Reeder |
|
Name: | Roger F. Reeder | |
Title: | Vice President |
SANTANDER BANK, N.A. | ||
By: |
/s/ John P. Nuzzo |
|
Name: | John P. Nuzzo | |
Title: | Vice President |
SCHEDULE I
COMMITMENTS OF LENDERS
Lender |
Revolving Credit
Commitment |
Applicable
Percentage (Revolving Credit Commitment) |
Term
Commitment |
Applicable
Percentage (Term Commitment) |
||||||||||||
Wells Fargo Bank, National Association |
$ | 299,250,000.00 | 31.500000000 | % | $ | 15,750,000.00 | 31.500000000 | % | ||||||||
Bank of America, N.A. |
$ | 137,750,000.00 | 14.500000000 | % | $ | 7,250,000.00 | 14.500000000 | % | ||||||||
Deutsche Bank AG New York Branch |
$ | 61,750,000.00 | 6.500000000 | % | $ | 3,250,000.00 | 6.500000000 | % | ||||||||
U.S. Bank National Association |
$ | 57,000,000.00 | 6.000000000 | % | $ | 3,000,000.00 | 6.000000000 | % | ||||||||
TD Bank, N.A. |
$ | 57,000,000.00 | 6.000000000 | % | $ | 3,000,000.00 | 6.000000000 | % | ||||||||
BMO Harris Bank N.A. |
$ | 52,250,000.00 | 5.500000000 | % | $ | 2,750,000.00 | 5.500000000 | % | ||||||||
NYCB Specialty Finance Company, LLC |
$ | 52,250,000.00 | 5.500000000 | % | $ | 2,750,000.00 | 5.500000000 | % | ||||||||
Capital One, National Association |
$ | 47,500,000.00 | 5.000000000 | % | $ | 2,500,000.00 | 5.000000000 | % | ||||||||
ING Capital LLC |
$ | 47,500,000.00 | 5.000000000 | % | $ | 2,500,000.00 | 5.000000000 | % | ||||||||
PNC Bank, National Association |
$ | 47,500,000.00 | 5.000000000 | % | $ | 2,500,000.00 | 5.000000000 | % | ||||||||
City National Bank |
$ | 33,250,000.00 | 3.500000000 | % | $ | 1,750,000.00 | 3.500000000 | % | ||||||||
The Huntington National Bank |
$ | 28,500,000.00 | 3.000000000 | % | $ | 1,500,000.00 | 3.000000000 | % | ||||||||
Santander Bank, N.A. |
$ | 28,500,000.00 | 3.000000000 | % | $ | 1,500,000.00 | 3.000000000 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 950,000,000.00 | 100.000000000 | % | $ | 50,000,000.00 | 100.000000000 | % | ||||||||
|
|
|
|
|
|
|
|
SCHEDULE II
SUBSIDIARY GUARANTORS
Name of Borrower/Loan Party |
Type of Organization (e.g. corporation, limited liability company, limited partnership) |
Jurisdiction of Organization/ Formation |
||
BJME Operating Corp. | Corporation | Massachusetts | ||
BJNH Operating Co., LLC | Limited liability company | Delaware | ||
Natick Realty, Inc. | Corporation | Maryland |
Schedule II
SCHEDULE 1.1A
COLLATERAL DOCUMENTS
1. |
Amended and Restated Security Agreement dated February 3, 2017 by and among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower), Beacon Holding Inc., a Delaware corporation (Holdings), the Subsidiary Guarantors party thereto from time to time and Wells Fargo Bank, National Association as Administrative Agent (the Agent). |
2. |
Amended and Restated Guaranty Agreement dated February 3, 2017 by and among Holdings, the other Subsidiary Guarantors party thereto from time to time, and the Agent. |
3. |
Trademark Security Agreement dated February 3, 2017 by and among the Borrower and the Agent. |
4. |
Acknowledgment to Intercreditor Agreement dated February 3, 2017. |
5. |
Intercompany Subordination Agreement dated February 3, 2017. |
Schedule 1.1A
SCHEDULE 1.1D
MATERIAL REAL PROPERTY
Club # |
Borrower/Loan Party |
Address/City/State/Zip Code |
County |
|||
52 | Natick Realty, Inc. |
Court at Oxford Valley 350 Commerce Blvd. Fairless Hills, PA 19030 |
Bucks | |||
57 | Natick Realty, Inc. |
550 Madison Avenue Reading, PA 19605 |
Berks | |||
67 | Natick NJ 1993 Realty Corp. |
1001 East Edgar Road Linden, NJ 07036 |
Union | |||
149 | Natick NH Hooksett Realty Corp. |
400 Quality Drive Hooksett, NH 03106 |
Merrimack | |||
308 | Natick NJ Flemington Realty Corp. |
186 Highway 31 Flemington, NJ 08822 |
Hunterdon |
Schedule 1.1D
SCHEDULE 1.1E
CREDIT CARD AGREEMENTS
1. |
Bank Card Merchant Agreement for Credit Cards, dated as of August 28, 2001, by and among Vantiv, LLC (f/k/a Fifth Third Processing Solutions, LLC and Fifth Third Bank) and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
2. |
American Express Card Acceptance Agreement, dated as of November 17, 2003, by and among American Express Travel Related Services Company, Inc. and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
3. |
Merchant Services Agreement, dated as of August 15, 2013, by and among DFS Services, LLC and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
4. |
Visa Incentive Network Merchant Participation Master Agreement, dated as of January 1, 2013, by and among Visa USA Inc. and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
5. |
Co-Brand Agreement, dated as of July 11, 2014, by and among MasterCard International Incorporated and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
6. |
Co-Brand Credit Card Program Agreement, dated as of June 5, 2014, by and among Comenity Capital Bank and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
7. |
MasterCard Acceptance Agreement, dated as of March 22, 2013, by and among MasterCard International Incorporated and BJs Wholesale Club, Inc., as amended, restated, supplemented or otherwise modified from time to time. |
Schedule 1.1E
Schedule 1.1F
EXISTING LETTERS OF CREDIT
Issue Date |
Beneficiary |
Issuing Bank |
Amount | Expiration Date |
Purpose |
|||||||
2/1/2012 |
Canarsie Plaza LLC | Wells Fargo Bank | $ | 2,500,000.00 | 2/1/2017 | Lease requirement | ||||||
3/25/2013 |
Liberty Mutual Insurance | Wells Fargo Bank | $ | 500,000.00 | 3/25/2017 | Insurance requirement | ||||||
6/11/2013 |
TransMontaigne Product Services LLC | Wells Fargo Bank | $ | 2,600,000.00 | 6/6/2017 | Vendor requirement | ||||||
6/25/2013 |
HUH Hempstead BJ 2012 LLC | Wells Fargo Bank | $ | 1,452,000.00 | 6/13/2017 | Lease requirement | ||||||
11/22/2013 |
Valero | Wells Fargo Bank | $ | 2,000,000.00 | 11/19/2017 | Vendor requirement | ||||||
12/2/2013 |
Sunoco | Wells Fargo Bank | $ | 400,000.00 | 11/19/2017 | Vendor requirement | ||||||
12/5/2013 |
Phillips 66 | Wells Fargo Bank | $ | 2,000,000.00 | 11/26/2017 | Vendor requirement | ||||||
1/13/2014 |
Marathon Petroleum | Wells Fargo Bank | $ | 3,000,000.00 | 1/13/2018 | Vendor requirement | ||||||
1/16/2014 |
Atlantic Specialty Insurance | Wells Fargo Bank | $ | 7,500,000.00 | 1/10/2018 | Insurance requirement | ||||||
3/12/2014 |
Apex Oil Company | Wells Fargo Bank | $ | 1,000,000.00 | 3/12/2017 | Vendor requirement | ||||||
5/23/2014 |
BP Products North America Inc | Wells Fargo Bank | $ | 7,000,000.00 | 5/23/2017 | Vendor requirement | ||||||
11/17/2014 |
PBF Holding Company LLC | Wells Fargo Bank | $ | 8,000,000.00 | 11/17/2017 | Vendor requirement | ||||||
1/20/2015 |
Arch Insurance Company | Wells Fargo Bank | $ | 1,875,000.00 | 1/13/2017 | Insurance requirement | ||||||
3/15/2015 |
Arch Insurance Company | Wells Fargo Bank | $ | 100,000.00 | 3/2/2017 | Insurance requirement | ||||||
|
|
|||||||||||
$ | 39,927,000.00 |
224
|
|
|||||||||||||||
Grand Total |
7,833,817.58 | |||||||||||||||
|
|
|||||||||||||||
HK LACP - BJS WHOLESALE CLUB, INC. Total |
956,666.76 | |||||||||||||||
2/02/2017 | 1912723 | 12/05/2016 | 3/02/2017 |
WUXI HOUSETEX INDUSTRIES CO., |
58,424.00 | |||||||||||
2/02/2017 | 1914516 | 12/30/2016 | 2/27/2017 |
CANGNAN COLOR BAG CO., LTD |
130,636.80 | |||||||||||
2/02/2017 | 1915054 | 1/09/2017 | 2/03/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
20,820.92 | |||||||||||
2/02/2017 | 1915056 | 1/09/2017 | 2/03/2017 |
MOOSE TOYS PTY LTD |
158,906.40 | |||||||||||
2/02/2017 | 1915131 | 1/10/2017 | 2/09/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
56,409.12 | |||||||||||
2/02/2017 | 1915198 | 1/11/2017 | 2/10/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
96,294.60 | |||||||||||
2/02/2017 | 1915199 | 1/11/2017 | 2/10/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
105,392.00 | |||||||||||
2/02/2017 | 1915519 | 1/17/2017 | 2/13/2017 |
MG MACAO COMMERCIAL OFFSHORE LTD. |
90,072.00 | |||||||||||
2/02/2017 | 1916036 | 1/20/2017 | 2/13/2017 |
MG MACAO COMMERCIAL OFFSHORE LTD. |
197,640.00 | |||||||||||
2/02/2017 | 1916545 | 1/26/2017 | 2/22/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
42,070.92 | |||||||||||
HK LCs - BJS WHOLESALE CLUB, INC. Total |
3,078,357.24 | |||||||||||||||
2/02/2017 |
TP605500060005-6 |
11/03/2016 | 1/19/2017 |
CANGNAN COLOR BAG CO., LTD |
102,876.48 | |||||||||||
2/02/2017 |
TP605500060006-6 |
11/03/2016 | 3/10/2017 |
INTEX TRADING LTD |
281,661.12 | |||||||||||
2/02/2017 |
TP605500060009-6 |
11/10/2016 | 1/27/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
2,103.55 | |||||||||||
2/02/2017 |
TP605500060010-6 |
11/15/2016 | 2/21/2017 |
MG MACAO COMMERCIAL OFFSHORE LTD. |
191,208.60 | |||||||||||
2/02/2017 |
TP605500060011-6 |
11/16/2016 | 2/12/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
81,210.26 | |||||||||||
2/02/2017 |
TP605500060012-6 |
11/21/2016 | 5/08/2017 |
CIXI GSTAR ELECTRIAL APPLIANCE |
57,904.88 | |||||||||||
2/02/2017 |
TP605500060014-6 |
11/24/2016 | 3/08/2017 |
INTEX TRADING LTD |
67,227.54 | |||||||||||
2/02/2017 |
TP605500060015-6 |
11/24/2016 | 2/17/2017 |
MG MACAO COMMERCIAL OFFSHORE LTD. |
68,040.00 | |||||||||||
2/02/2017 |
TP605500060016-6 |
12/09/2016 | 3/10/2017 |
QUANZHOU SHUNTONG CRAFTS CO., LTD |
129,600.00 | |||||||||||
2/02/2017 |
TP605500060019-6 |
12/20/2016 | 3/12/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
24,793.78 | |||||||||||
2/02/2017 |
TP605500060020-6 |
12/20/2016 | 3/11/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
220,872.33 | |||||||||||
2/02/2017 |
TP605500060021-6 |
12/20/2016 | 5/07/2017 |
CANGNAN COLOR BAG CO., LTD |
308,629.44 | |||||||||||
2/02/2017 |
TP605500060022-6 |
12/30/2016 | 2/18/2017 |
INTEX TRADING LTD |
74,513.25 | |||||||||||
2/02/2017 |
TP605500060023-6 |
12/30/2016 | 2/06/2017 |
VENTUS INDUSTRIAL LIMITED |
30,641.75 | |||||||||||
2/02/2017 |
TP605500060024-6 |
12/30/2016 | 2/06/2017 |
VENTUS INDUSTRIAL LIMITED |
28,106.40 | |||||||||||
2/02/2017 |
TP605500060025-6 |
12/30/2016 | 2/06/2017 |
VENTUS INDUSTRIAL LIMITED |
3,764.29 | |||||||||||
2/02/2017 |
TP605500060026-6 |
12/30/2016 | 2/08/2017 |
VENTUS INDUSTRIAL LIMITED |
48,732.15 | |||||||||||
2/02/2017 |
TP605500060027-6 |
12/30/2016 | 2/06/2017 |
VENTUS INDUSTRIAL LIMITED |
57,727.69 | |||||||||||
2/02/2017 |
TP605500060028-7 |
1/06/2017 | 2/08/2017 |
NINGBO SINGFUN ELECTRIC APPLIANCE |
4,301.24 | |||||||||||
2/02/2017 |
TP605500060029-7 |
1/18/2017 | 4/26/2017 |
INTEX TRADING LTD |
364,650.20 | |||||||||||
2/02/2017 |
TP605500060030-7 |
1/17/2017 | 4/10/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
470,169.13 | |||||||||||
2/02/2017 |
TP605500060031-7 |
1/17/2017 | 4/21/2017 |
SWIMWAYS FAR EAST COMPANY LIMITED |
187,803.36 | |||||||||||
2/02/2017 |
TP605500060032-7 |
1/19/2017 | 4/25/2017 |
MG MACAO COMMERCIAL OFFSHORE LTD. |
271,819.80 |
US BJS WHOLESALE CLUB, INC. Total |
3,798,793.58 | |||||||||||||||
2/02/2017 | 00000011306993 | 1/30/2017 | 2/27/2017 | 30,257.70 | ||||||||||||
2/02/2017 | 00000011319992 | 12/28/2016 | 2/21/2017 | 37,196.00 | ||||||||||||
2/02/2017 | 00000011321191 | 1/06/2017 | 2/03/2017 | 71,124.48 | ||||||||||||
2/02/2017 | 00000011321241 | 1/06/2017 | 2/03/2017 | 35,778.24 | ||||||||||||
2/02/2017 | 00000011322199 | 1/06/2017 | 2/06/2017 | 17,889.12 | ||||||||||||
2/02/2017 | 00000011325448 | 1/19/2017 | 2/17/2017 | 160,354.08 | ||||||||||||
2/02/2017 | 00000011327641 | 1/27/2017 | 3/27/2017 | 260,372.00 | ||||||||||||
2/02/2017 | 00000011329104 | 2/02/2017 | 4/03/2017 | 74,392.00 | ||||||||||||
2/02/2017 | 00000064802421 | 11/04/2016 | 2/17/2017 |
ALPAN LIGHTING PRODUCTS, INC |
211,680.00 | |||||||||||
2/02/2017 | 00000064802422 | 11/04/2016 | 3/14/2017 |
SKYWALKER HOLDINGS LLC |
210,157.40 | |||||||||||
2/02/2017 | 00000064802424 | 11/04/2016 | 2/04/2017 |
TRAVELPRO INTERNATIONAL |
270,307.37 | |||||||||||
2/02/2017 | 00000064802426 | 11/25/2016 | 3/29/2017 |
ALPAN LIGHTING PRODUCTS, INC |
271,109.16 | |||||||||||
2/02/2017 | 00000064802427 | 11/25/2016 | 4/07/2017 |
ALPAN LIGHTING PRODUCTS, INC |
385,654.50 | |||||||||||
2/02/2017 | 00000064802428 | 11/25/2016 | 3/29/2017 |
ALPAN LIGHTING PRODUCTS, INC |
192,827.25 | |||||||||||
2/02/2017 | 00000064802430 | 12/21/2016 | 1/13/2017 |
ROSENTHAL AND ROSENTHAL |
156,331.88 | |||||||||||
2/02/2017 | 00000064802432 | 12/15/2016 | 2/07/2017 |
JIA HOME |
20,296.92 | |||||||||||
2/02/2017 | 00000064802433 | 12/20/2016 | 1/27/2017 |
CURTIS INTERNATIONAL LIMITED |
86,234.40 | |||||||||||
2/02/2017 | 00000064802434 | 12/20/2016 | 3/15/2017 |
ALPAN LIGHTING PRODUCTS, INC |
144,925.20 | |||||||||||
2/02/2017 | 00000064802435 | 12/20/2016 | 2/08/2017 |
ALPAN LIGHTING PRODUCTS, INC |
103,061.70 | |||||||||||
2/02/2017 | 00000064802436 | 12/20/2016 | 3/14/2017 |
SKYWALKER HOLDINGS LLC, |
159,942.80 | |||||||||||
2/02/2017 | 00000064802437 | 12/20/2016 | 2/08/2017 |
ALPAN LIGHTING PRODUCTS, INC |
149,499.00 | |||||||||||
2/02/2017 | 00000064802438 | 12/20/2016 | 3/15/2017 |
ALPAN LIGHTING PRODUCTS, INC |
120,153.60 | |||||||||||
2/02/2017 | 00000064802439 | 12/20/2016 | 3/15/2017 |
ALPAN LIGHTING PRODUCTS, INC |
127,008.00 | |||||||||||
2/02/2017 | 00000064802440 | 12/22/2016 | 2/12/2017 |
INTERNATIONAL LEISURE PRODUCTS, INC |
72,670.72 | |||||||||||
2/02/2017 | 00000064802441 | 1/05/2017 | 2/03/2017 |
TRAVELPRO INTERNATIONAL |
1,512.89 | |||||||||||
2/02/2017 | 00000064802442 | 1/17/2017 | 3/15/2017 |
ALPAN LIGHTING PRODUCTS, INC |
138,643.34 | |||||||||||
2/02/2017 | 00000064802443 | 1/17/2017 | 3/24/2017 |
ALPAN LIGHTING PRODUCTS, INC |
84,672.00 | |||||||||||
2/02/2017 | 00000064802444 | 1/17/2017 | 3/19/2017 |
INTERNATIONAL LEISURE PRODUCTS, |
48,050.69 | |||||||||||
2/02/2017 | 00000064802445 | 1/27/2017 | 3/21/2017 |
ALPAN LIGHTING PRODUCTS, INC |
126,433.44 | |||||||||||
2/02/2017 | 48024419199551 | 1/19/2017 | 2/17/2017 |
TRAVELPRO INTERNATIONAL |
30,257.70 |
SCHEDULE 5.12
SUBSIDIARIES
Holder |
Issuer |
Type of
Organization |
Jurisdiction of
Organization / Formation |
# of
Shares Owned |
Total
Shares Outstanding |
% of Interest
Pledged pursuant to Collateral and Guaranty Requirement |
Certificate
No. |
Par
Value |
||||||||||||||||||
Beacon Holding Inc. |
BJs Wholesale Club, Inc. |
Corporation | Delaware | 10 | 10 | 100 | % | 1 | $0.01 | |||||||||||||||||
BJs Wholesale Club, Inc. |
CWC Beverages Corp. |
Corporation | Connecticut | 1 | 1 | 100 | % | 3 | n/a | |||||||||||||||||
BJs Wholesale Club, Inc. |
JWC Beverages Corp. |
Corporation | New Jersey | 1 | 1 | 100 | % | 3 | n/a | |||||||||||||||||
BJs Wholesale Club, Inc. |
Mormax Beverages Corp. |
Corporation | Delaware | 100 | 100 | 100 | % | 2 | $0.01 | |||||||||||||||||
BJs Wholesale Club, Inc. |
Mormax Corporation |
Corporation | Massachusetts | 5,000 | 5,000 | 100 | % | 4 | $1.00 | |||||||||||||||||
BJs Wholesale Club, Inc. |
Natick GA Beverage Corp. |
Corporation | Georgia | 100 | 100 | 100 | % | 1 | $1.00 | |||||||||||||||||
BJs Wholesale Club, Inc. |
YWC Beverages Corp. |
Corporation | New York | 1 | 1 | 100 | % | 3 | n/a | |||||||||||||||||
BJs Wholesale Club, Inc. |
BJME Operating Corp. |
Corporation | Massachusetts | 1,000 | 1,000 | 100 | % | 4 | $1.00 |
Schedule 5.12
Holder |
Issuer |
Type of
Organization |
Jurisdiction of
Organization / Formation |
# of
Shares Owned |
Total
Shares Outstanding |
% of Interest
Pledged pursuant to Collateral and Guaranty Requirement |
Certificate
No. |
Par
Value |
||||||||||||||||||
BJME Operating Corp. |
Natick Realty, Inc. |
Corporation | Maryland | 105,000 | 105,0001 | 100 | % | 5 | $0.01 per share | |||||||||||||||||
BJME Operating Corp. |
BJNH Operating Co., LLC |
Limited Liability
Company |
Delaware | n/a | n/a | 100 | % | Uncertificated | n/a | |||||||||||||||||
Natick Realty, Inc. |
Natick Fifth Realty Corp. |
Corporation | Maryland | 1,000 | 1,000 | 100 | % | 2 | $1.00 per share | |||||||||||||||||
Natick Realty, Inc. |
Natick NH Hooksett Realty Corp. |
Corporation | New Hampshire | 100 | 100 | 100 | % | 1 | $1.00 per share | |||||||||||||||||
Natick Realty, Inc. |
Natick NJ 1993 Realty Corp. |
Corporation | New Jersey | 1,000 | 1,000 | 100 | % | 2 | $1.00 per share | |||||||||||||||||
Natick Realty, Inc. |
Natick NJ Flemington Realty Corp. |
Corporation | New Jersey | 1,000 | 1,000 | 100 | % | 2 | $1.00 per share | |||||||||||||||||
Natick Realty, Inc. |
Natick NJ Manahawkin Realty Corp. |
Corporation | New Jersey | 100 | 100 | 100 | % | 2 | $1.00 per share | |||||||||||||||||
Natick Realty, Inc. |
Natick NJ Realty Corp. |
Corporation | New Jersey | 1,000 | 1,000 | 100 | % | 2 | $1.00 per share |
1 |
Approximately 120 shares of Series A Non-Voting Preferred Stock of Natick Realty, Inc. are held by various current and former employees of BJs Wholesale Club, Inc. or their estates. BJME Operating Corp. holds all of the outstanding Common Stock of Natick Realty, Inc. |
Schedule 5.12
229
SCHEDULE 8.12
DEPOSIT ACCOUNTS
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
Number |
Material
Bank Account (Y/N) |
||||
BJs Wholesale Club, Inc. | Master / Concentration |
Bank of America NC1-002-27-05 101 S. Tryon St. Charlotte, NC 28255 |
511-57328 | Y | ||||
BJs Wholesale Club, Inc. | Master / Letter of Credit |
Wells Fargo Bank NK 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
2000035271886 | Y | ||||
BJs Wholesale Club, Inc. | Master / Concentration |
Santander Bank 75 State St. Boston, MA 02109 |
64904963200 | Y | ||||
BJs Wholesale Club, Inc. | Concentration |
Santander Bank 75 State St. Boston, MA 02109 |
64904963309 | Y | ||||
BJs Wholesale Club, Inc. | Receipts |
Santander Bank 75 State St. Boston, MA 02109 |
64904963317 | N | ||||
BJs Wholesale Club, Inc. | Home Office Check Deposits |
Santander Bank 75 State St. Boston, MA 02109 |
64904964083 | N | ||||
BJs Wholesale Club, Inc. | Concentration (ACH Receipts/Disb.) |
Bank of America NC1-002-27-05 101 S. Tryon St. Charlotte, NC 28255 |
00541-45326 | Y | ||||
BJME Operating Corp. | Subsidiary |
Santander Bank 75 State St. Boston, MA 02109 |
64904963390 | N |
Schedule 8.12
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
Number |
Material
Bank Account (Y/N) |
||||
BJNH Operating Co., LLC | Subsidiary |
Santander Bank 75 State St. Boston, MA 02109 |
64904963408 | N | ||||
BJs Wholesale Club, Inc. | New Club Deposits |
Bank of America NC1-002-27-05 101 S. Tryon St. Charlotte, NC 28255 |
00551-48254 | N | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
20000-0109-7298 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
20900-0259-4535 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
20500-0028-2083 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
20400-0008-1003 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
20882-1000-8773 | Y | ||||
BJs Wholesale Club, Inc. | Lottery |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
2000001101469 | N |
Schedule 8.12
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
Number |
Material
Bank Account (Y/N) |
||||
BJs Wholesale Club, Inc. | Lottery |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
2000001101223 | N | ||||
BJs Wholesale Club, Inc. | Lottery |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
2000001101346 | N | ||||
BJs Wholesale Club, Inc. | Lottery |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
2000001101427 | N | ||||
BJs Wholesale Club, Inc. | Lottery |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
2000011055233 | N | ||||
BJs Wholesale Club, Inc. | Lottery |
Santander Bank 75 State St. Boston, MA 02109 |
758-600-357-59 | N | ||||
BJs Wholesale Club, Inc. | Lottery |
Santander Bank 75 State St. Boston, MA 02109 |
758-600-470-69 | N | ||||
BJs Wholesale Club, Inc. | Money Market |
Bank of America Merrill Lynch 200 N College St., 3rd Floor Charlotte, NC 28255-0001 |
5S107A07 | N | ||||
BJs Wholesale Club, Inc. |
ACH Rebate Receipts |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
0046404-24327 | N |
Schedule 8.12
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
Number |
Material
Bank Account (Y/N) |
||||
BJs Wholesale Club, Inc. |
Funding Beacon Holdings Inc. |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
0046404-25148 | N | ||||
BJs Wholesale Club, Inc. | Disbursement |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
22200-77087 | N | ||||
BJs Wholesale Club, Inc. | Disbursements - Cigna |
JP Morgan 1 Chase Manhattan Plaza New York, NY 10005 |
47575-8072 | N | ||||
BJs Wholesale Club, Inc. |
Employee Donations |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
0046404-29982 | N | ||||
BJs Wholesale Club, Inc. | ACH Disbursements |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
0046404-31213 | N | ||||
BJs Wholesale Club, Inc. |
Miscellaneous Payroll |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
0046404-46978 | N | ||||
BJs Wholesale Club, Inc. | Bank Master |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7724 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7617 | Y |
Schedule 8.12
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
Number |
Material
Bank Account (Y/N) |
||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7625 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7666 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7567 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7526 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7427 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7575 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
US Bank SL-MO T11C One US Bank Plaza St. Louis, MO 63101 |
1539-1089-7476 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
41-2709-5248 | Y |
Schedule 8.12
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
Number |
Material
Bank Account (Y/N) |
||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
41-2709-5255 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
41-2709-5263 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
41-2709-5271 | Y | ||||
BJs Wholesale Club, Inc. | Club Depository |
Wells Fargo Bank 90 S 7th St., 7th Floor Minneapolis, MN 55402 |
41-2709-5289 | Y | ||||
BJs Wholesale Club, Inc. |
Consumer Funds (Trust Account) |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
0046404-48251 | N | ||||
BJs Wholesale Club, Inc. | Funding |
Bank of America NC1-002-2705 101 S. Tryon Street Charlotte, NC 28255 |
00046468-91967 | N | ||||
BJs Wholesale Club, Inc. | Depository |
TD Bank ME2-009-000 77 Exchange St. Bangor, ME 04401 |
24278-11028 | N | ||||
Natick Realty, Inc. | REIT accounts |
Santander Bank 75 State St. Boston, MA 02109 |
64904963416 | N |
Schedule 8.12
SCHEDULE 9.1(B)
EXISTING LIENS
None.
Schedule 9.1(b)
SCHEDULE 9.2(F)
EXISTING INVESTMENTS
All Equity Interests as set forth on Schedule 5.12 .
Schedule 9.2(f)
SCHEDULE 9.3(B)
EXISTING INDEBTEDNESS
1. |
Indebtedness related to a capital lease, dated May 24, 2010, by and among BJs Wholesale Club, Inc., as Tenant, and Equity One JV Sub Northborough LLC, as Landlord, for certain land and buildings located in Northborough, Massachusetts, in the principal amount of $8,077,688 and with an expiration date of September 17, 2031. |
Schedule 9.3(b)
SCHEDULE 9.8
EXISTING AFFILIATE TRANSACTIONS
None.
Schedule 9.8
SCHEDULE 9.9
EXISTING BURDENSOME AGREEMENTS
None.
Schedule 9.9
SCHEDULE 12.8
CERTAIN ADDRESSES FOR NOTICES
HOLDINGS, THE BORROWER OR ANY LOAN PARTY:
[c/o] BJs Wholesale Club, Inc.
25 Research Drive
Westborough, MA 01581
Attention: Robert W. Eddy / Chief Financial Officer
Telephone: 774-512-5950
Telecopier: 774-512-6056
Email: rweddy@bjs.com
Website: www.bjs.com
With a copy (which will not constitute notice) to:
Latham & Watkins LLP
355 South Grand Avenue
Los Angeles, CA 90071
Attention: John Jameson
Telephone: (213) 891-7516
Telecopier: (213) 891-8493
Email: john.jameson@lw.com
WELLS FARGO BANK, NATIONAL ASSOCIATION:
Wells Fargo Bank, National Association
Wells Fargo Capital Finance
Retail Finance Division
One Boston Place, 19th Floor
Boston, MA 02108
Attention: Joseph Burt, Director
Telephone: (617) 854-7279
Facsimile: (866) 617-3988
Email: Joseph.Burt@wellsfargo.com
Address for borrowing requests:
Wells Fargo Bank, National Association
One Boston Place, 19th Floor
Boston, MA 02108
Attention: BJs Wholesale Club, Inc. - Loan Servicer
Facsimile: 866-358-0023
WFRFwires@wellsfargo.com
Schedule 12.8
Address for payments:
ABA No. 121-000-248
Account Number 37235547964502815
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, CA
Account Name: Wells Fargo Bank, N.A.
Reference: BJS WHOLESALE CLUB, INC. Lucas ID BWU00
Schedule 12.8
EXHIBIT A
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (this Assignment and Assumption ) is dated as of the Assignment Effective Date set forth below and is entered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] Assignor ) and [the][each] 2 Assignee identified in item 2 below ([the][each, an] Assignee ). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given to them in the Amended and Restated Credit Agreement identified below (the Credit Agreement ), receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Assignment Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignors][the respective Assignors] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including, without limitation, the Letters of Credit and the Swing Loans included in such facilities 5 ) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor
1 |
For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language. |
2 |
For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language. |
3 |
Select as appropriate. |
4 |
Include bracketed language if there are either multiple Assignors or multiple Assignees. |
5 |
Include all applicable subfacilities. |
A-1
to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] Assigned Interest). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.
1. |
Assignor[s] : |
2. |
Assignee[s] : |
[for each Assignee identify Lender ]
3. |
Borrower : BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ) |
4. |
Administrative Agent : Wells Fargo Bank, National Association, including any successor thereto, as the administrative agent under the Credit Agreement |
5. |
Credit Agreement : The Amended and Restated Credit Agreement, dated as of February 3, 2017, by and among others, the Borrower, Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto |
6. |
Assigned Interest : |
Assignor[s] 6 |
Assignee[s] 7 |
Facility
Assigned 8 |
Aggregate Amount
of applicable Commitment/Loans for all Lenders 9 |
Amount of
Commitment/Loans Assigned |
Percentage Assigned
of Commitment/ Loans 10 |
CUSIP
Number |
||||||||||||||||||
$ | $ | % | ||||||||||||||||||||||
$ | $ | % | ||||||||||||||||||||||
$ | $ | % |
[7. |
Trade Date: ] 11 |
6 |
List each Assignor, as appropriate. |
7 |
List each Assignee, as appropriate. |
8 |
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment and Assumption (e.g., Term Commitments, Revolving Credit Commitments, Extended Revolving Credit Commitments, etc.). |
9 |
Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Assignment Effective Date. |
10 |
Set forth, to at least 9 decimals, as a percentage of the applicable Commitment/Loans of all Lenders thereunder. |
A-2
Assignment Effective Date: , 20 [TO BE INSERTED BY THE ADMINISTRATIVE AGENT AND WHICH SHALL BE THE ASSIGNMENT EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
11 |
To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date. |
A-3
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR | ||
[NAME OF ASSIGNOR] | ||
By: |
|
|
Name: | ||
Title: | ||
ASSIGNEE | ||
[NAME OF ASSIGNEE] | ||
By: |
|
|
Name: | ||
Title: |
[Consented to and] 1 Accepted: | ||
WELL FARGO BANK, NATIONAL ASSOCIATION as Administrative Agent | ||
By: |
|
|
Name: | ||
Title: | ||
[Consented to:
[ ] |
||
By: |
|
|
Name: | ||
Title:] 2 |
1 |
To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement. |
2 |
To be added only if the consent of the Borrower and/or other parties (e.g. Swing Loan Lender or the Issuers) is required by the terms of the Credit Agreement. |
A-4
ANNEX 1
TO ASSIGNMENT AND ASSUMPTION
Amended and Restated Credit Agreement (the Credit Agreement ), dated as of February 3, 2017, among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto.
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1. Assignor . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
1.2. Assignee . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 12.2(b)(iii) and (v) of the Credit Agreement (subject to such consents, if any, as may be required under Section 12.2(b)(iii) of the Credit Agreement), (iii) from and after the Assignment Effective Date referred to in this Assignment and Assumption, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most
A-5
recent financial statements delivered pursuant to Section 7.1(a), (b) and, if applicable, (c) thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest and (vii) attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, including but not limited to any documentation required pursuant to Section 3.1 of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2. Payments . From and after the Assignment Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Assignment Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Assignment Effective Date.
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York without giving effect to the conflicts of laws principles thereof, but including Section 5-1401 of the New York General Obligations Law.
A-6
EXHIBIT B-1
FORM OF REVOLVING CREDIT NOTE
, 20
FOR VALUE RECEIVED, the undersigned (the Borrower , together with all successors and assigns), promises to pay (hereinafter, together with its successors in title and assigns, the Lender ) the aggregate unpaid principal balance of Revolving Loans made by the Lender to or for the account of the Borrower pursuant to the Credit Agreement (as hereafter defined) and amounts advanced by the Lender in respect of any Letter of Credit and Swing Loans, with interest, fees, expenses and costs at the rate and payable in the manner stated in the Credit Agreement. As used herein, the Credit Agreement means and refers to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as such may be amended, restated, extended, supplemented or otherwise modified from time to time) by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation, Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and the Lender and each other Person from time to time party thereto as a lender thereunder. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
This is a Revolving Credit Note to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. This Revolving Credit Note is also entitled to the benefits of the Guaranty and is secured by the Collateral. The principal of, and interest on, this Revolving Credit Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. The Administrative Agents books and records concerning the Revolving Loans and amounts owing in respect of Letters of Credit and Swing Loans, the accrual of interest and fees thereon, and the repayment of such Revolving Loans and advances in respect of Letters of Credit and Swing Loans, shall be prima facie evidence of the indebtedness to the Lender hereunder, absent manifest error.
No delay or omission by the Administrative Agent or the Lender in exercising or enforcing any of the Administrative Agents or Lenders powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver.
The Borrower waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by the Administrative Agent and/or the Lender with respect to this Revolving Credit Note and/or any Collateral Document or any extension or other indulgence with respect to any other liability or
B-1-1
any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Revolving Credit Note.
This Revolving Credit Note shall be binding upon the Borrower and upon its successors, assigns, and representatives, and shall inure to the benefit of the Lender and its successors, endorsees and assigns.
The Borrower agrees that any action or proceeding arising out of or relating to this Revolving Credit Note or for recognition or enforcement of any judgment, may be brought in the courts of the state of New York sitting in New York City in the Borough of Manhattan or of the United States for the Southern District of New York, and any appellate court from any thereof, and by execution and delivery of this Revolving Credit Note, the Borrower and the Lender each consent, for itself and in respect of its property, to the exclusive jurisdiction of those courts. To the fullest extent permitted by applicable law, the Borrower irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens , which it may now or hereafter have to the bringing of any action or proceeding in the courts of the state of New York sitting in New York City in the Borough of Manhattan or of the United States for the Southern District of New York, and any appellate court from any thereof.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Administrative Agent and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Revolving Credit Note, are each relying thereon. THE BORROWER, AND THE LENDER BY ITS ACCEPTANCE HEREOF, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS REVOLVING CREDIT NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY).
[ Remainder of page intentionally left blank ]
B-1-2
LOANS AND PAYMENTS
Date |
Amount of Loan |
Maturity Date |
Payments of
|
Principal Balance of Note |
Name of Person Making this Notation |
B-1-4
EXHIBIT B-2
FORM OF TERM NOTE
, 20
FOR VALUE RECEIVED, the undersigned (the Borrower , together with all successors and assigns), promises to pay (hereinafter, together with its successors in title and assigns, the Lender ) the aggregate unpaid principal balance of Term Loan made by the Lender to or for the account of the Borrower pursuant to the Credit Agreement (as hereafter defined), with interest, fees, expenses and costs at the rate and payable in the manner stated in the Credit Agreement. As used herein, the Credit Agreement means and refers to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as such may be amended, restated, extended, supplemented or otherwise modified from time to time) by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation, Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and the Lender and each other Person from time to time party thereto as a lender thereunder. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
This is a Term Note to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. This Term Note is also entitled to the benefits of the Guaranty and is secured by the Collateral. The principal of, and interest on, this Term Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. The Administrative Agents books and records concerning the Term Loan, the accrual of interest and fees thereon, and the repayment of such Term Loan, shall be prima facie evidence of the indebtedness to the Lender hereunder, absent manifest error.
No delay or omission by the Administrative Agent or the Lender in exercising or enforcing any of the Administrative Agents or Lenders powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver.
The Borrower waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by the Administrative Agent and/or the Lender with respect to this Term Note and/or any Collateral Document or any extension or other indulgence with respect to any other liability or any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Term Note.
B-2-1
This Term Note shall be binding upon the Borrower and upon its successors, assigns, and representatives, and shall inure to the benefit of the Lender and its successors, endorsees and assigns.
The Borrower agrees that any action or proceeding arising out of or relating to this Term Note or for recognition or enforcement of any judgment, may be brought in the courts of the state of New York sitting in New York City in the Borough of Manhattan or of the United States for the Southern District of New York, and any appellate court from any thereof, and by execution and delivery of this Term Note, the Borrower and the Lender each consent, for itself and in respect of its property, to the exclusive jurisdiction of those courts. To the fullest extent permitted by applicable law, the Borrower irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens , which it may now or hereafter have to the bringing of any action or proceeding in the courts of the state of New York sitting in New York City in the Borough of Manhattan or of the United States for the Southern District of New York, and any appellate court from any thereof.
THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Administrative Agent and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Term Note, are each relying thereon. THE BORROWER, AND THE LENDER BY ITS ACCEPTANCE HEREOF, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS TERM NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY).
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LOANS AND PAYMENTS
Date |
Amount of Loan |
Maturity Date |
Payments of
|
Principal Balance of Note |
Name of Person Making this Notation |
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EXHIBIT C
FORM OF NOTICE OF BORROWING
, 20
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Administrative Agent under the Credit Agreement referred to below
One Boston Place, 19th Floor
Boston, MA 02108
Attention: BJs Wholesale Club, Inc. Loan Servicer
Facsimile: (866) 358-0023
Re: BJs Wholesale Club, Inc.
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.2(a) of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement and, in connection therewith, sets forth below the information relating to the Borrowing (the Proposed Borrowing ) as required by Section 2.2(a) of the Credit Agreement:
(a) The date of the Proposed Borrowing is , (the Funding Date ) (which shall be a Business Day).
(b) The aggregate amount of the Proposed Borrowing is $ .
(c) $ of the Proposed Borrowing shall be composed of Base Rate Loans and $ of the Proposed Borrowing shall be composed of Eurocurrency Rate Loans with an Interest Period of months (such Interest Period to comply with the provisions of the definition of Interest Period ). 1
(d) The Class of the Proposed Borrowing shall be [Term Loans]/[Revolving Loans]. 2
1 |
Edit, as applicable, to the extent that the Proposed Borrowing will be comprised entirely of Base Rate Loans or Eurocurrency Loans. |
2 |
Delete as applicable. |
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(e) [Borrower represents and warrants that the Borrower and its Subsidiaries (taken as a whole) are Solvent after giving effect to such Proposed Borrowing and the use of proceeds thereof.] 3
The undersigned hereby represents and warrants that the conditions set forth in Section 4.2(b) of the Credit Agreement shall be satisfied on the Funding Date both immediately before and immediately after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom.
[ Remainder of page intentionally left blank ]
3 |
For any Borrowing the proceeds of which shall be used to fund a Restricted Payment. |
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BJS WHOLESALE CLUB, INC. | ||
By: |
|
|
Name: | ||
Title: |
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EXHIBIT D
FORM OF SWING LOAN REQUEST
,
Wells Fargo Bank, National Association
as Administrative Agent under the Credit Agreement referred to below
One Boston Place, 19th Floor
Boston, MA 02108
Attention: BJs Wholesale Club, Inc. Loan Servicer
Facsimile: (866) 358-0023
Re: BJs Wholesale Club, Inc.
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.3(b) of the Credit Agreement that the undersigned hereby requests that the Swing Loan Lender make Swing Loans available to the Borrower under the Credit Agreement and, in connection therewith, sets forth below the information relating to such Swing Loans (the Proposed Advance ) as required by Section 2.3(b) of the Credit Agreement:
(a) The date of the Proposed Advance is , 20 (the Funding Date ) (which shall be a Business Day).
(b) The aggregate amount of the Proposed Advance is $ .
[Borrower represents and warrants that the Borrower and its Subsidiaries (taken as a whole) are Solvent after giving effect to such Proposed Borrowing and the use of proceeds thereof.] 1
The undersigned hereby represents and warrants that the conditions set forth in Section 4.2(b) of the Credit Agreement shall be satisfied on the Funding Date both immediately before and immediately after giving effect to the Proposed Advance and to the application of the proceeds therefrom.
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1 |
For any Borrowing the proceeds of which shall be used to fund a Restricted Payment. |
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BJS WHOLESALE CLUB, INC. | ||
By: |
|
|
Name: | ||
Title: |
D-2
EXHIBIT E
FORM OF LETTER OF CREDIT REQUEST
, 20
[Name of Issuer], as an Issuer
under the Credit Agreement referred to below
Wells Fargo Bank, National Association
as Administrative Agent under the Credit Agreement referred to below
One Boston Place, 19th Floor
Boston, MA 02108
(617) 854-7279
Attention: BJs Wholesale Club, Inc.
Re: BJs Wholesale Club, Inc.
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.4(c) of the Credit Agreement, that the undersigned requests the issuance of a Letter of Credit by [Name of Issuer] in the form of a [standby] [documentary] letter of credit [for its own account] [for the account of a Restricted Subsidiary of the Borrower] for the benefit of [Name of Beneficiary], in the amount of $ to be issued on , 20 (the Issue Date ) and having an expiration date of , 20 (which day shall be a Business Day).
The undersigned hereby represents and warrants that the conditions set forth in Section 4.2(b) of the Credit Agreement shall be satisfied on the Issue Date both immediately before and immediately after the proposed issuance.
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BJS WHOLESALE CLUB, INC. | ||
By: |
|
|
Name: | ||
Title: |
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EXHIBIT F
FORM OF NOTICE OF CONVERSION OR CONTINUATION
, 20
Wells Fargo Bank, National Association
as Administrative Agent under the Credit Agreement referred to below
One Boston Place, 19th Floor
Boston, MA 02108
Attention: BJs Wholesale Club, Inc. Loan Servicer
Facsimile: (866) 358-0023
Re: BJs Wholesale Club, Inc.
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.11(a) of the Credit Agreement that the undersigned hereby requests a [conversion on , 20 ] [continuation] of $[ ] in principal amount of presently outstanding [Revolving] [Term] Loans that are [Base Rate Loans] [Eurocurrency Rate Loans having an Interest Period ending on , 20 ][to] [as] [Base Rate] [Eurocurrency Rate] Loans. [The Interest Period for such amount requested to be converted to or continued as Eurocurrency Rate Loans is month[s]).
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F-1
BJS WHOLESALE CLUB, INC. |
By: | ||
Name: | ||
Title: |
F-2
EXHIBIT G
[RESERVED]
G-1
EXHIBIT H
FORM OF GUARANTY
Please see attached .
G-1
On File with the Administrative Agent.
EXHIBIT I
FORM OF SECURITY AGREEMENT
Please see attached .
I-1
On File with the Administrative Agent.
EXHIBIT J
FORM OF BORROWING BASE CERTIFICATE
Please see attached.
J-1
On File with the Administrative Agent.
EXHIBIT K
FORM OF INTERCREDITOR AGREEMENT
Please see attached .
K-1
On File with the Administrative Agent.
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EXHIBIT L
FORM OF INTERCOMPANY SUBORDINATION AGREEMENT
This INTERCOMPANY SUBORDINATION AGREEMENT , dated as of [ , ] (as from time to time amended, amended and restated, modified, replaced or supplemented in accordance with the terms hereof, this Intercompany Subordination Agreement ), is made and entered into by and among each of the undersigned Loan Parties, to the extent a borrower from time to time (in such capacity for the purposes of this Agreement, an Obligor ) from any other entity listed on the signature page which is not a Loan Party (in such capacity for the purposes of this Intercompany Subordination Agreement, a Subordinated Creditor ).
RECITALS
Reference is made to (i) that Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent thereunder (in such capacity, including any successor thereto, the Agent ), and each lender from time to time party thereto (together with each other secured party thereunder, collectively, the Secured Parties ), and any related notes, guarantees, collateral documents, instruments and agreements executed in connection with the Credit Agreement, and in each case as amended, modified, renewed, refunded, replaced, restated, restructured, increased, supplemented or refinanced in whole or in part from time to time, regardless of whether such amendment, modification, renewal, refunding, replacement, restatement, restructuring, increase, supplement or refinancing is with the same lenders or holders, agents or otherwise. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to them in the Credit Agreement.
B. All Indebtedness of each Obligor that is a Loan Party to each Subordinated Creditor that is not a Loan Party now or hereafter existing (whether created directly or acquired by assignment or otherwise), and all interest, premiums, costs, expenses or indemnification amounts thereon or payable in respect thereof or in connection therewith, are hereinafter referred to as the Subordinated Debt . Indebtedness owed to a Subordinated Creditor by any Obligor that is not a Loan Party shall not be subordinated to, and shall rank pari passu in right of payment with, any other obligation of such Obligor.
C. This Intercompany Subordination Agreement is entered into pursuant to Sections 9.3(b)(ii) and 9.3(d) of the Credit Agreement and delivered in connection therewith.
SECTION 1. Subordination .
(a) Each Subordinated Creditor and each Obligor agrees that the Subordinated Debt is and shall be subordinate, to the extent and in the manner hereinafter set forth, to the prior payment in full in cash of all Obligations of any such Obligor now or hereafter existing under the Credit Agreement and the other Loan Documents, including, without limitation, where applicable, such Obligors guarantee thereof (the Senior Indebtedness ).
(b) For the purposes of this Intercompany Subordination Agreement, (A) the Obligations shall not be deemed to have been paid in full until the later of: (i) the payment in full in cash of the Obligations and all other amounts (other than (x) contingent indemnification obligations as to which no claim has been asserted, (y) obligations and liabilities under Secured Hedge Agreements and Cash Management Services as to which arrangements satisfactory to the applicable Hedge Bank or Cash Management Bank shall have been made and (z) Letter of Credit Obligations which have been Cash Collateralized or back-stopped by a letter of credit as provided for in the Credit Agreement) payable under the Credit Agreement and the other Loan Documents and (ii) the Scheduled Termination Date.
(c) A Subordinated Creditor shall automatically be released from its obligations hereunder upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subordinated Creditor ceases to be a Subsidiary of the Borrower.
SECTION 2. Events of Subordination .
(a) In the event of any dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection, relief or composition of any Obligor or its debts, whether voluntary or involuntary, in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or other similar case or proceeding under any Debtor Relief Law or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of any Obligor or otherwise, the Secured Parties shall be entitled to receive payment in full of the Senior Indebtedness before any Subordinated Creditor is entitled to receive any payment of all or any of the Subordinated Debt, and any payment or distribution of any kind (whether in cash, property or securities, but other than (A) equity securities or (B) debt securities of such Obligor that are subordinated, to at least the same extent as the Subordinated Debt hereunder, to the payment of all Senior Indebtedness then outstanding) that otherwise would be payable or deliverable upon or with respect to the Subordinated Debt in any such case, proceeding, assignment, marshalling or otherwise (including any payment that may be payable by reason of any other indebtedness of such Obligor being subordinated to payment of the Subordinated Debt) shall be paid or delivered directly to the Agent for the account of the Secured Parties for application (in the case of cash) to, or as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Senior Indebtedness until the Senior Indebtedness shall have been paid in full in cash.
(b) If any Event of Default has occurred and is continuing under the Credit Agreement and after notice from the Agent to each Subordinated Creditor (provided that no such notice shall be required to be given in the case of any Event of Default arising under Section 10.1(f) of the Credit Agreement), then no payment (including any payment that may be payable by reason of any other Indebtedness of any Obligor being subordinated to payment of the Subordinated Debt) or distribution of any kind or character shall be made by or on behalf of any Obligor for or on account of any Subordinated Debt, and no Subordinated Creditor shall take or receive from any Obligor, directly or indirectly, in cash or other property or by set-off or in any other manner, including, without limitation, from or by way of collateral, payment of all or any of the Subordinated Debt, until (x) the Senior Indebtedness shall have been paid in full in cash or (y) such Event of Default shall have been cured or waived, unless (i) with respect to an Event of Default arising under Section 10.1(f) of the Credit Agreement, as otherwise agreed in writing by
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the Agent, or (ii) with respect to any other Event of Default, as otherwise agreed, in the Agents reasonable discretion, in writing by the Agent providing the applicable notice for the Credit Agreement.
(c) [Reserved].
(d) Except as otherwise set forth in Sections 2(a) through (c) above, any Obligor is permitted to pay, and any Subordinated Creditor is entitled to receive, any payment or prepayment of principal and interest on the Subordinated Debt.
SECTION 3. In Furtherance of Subordination . Each Subordinated Creditor agrees as follows:
(a) If any proceeding referred to in Section 2(a) above is commenced by or against any Obligor,
(i) the Agent is hereby irrevocably authorized and empowered (in its own name or in the name of each Subordinated Creditor or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in Section 2(a) and give acquittance therefor and to file claims and proofs of claim and take such other action (including, without limitation, voting the Subordinated Debt or enforcing any security interest or other lien securing payment of the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Agent and of the other Secured Parties hereunder; and
(ii) each Subordinated Creditor shall duly and promptly take such action as the Agent may reasonably request (A) to collect the Subordinated Debt for the account of the Agent and of the other Secured Parties and to file appropriate claims or proofs or claim in respect of the Subordinated Debt, (B) to execute and deliver to the Agent such powers of attorney, assignments, or other instruments as the Agent may request in order to enable the Agent to enforce any and all claims with respect to, and any security interests and other liens securing payment of, the Subordinated Debt, and (C) to collect and receive any and all payments or distributions which may be payable or deliverable upon or with respect to the Subordinated Debt.
(b) All payments or distributions upon or with respect to the Subordinated Debt which are received by each Subordinated Creditor contrary to the provisions of this Intercompany Subordination Agreement shall be received in trust for the benefit of the Agent and of the other Secured Parties, shall be segregated from other funds and property held by such Subordinated Creditor and shall be forthwith paid over to the Agent for the account of the Agent and of the other Secured Parties in the same form as so received (with any necessary indorsement) to be applied (in the case of cash) to, or held as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Senior Indebtedness, as applicable in accordance with the terms of the Credit Agreement.
(c) The Agent is hereby authorized to demand specific performance of this Intercompany Subordination Agreement, whether or not such Obligor shall have complied with any of the provisions hereof applicable to it, at any time when such Subordinated Creditor shall
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have failed to comply with any of the provisions of this Intercompany Subordination Agreement applicable to it. Each Subordinated Creditor hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance.
SECTION 4. Rights of Subrogation . Each Subordinated Creditor agrees that no payment or distribution to the Agent or the other Secured Parties pursuant to the provisions of this Intercompany Subordination Agreement shall entitle such Subordinated Creditor to exercise any right of subrogation in respect thereof until the Senior Indebtedness shall have been paid in full in cash (other than (x) contingent indemnification obligations as to which no claim has been asserted, (y) obligations and liabilities under Secured Hedge Agreements and Cash Management Services agreements as to which arrangements satisfactory to the applicable Hedge Bank or Cash Management Bank shall have been made and (z) Letter of Credit Obligations which have been Cash Collateralized or back stopped by a letter of credit as provided for in the Credit Agreement).
SECTION 5. Further Assurances . Each Subordinated Creditor and each Obligor will, at its expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Agent may reasonably request in writing, in order to protect any right or interest granted or purported to be granted hereby or to enable the Agent or any other Secured Parties to exercise and enforce its rights and remedies hereunder.
SECTION 6. Agreements in Respect of Subordinated Debt . No Subordinated Creditor will except as permitted under the Credit Agreement:
(a) sell, assign, pledge, encumber or otherwise dispose of any of the Subordinated Debt unless such sale, assignment, pledge, encumbrance or disposition is made expressly subject to this Intercompany Subordination Agreement; or
(b) permit the terms of any of the Subordinated Debt to be changed in such a manner as to have a material adverse effect upon the rights or interests of the Agent or any Lender hereunder.
SECTION 7. Agreement by the Obligors . Each Obligor agrees that it will not make any payment of any of the Subordinated Debt, or take any other action, in each case if such payment or other action would be in contravention of the provisions of this Intercompany Subordination Agreement.
SECTION 8. Obligations Hereunder Not Affected . All rights and interests of the Agent and the other Secured Parties hereunder, and all agreements and obligations of each Subordinated Creditor and each Obligor under this Intercompany Subordination Agreement, shall remain in full force and effect irrespective of:
(a) any amendment, extension, renewal, compromise, discharge, acceleration or other change in the time for payment or the terms of the Senior Indebtedness or any part thereof;
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(b) any taking, holding, exchange, enforcement, waiver, release, failure to perfect, sell or otherwise dispose of any security for payment of the Guaranty or any Senior Indebtedness;
(c) the application of security and directing the order or manner of sale thereof as the Agent and other Secured Parties in their sole discretion may determine;
(d) the release or substitution of one or more of any endorsers or other guarantors of any of the Senior Indebtedness;
(e) the taking of, or failure to take any action which might in any manner or to any extent vary the risks of any Obligor or which, but for this Section 8, might operate as a discharge of such Obligor;
(f) any defense arising by reason of any disability, change in corporate existence or structure or other defense of any Obligor or a Subordinated Creditor, the cessation from any cause whatsoever (including any act or omission of any Secured Party) of the liability of such Obligor or a Subordinated Creditor;
(g) any defense based on any claim that such Obligors or Subordinated Creditors obligations exceed or are more burdensome than those of any other Obligor or any other subordinated creditor, as applicable;
(h) the benefit of any statute of limitations affecting such Obligors or Subordinated Creditors liability hereunder;
(i) any right to proceed against any Obligor, proceed against or exhaust any security for the Obligations, or pursue any other remedy in the power of any Secured Party, whatsoever;
(j) any benefit of and any right to participate in any security now or hereafter held by any Secured Party, and
(k) to the fullest extent permitted by law, any and all other defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties.
This Intercompany Subordination Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise be returned by the Agent or any other Secured Party upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise, all as though such payment had not been made.
SECTION 9. Waiver . Each Subordinated Creditor and each Obligor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Intercompany Subordination Agreement and any requirement that the Agent or any other Secured Party protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against any Obligor or any other person or entity or any collateral.
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SECTION 10. Amendments, Etc . No amendment or waiver of any provision of this Intercompany Subordination Agreement, and no consent to any departure by any Subordinated Creditor or any Obligor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent, such Obligor and each Subordinated Creditor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
SECTION 11. Expenses . The Agent is entitled to the benefits of Section 12.3 of the Credit Agreement with respect to reasonable out-of-pocket cost and expenses incurred in connection with the preparation, negotiation and execution of this Intercompany Subordination Agreement.
SECTION 12. Addresses for Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 12.8 of the Credit Agreement. All communications and notice hereunder to an Obligor other than the Borrower shall be given in care of the Borrower.
SECTION 13. No Waiver; Remedies . No failure on the part of the Agent or any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 14. Joinder . Upon execution and delivery after the date hereof by any Restricted Subsidiary of a joinder agreement in substantially the form of Exhibit A hereto, each such party shall become an Obligor and/or a Subordinated Creditor, as applicable, hereunder with the same force and effect as if originally named as an Obligor or a Subordinated Creditor, as applicable, hereunder. The rights and obligations of each Obligor and each Subordinated Creditor hereunder shall remain in full force and effect notwithstanding the addition of any new Obligor or Subordinated Creditor as a party to this Intercompany Subordination Agreement.
SECTION 15. Governing Law; Jurisdiction; Etc . (a) THIS INTERCOMPANY SUBORDINATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE STATE, COUNTY AND CITY OF NEW YORK IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INTERCOMPANY SUBORDINATION AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE
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HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS INTERCOMPANY SUBORDINATION AGREEMENT SHALL AFFECT ANY RIGHT THAT THE AGENT OR ANY OTHER SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS INTERCOMPANY SUBORDINATION AGREEMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INTERCOMPANY SUBORDINATION AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(d) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11 OF THIS INTERCOMPANY SUBORDINATION AGREEMENT. NOTHING IN THIS INTERCOMPANY SUBORDINATION AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(e) EACH PARTY TO THIS INTERCOMPANY SUBORDINATION AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS INTERCOMPANY SUBORDINATION AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS INTERCOMPANY SUBORDINATION AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 15(E) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 16. Counterparts; Effectiveness . This Intercompany Subordination Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together
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shall constitute a single contract. This Intercompany Subordination Agreement shall become effective when it shall have been executed by the Borrower, the Obligors, the Subordinated Creditors and the Agent and thereafter shall be binding upon and inure to the benefit of each Obligor, each Subordinated Creditor, the Agent, the other Secured Parties and their respective permitted successors and assigns, subject to Section 6 hereof. Delivery of an executed counterpart of a signature page of this Intercompany Subordination Agreement by telecopy or other electronic imaging means (including in .pdf format via electronic mail) shall be effective as delivery of a manually executed counterpart of this Intercompany Subordination Agreement.
SECTION 17. Intercreditor Agreement . The terms and provisions of this Intercompany Subordination Agreement are subject to the Intercreditor Agreement, to the extent applicable.
[ Remainder of page left intentionally blank ]
L-8
IN WITNESS WHEREOF, each Subordinated Creditor, each Obligor and the Borrower each has caused this Intercompany Subordination Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
BJS WHOLESALE CLUB, INC. |
By: | ||
Name: | ||
Title: |
L-9
OBLIGORS : | ||
BEACON HOLDING INC. |
By: |
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Name: | ||
Title: |
BJME OPERATING CORP. |
By: |
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Name: | ||
Title: |
BJNH OPERATING CO., LLC |
By: |
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Name: | ||
Title: |
NATICK REALTY, INC. |
By: |
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Name: | ||
Title: |
L-10
SUBORDINATED CREDITORS : | ||
CWC BEVERAGES CORP. |
By: |
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Name: | ||
Title: |
JWC BEVERAGES CORP. |
By: |
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Name: | ||
Title: |
MORMAX BEVERAGES CORP. |
By: |
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Name: | ||
Title: |
MORMAX CORPORATION |
By: |
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Name: | ||
Title: |
NATICK GA BEVERAGE CORP. |
By: |
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Name: | ||
Title: |
YWC BEVERAGE CORP. |
By: |
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Name: | ||
Title: |
L-11
NATICK FIFTH REALTY CORP. |
By: |
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Name: | ||
Title: |
NATICK NH HOOKSETT REALTY CORP. |
By: |
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Name: | ||
Title: |
NATICK NJ 1993 REALTY CORP. |
By: |
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Name: | ||
Title: |
NATICK NJ FLEMINGTON REALTY CORP. |
By: |
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Name: | ||
Title: |
NATICK NJ MANAHAWKIN REALTY CORP. |
By: |
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Name: | ||
Title: |
NATICK NJ REALTY CORP. |
By: |
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Name: | ||
Title: |
L-12
Agreed and acknowledged as of the date first above written: | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION , as Agent |
By: |
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Name: | ||
Title: |
L-13
Exhibit A to the Intercompany Subordination Agreement
FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT, dated as of [ , 201 ] (this Joinder ), is delivered pursuant to the Intercompany Subordination Agreement, dated as of February 3, 2017 (as the same may from time to time be amended, restated, supplemented or otherwise modified, the Intercompany Subordination Agreement ) among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), the Subordinated Creditors and Obligors from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent under the Credit Agreement. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Intercompany Subordination Agreement.
1. Joinder in the Intercompany Subordination . The undersigned hereby agrees that on and after the date hereof, it shall be [an Obligor ] [and] [a Subordinated Creditor ] under and as defined in the Intercompany Subordination Agreement, hereby assumes and agrees to perform all of the obligations of [an Obligor] [and] [a Subordinated Creditor] thereunder and agrees that it shall comply with and be fully bound by the terms of the Intercompany Subordination Agreement as if it had been a signatory thereto as of the date thereof; provided that the representations and warranties made by the undersigned thereunder shall be deemed true and correct as of the date of this Joinder.
2. Unconditional Joinder . The undersigned acknowledges that the undersigneds obligations as a party to this Joinder are unconditional and are not subject to the execution of one or more Joinders by other parties. The undersigned further agrees that it has joined and is fully obligated as [an Obligor] [and] [a Subordinated Creditor] under the Intercompany Subordination Agreement.
3. Incorporation by Reference . All terms and conditions of the Intercompany Subordination Agreement are hereby incorporated by reference in this Joinder as if set forth in full.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Joinder as of the day and year first above written.
[ ] |
By: |
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Name: | ||
Title: |
L-14
EXHIBIT M
FORM OF SOLVENCY CERTIFICATE
of
BJS WHOLESALE CLUB, INC.
AND ITS SUBSIDIARIES
[ ], 2017
Pursuant to Section 4.1(a)(viii) of that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto, the undersigned, solely in the undersigneds capacity as [chief financial officer] of the Borrower, hereby certifies, on behalf of Borrower and not in the undersigneds individual or personal capacity and without personal liability, that, to his knowledge, as of the Restatement Effective Date, after giving effect to the Transactions (including the making of the Loans and other extensions of credit under the Credit Agreement on the Restatement Effective Date and the application of the proceeds thereof):
(a) the fair value of the assets of the Borrower and its Restricted Subsidiaries, on a consolidated basis, exceeds their debts and liabilities, subordinated, contingent or otherwise, on a consolidated basis;
(b) the present fair saleable value of the property of the Borrower and its Restricted Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, on a consolidated basis, as such debts and other liabilities become absolute and matured;
(c) the Borrower and its Restricted Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, on a consolidated basis, as such liabilities become absolute and matured; and
(d) the Borrower and its Restricted Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.
For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual
M-1
and matured liability. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
The undersigned is familiar with the business and financial position of the Borrower and its Restricted Subsidiaries. In reaching the conclusions set forth in this Solvency Certificate, the undersigned has made such investigations and inquiries as the undersigned has deemed appropriate, having taken into account the nature of the business proposed to be conducted by the Borrower and its Restricted Subsidiaries after consummation of the Transactions.
[ Signature Page Follows ]
M-2
IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate, solely in the undersigneds capacity as chief financial officer of the Borrower, on behalf of the Borrower and not in the undersigneds individual or personal capacity and without personal liability, as of the date first stated above.
BJS WHOLESALE CLUB, INC. |
By: |
|
|
Name: | ||
Title: |
M-3
EXHIBIT N
[RESERVED]
N-1
EXHIBIT O-1
FORM OF NON-BANK CERTIFICATE
(For Foreign Lenders That Are Not Partnerships or Pass-Thru Entities For U.S. Federal
Income Tax Purposes)
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation, Wells Fargo Bank, National Association, as Administrative Agent under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
(the Foreign Lender ) is providing this certificate pursuant to Section 3.1(b) of the Credit Agreement.
The Foreign Lender hereby represents and warrants that:
1. |
The Foreign Lender is the sole record and beneficial owner of the Loans (as well as any Notes evidencing such Loans) in respect of which it is providing this certificate. |
2. |
The Foreign Lender is not a bank for purposes of Section 881(c)(3)(A) of the Code. |
3. |
The Foreign Lender is not a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code. |
4. |
The Foreign Lender is not a controlled foreign corporation within the meaning of Section 881(c)(3)(C) of the Code related to the Borrower within the meaning of Section 864(d) of the Code. |
[ Signature Page Follows ]
O-1-1
IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the day of , 20 .
[NAME OF FOREIGN LENDER] | ||
By: |
|
|
Name: | ||
Title: |
O-1-2
EXHIBIT O-2
FORM OF NON-BANK CERTIFICATE
(For Foreign Lenders That Are Not Partnerships or Pass-Thru Entities For U.S. Federal
Income Tax Purposes)
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation, Wells Fargo Bank, National Association, as Administrative Agent under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
(the Foreign Lender ) is providing this certificate pursuant to Section 3.1(b) of the Credit Agreement.
The Foreign Lender hereby represents and warrants that:
1. |
The Foreign Lender is the sole record and beneficial owner of the Loans (as well as any Notes evidencing such Loans) in respect of which it is providing this certificate. |
2. |
The Foreign Lender is not a bank for purposes of Section 881(c)(3)(A) of the Code. |
3. |
The Foreign Lender is not a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code. |
4. |
The Foreign Lender is not a controlled foreign corporation within the meaning of Section 881(c)(3)(C) of the Code related to the Borrower within the meaning of Section 864(d) of the Code. |
[ Signature Page Follows ]
O-2-1
IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the day of , 20 .
[NAME OF FOREIGN LENDER] |
By: |
|
|
Name: | ||
Title: |
O-2-2
EXHIBIT O-3
FORM OF NON-BANK CERTIFICATE
(For Foreign Participants That Are Not Partnerships or Pass-Thru Entities For U.S.
Federal Income Tax Purposes)
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation, Wells Fargo Bank, National Association, as Administrative Agent under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
(the Foreign Participant ) is providing this certificate pursuant to Sections 3.1(b) and 12.2(d) of the Credit Agreement.
The Foreign Participant hereby represents and warrants that:
1. |
The Foreign Participant is the sole record and beneficial owner of the participation in respect of which it is providing this certificate. |
2. |
The Foreign Participant is not a bank for purposes of Section 881(c)(3)(A) of the Code. |
3. |
The Foreign Participant is not a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code. |
4. |
The Foreign Participant is not a controlled foreign corporation within the meaning of Section 881(c)(3)(C) of the Code related to the Borrower within the meaning of Section 864(d) of the Code. |
[ Signature Page Follows ]
O-3-1
IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the day of , 20 .
[NAME OF FOREIGN PARTICIPANT] |
By: | ||
Name: | ||
Title: |
O-3-2
EXHIBIT O-4
FORM OF NON-BANK CERTIFICATE
(For Foreign Participants That Are Partnerships or Pass-Thru Entities For U.S. Federal
Income Tax Purposes)
Reference is made to that certain Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation, Wells Fargo Bank, National Association, as Administrative Agent under the Loan Documents, and each Lender from time to time party thereto. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
(the Foreign Participant ) is providing this certificate pursuant to Sections 3.1(b) and 12.2(d) of the Credit Agreement.
The Foreign Participant hereby represents and warrants that:
1. |
The Foreign Participant is the sole record owner of the participation in respect of which it is providing this certificate. |
2. |
The Foreign Participants partners/members are the sole beneficial owners of the participation. |
3. |
Neither the Foreign Participant nor any of its partners/members is a bank for purposes of Section 881(c)(3)(A) of the Code. |
4. |
None of the Foreign Participants partners/members is a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code. |
5. |
None of the Foreign Participants partners/members is a controlled foreign corporation within the meaning of Section 881(c)(3)(C) of the Code related to the Borrower within the meaning of Section 864(d) of the Code. |
[ Signature Page Follows ]
O-4-1
IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the day of , 20 .
[NAME OF FOREIGN PARTICIPANT] |
By: |
|
Name: | ||
Title: |
O-4-2
EXHIBIT P
FORM OF COMPLIANCE CERTIFICATE
[ , 20 ]
Reference is made to the Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto (capitalized terms used herein have the meanings attributed thereto in the Credit Agreement unless otherwise defined herein). Pursuant to Section 7.2(a) of the Credit Agreement, the undersigned, solely in his/her capacity as a Responsible Officer of the Borrower, certifies as follows:
1. [Attached hereto as Exhibit A is a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the Fiscal Year ended [ , 20 ], and the related consolidated statements of income or operations, stockholders equity and cash flows for such Fiscal Year together with related notes thereto and managements discussion and analysis describing results of operations, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of PricewaterhouseCoopers LLP, which report and opinion have been prepared in accordance with generally accepted auditing standards and are not subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit. Also attached hereto as Exhibit A are the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.] 1
2. [Attached hereto as Exhibit A is a condensed consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the Fiscal Quarter ended [ , 20 ], and the related (i) condensed consolidated statements of income or operations for such Fiscal Quarter and for the portion of the Fiscal Year then ended and (ii) condensed consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail (collectively, the Financial Statements ), together with managements discussion and analysis describing results of operations. Such Financial Statements fairly present in all material respects the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject to normal year-end adjustments and the absence of footnotes. Also attached hereto as Exhibit A are the related consolidating financial statements reflecting the
1 |
To be included if accompanying annual financial statements only. |
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adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.] 2
3. [Attached hereto as Exhibit B are the Projections required to be delivered pursuant to Section 7.1(d) of the Credit Agreement. Such Projections have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such Projections. Actual results may vary from such Projections and such variations may be material.] 3
4. [To my knowledge, except as otherwise disclosed to the Administrative Agent pursuant to the Credit Agreement, no Default has occurred and is continuing.] [If unable to provide the foregoing certification, attach an Annex A specifying the details of the Default that has occurred and is continuing and any action taken or proposed to be taken with respect thereto.]
5. [Attached hereto as Schedule 1 is a reasonably detailed calculation of the Fixed Charge Coverage Ratio of the Borrower and its Restricted Subsidiaries as of the end of the most recent Test Period, which calculation is true and accurate on and as of the date of this Certificate.]
6. [Attached hereto as Schedule 2 are reasonably detailed calculations, which calculations are true and accurate on and as of the date of this Certificate, of the Net Cash Proceeds received during the applicable period ended [ , 20 ] by or on behalf of, Holdings, the Borrower or any of its Restricted Subsidiaries in respect of any Disposition subject to prepayment pursuant to Section 2.9(b) of the Credit Agreement.]
7. [Attached hereto is the information required to be delivered pursuant to Section 7.2(d) of the Credit Agreement.]
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
2 |
To be included if accompanying quarterly financial statements only. |
3 |
To be included only in annual compliance certificate (beginning with the fiscal year ending January 28, 2017). |
P-2
IN WITNESS WHEREOF, the undersigned, solely in his/her capacity as a Responsible Officer of BJs Wholesale Club, Inc., and not in his or her personal or individual capacity and without personal or individual liability, has executed this certificate for and on behalf of BJs Wholesale Club, Inc. and has caused this certificate to be delivered as of the date first set forth above.
BJS WHOLESALE CLUB, INC. |
By: |
|
Name: | ||
Title: |
P-3
FINANCIAL COVENANTS SUMMARY
A. |
FIXED CHARGE COVERAGE RATIO |
Test Period covered by the calculations below: [ , 20 ] to [ , 20 ].
Consolidated EBITDA : See item A(1)(d) of Schedule I attached hereto: |
$ | |
Capital Expenditures: See item A(2)(a)(iii) of Schedule I attached hereto: |
$ | |
Cash Taxes: See item A(2)(b) of Schedule I attached hereto: |
$ | |
Fixed Charges See item A(3)(c) of Schedule I attached hereto |
$ | |
Fixed Charge Coverage Ratio : (Consolidated EBITDA minus Capital Expenditures minus Cash Taxes) divided by (Fixed Charges) for the test period (See Fixed Coverage Ratio on Schedule I attached hereto): | :1:00 |
B. |
NET CASH PROCEEDS |
With respect to any Disposition subject to prepayment pursuant to Section 2.9(b) of the Credit Agreement during the applicable period ended [ , 20 ]:
Net Cash Proceeds : See item B(III) on Schedule 2 attached hereto: | $ |
P-4
SCHEDULE 1
TO COMPLIANCE CERTIFICATE
Test Period covered by the calculations below: [ , 20 ] to [ , 20 ].
Fixed Charge Coverage Ratio for the Test Period is : : 1:00.
A. |
Fixed Charge Coverage Ratio |
1) |
Consolidated EBITDA |
Consolidated Net Income:
(i). | the net income (loss) of the Borrower and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP, excluding, without duplication: | $ |
a. | any net after-tax extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses, and Transaction Expenses, relocation costs, integration costs, facility consolidation and closing costs (other than with respect to Stores), severance costs and expenses and one-time compensation charges; provided that the aggregate amount of cash losses excluded pursuant to this item (A)(1)(a)(i)(a) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(a)); provided further that Net Income for such period shall be reduced by an amount equal to the amount by which (if any) (i) the aggregate amount of cash losses incurred during such Test Period on account of any non-cash loss which was excluded from the calculation of Consolidated Net Income in any prior period pursuant to this item (A)(1)(a)(i)(a) plus (ii) the aggregate amount of cash losses excluded from the calculation of Consolidated Net Income pursuant to the first proviso of this item (A)(1)(a)(i)(a) during such Test Period, exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(a)) | $ | ||
b. | the cumulative effect of a change in accounting principles during such period, whether effected through a cumulative effect adjustment or a retroactive application in each case in accordance with GAAP | $ | ||
c. | effects of adjustments (including the effect of such adjustments pushed down to the Borrower and the Restricted Subsidiaries) in the Borrowers Consolidated financial statements pursuant to GAAP (including in the inventory, property and |
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equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes | $ | |||
d. | any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed or discontinued operations; provided that the aggregate amount of cash losses excluded pursuant to this item (A)(1)(a)(i)(d) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(d)); provided further that Net Income for such period shall be reduced by an amount equal to the amount by which (if any) (i) the aggregate amount of cash losses incurred during such Test Period on account of any non-cash loss which was excluded from the calculation of Consolidated Net Income in any prior period pursuant to this item (A)(1)(a)(i)(d) plus (ii) the aggregate amount of cash losses excluded from the calculation of Consolidated Net Income pursuant to the first proviso of this item (A)(1)(a)(i)(d) during such Test Period, exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(d)) | $ | ||
e. | any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower and its Restricted Subsidiaries other than in the ordinary course of business, as determined in good faith by the Borrower | $ | ||
f. | the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, provided that Consolidated Net Income of the Borrower and its Restricted Subsidiaries shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by the referent Person to the Borrower or a Restricted Subsidiary thereof in respect of such period | $ | ||
g. | (i) any net unrealized gain or loss (after any offset) resulting in such period from obligations in respect of Swap Contracts and the application of Financial Accounting Standards Board Accounting Standards Codification 815 (Derivatives and Hedging), (ii) any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including the net loss or gain (A) resulting from Swap Contracts |
P-6
for currency exchange risk and (B) resulting from intercompany Indebtedness) and all other foreign currency translation gains or losses to the extent such gain or losses are non-cash items, and (iii) any net after-tax income (loss) for such period attributable to the early extinguishment or conversion of (A) Indebtedness, (B) obligations under any Swap Contracts or (C) other derivative instruments | $ | |||
h. | any impairment charge or asset write-off, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP | $ | ||
i. | any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under the Credit Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days) | $ | ||
j. | to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days), expenses, charges or losses with respect to liability or casualty events or business interruption | $ | ||
k. | any non-cash (for such period and all other periods) compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs shall be excluded | $ |
Consolidated Net Income (item (A)(1)(a)(i) minus the sum of items (A)(1)(a)(i)(a) through (k)) | $ | |||
b) increased by (without duplication, and as determined in accordance with GAAP to the extent applicable): |
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(i). | provision for taxes based on income or profits or capital, plus franchise or similar taxes and foreign withholding taxes, of the Borrower and its Restricted Subsidiaries for such period deducted in computing Consolidated Net Income | $ | ||
(ii). | (A) total interest expense of the Borrower and its Restricted Subsidiaries for such period and (B) bank fees and costs of surety bonds, in each case under this clause (B), in connection with financing activities and, in each case under clauses (A) and (B), to the extent the same was deducted in computing Consolidated Net Income | $ | ||
(iii). | Consolidated Depreciation and Amortization Expense of the Borrower and its Restricted Subsidiaries for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income | $ | ||
(iv). | any expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness permitted to be incurred under the Credit Agreement including a refinancing thereof (whether or not successful) and any amendment or modification to the terms of any such transactions, in each case, deducted in computing Consolidated Net Income | $ | ||
(v). | the amount of any restructuring charge or reserve deducted in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with (A) Permitted Acquisitions after the Effective Date or (B) the closing of any Stores or distribution centers after the Effective Date; provided that the aggregate amount of cash charges added pursuant to this item (A)(1)(b)(vi) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(b)(vi)) | $ | ||
(vi). | the amount of costs relating to pre-opening and opening costs for Stores, signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, consolidation and closing costs for Stores and costs incurred in connection with non-recurring product and intellectual property development after the Effective Date, other business optimization expenses (including costs and expenses relating to business optimization programs), and new systems design and implementation costs and project start-up costs; provided that the aggregate amount of all foregoing cash items added pursuant to this item (A)(1)(b)(vi) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(b)(vi)) | $ |
P-8
(vii). | any other non-cash charges including any write offs or write downs reducing Consolidated Net Income for such period (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, (1) the Borrower may determine not to add back such non-cash charge in the current period and (2) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period) | $ | ||
(viii). | the amount of any minority interest expense deducted in calculating Consolidated Net Income | $ | ||
(ix). | the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued in such period under the Sponsor Management Agreement or otherwise to the Sponsors to the extent permitted under Section 9.8 of the Credit Agreement and deducted in such period in computing Consolidated Net Income | $ | ||
(x). | the amount of net cost savings and synergies (other than any of the foregoing related to Specified Transactions) projected by the Borrower in good faith to result from actions taken, committed to be taken or reasonably expected to be taken no later than twelve (12) months after the end of such period (calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of the period for which Consolidated EBITDA is being determined), net of the amount of actual benefits realized during such period from such actions; provided that (A) such cost savings and synergies are reasonably identifiable and factually supportable, and (B) the aggregate amount of cost savings and synergies added pursuant to this item (A)(1)(b)(x) for any Test Period shall not exceed, after the Effective Date, the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(b)(x)) | $ | ||
(xi). | cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to item (A)(1)(c) below for any previous period and not added back | $ | ||
(xii). | any costs or expenses incurred by the Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or stockholders agreement, to the extent that such costs or expenses are funded with |
P-9
cash proceeds contributed to the capital of the Borrower or net cash proceeds of issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests) | $ | |||
(xiii). | any fees, premiums, expenses or charges incurred or paid in connection with the Credit Agreement and the Transactions (including the Restatement Effective Date Dividend), in each case, deducted in computing Consolidated Net Income | $ |
c) | decreased by (without duplication, and as determined in accordance with GAAP to the extent applicable): |
(i). | any non-cash gains increasing Consolidated Net Income of the Borrower and its Restricted Subsidiaries for such period, excluding any gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period (other than such cash charges that have been added back to Consolidated Net Income in calculating Consolidated EBITDA in accordance with the calculation set forth in this Schedule 1) | $ | ||
(ii). | any non-cash gains with respect to cash actually received in a prior period unless such cash did not increase Consolidated EBITDA in such prior period | $ | ||
(iii). | the amount of cash payments made during such Test Period on account of any non-cash charge which was added back to the calculation of Consolidated EBITDA in any prior period pursuant to item (A)(1)(b)(v) above solely to the extent that (A) the aggregate amount of such cash payments during such Test Period plus (B) the aggregate amount of cash charges added back pursuant to item (A)(1)(b)(v) above during such Test Period exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(c)(iii)) | $ |
d) | Consolidated EBITDA (Consolidated Net Income plus the sum of items (A)(1)(b)(i) through (xii) minus the sum of items (A)(1)(c)(i) through (iii)) $ |
2) |
Capital Expenditures |
a) | (i). all amounts that would be reflected as additions to property, plant or equipment on a Consolidated statement of cash flows of the Borrower and its Restricted Subsidiaries in accordance with GAAP | $ |
(ii). | the value of all assets under Capitalized Leases incurred by the Borrower and its Restricted Subsidiaries during such period | $ |
provided that Capital Expenditures shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance
P-10
proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment or software to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay the Loans pursuant to Section 2.9(b) of the Credit Agreement or the loans under the First Lien Term Facility or the Second Lien Term Facility, (iv) expenditures that are accounted for as capital expenditures by the Borrower or any Restricted Subsidiary and that actually are paid for, or reimbursed to the Borrower or any Restricted Subsidiary in cash or Cash Equivalents, by a Person other than the Borrower or any Restricted Subsidiary and for which neither the Borrower nor any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation (other than rent) in respect of such expenditures to such Person or any other Person (whether before, during or after such period), (v) expenditures to the extent constituting any portion of a Permitted Acquisition, (vi) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (A) used or surplus equipment traded in at the time of such purchase and (B) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business, (vii) expenditures relating to the construction, acquisition, replacement, reconstruction, development, refurbishment, renovation or improvement of any property which has been transferred to a Person other than the Borrower or a Restricted Subsidiary during the same Fiscal Year in which such expenditures were made pursuant to a sale-leaseback transaction to the extent of the cash proceeds received by the Borrower or such Restricted Subsidiary pursuant to such sale-leaseback transaction or (viii) expenditures financed with the proceeds of an issuance of Equity Interests of the Borrower or a capital contribution to the Borrower or Indebtedness permitted to be incurred under the Credit Agreement
Capital Expenditures
(iii). |
the sum of items (A)(2)(a)(i) and (ii) |
$
Cash Taxes |
$ | |||
c) |
item (A)(1)(d) minus item (A)(2)(a)(iii) minus item (A)(2)(b) |
$ |
3) |
Fixed Charges |
with respect to the Borrower and Restricted Subsidiaries for any Test Period, the sum, determined on a Consolidated basis, of:
P-11
a) |
Consolidated Net Cash Interest Expense |
(i). | with respect to the Borrower and its Restricted Subsidiaries on a Consolidated basis for any period, determined in accordance with GAAP, total interest expense paid or payable in cash in such period (including that attributable to obligations with respect to Capitalized Leases in accordance with GAAP in effect on the Effective Date but excluding any imputed interest as a result of purchase accounting) of the Borrower and its Restricted Subsidiaries on a Consolidated basis and all commissions, discounts and other fees and charges owed with respect to Indebtedness of the Borrower and its Restricted Subsidiaries | $ | ||||
provided that Consolidated Net Cash Interest Expense shall not include (i) any non-cash interest or deferred financing costs, (ii) any amortization or write-down of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (iii) any expensing of bridge, commitment and other financing fees and (iv) penalties and interest related to taxes | ||||||
(ii). | interest income of the Borrower and its Restricted Subsidiaries actually received in cash during such period after giving effect to any net payments made or received by the Borrower and its Restricted Subsidiaries with respect to interest rate Swap Contracts. | $ |
Consolidated Net Cash Interest Expense
(iii). | item (A)(3)(a)(i) minus item (A)(3)(a)(ii) | $ |
b) | Scheduled payments of principal on Indebtedness for borrowed money of the Borrower and Restricted Subsidiaries due and payable during such period | $ |
Fixed Charges
c) | the sum of item (A)(3)(a)(iii) and item (A)(3)(b) | $ |
Fixed Charge Coverage Ratio
item (2)(c) divided by item (3)(c) |
||||
1.00 |
P-12
SCHEDULE 2
TO COMPLIANCE CERTIFICATE
B. |
Net Cash Proceeds |
With respect to any Disposition subject to prepayment pursuant to Section 2.9(b) of the Credit Agreement during the applicable period ended [ , 20 ]:
I. | The sum of cash and Cash Equivalents received in connection with such Dispositions (including any cash and Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) | $ | ||
II. | The sum of: |
a. | the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by the asset subject to such Dispositions and that is required to be repaid in connection with such Dispositions (other than Indebtedness under the Loan Documents, the First Lien Term Facility Documentation or any Permitted Refinancing of the Indebtedness under the First Lien Term Facility Documentation or the Second Lien Term Facility Documentation or any Permitted Refinancing of the Indebtedness under the Second Lien Term Facility Documentation) | $ | ||
b. | the out-of-pocket fees and expenses (including attorneys fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred by the Borrower or such Restricted Subsidiary in connection with such Dispositions | $ | ||
c. | taxes or distributions made pursuant to Section 9.6(g)(i) and (g)(iii) of the Credit Agreement paid or reasonably estimated to be payable in connection therewith (including taxes imposed on the distribution or repatriation of any such Net Cash Proceeds) | $ | ||
d. | in the case of any Disposition by a non-wholly owned Restricted Subsidiary, the pro rata portion of the Net Cash Proceeds thereof (calculated without regard to this clause (d)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Restricted Subsidiary as a result thereof | $ |
R-13
e. | any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Borrower or any Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, it being understood that Net Cash Proceeds shall include the amount of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in this clause (e) | $ |
III. |
Net Cash item (B)(I) minus the sum of items (B)(II)(a) Proceeds : through (e) |
$ |
P-14
Exhibit 10.1(a)
[EXECUTION COPY]
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this First Amendment ) is entered into as of August 17, 2018, by and among BJS WHOLESALE CLUB, INC., a Delaware corporation as the borrower (the Borrower ), BJS WHOLESALE CLUB HOLDINGS, INC. (f/k/a Beacon Holding Inc., a Delaware corporation ( Holdings ), WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent under the Loan Documents, and each of the Lenders party hereto.
W I T N E S S E T H :
WHEREAS, the Borrower, Holdings, the Administrative Agent, the Issuers from time to time party thereto, the Lenders from time to time party thereto, and any other Secured Parties from time to time party thereto are parties to an Amended and Restated Credit Agreement, dated as of February 3, 2017 (the Credit Agreement );
WHEREAS, the Borrower, Holdings, the lenders from time to time party thereto and the First Lien Term Facility Administrative Agent are parties to the First Lien Term Facility Credit Agreement, dated as of February 3, 2017;
WHEREAS, Holdings, the Borrower, the Administrative Agent, the Issuers and the Lenders wish to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
SECTION 1. Definitions.
Unless otherwise indicated, all capitalized terms used herein (including the preamble and the recitals) and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below (as amended by this First Amendment).
SECTION 2. Amendments to Credit Agreement.
Subject to the satisfaction (or waiver) of the conditions set forth in Section 3, the Credit Agreement is hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is hereby amended by adding the following definitions in appropriate alphabetical order:
First Amendment shall mean the First Amendment, dated as of August 17, 2018, to this Agreement by and among Holdings, the Borrower, the Administrative Agent and the Lenders party thereto.; and
First Amendment Effective Date means August 17, 2018.;
1
(b) The definition of Applicable Margin in Section 1.1 of the Credit Agreement is hereby amended by amending and restating such definition in its entirety as follows:
Applicable Margin means for each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date, the following percentages per annum, as determined on each Adjustment Date based upon Average Historical Excess Availability for the immediately preceding three-month period:
Level |
Average Historical Excess Availability |
Eurocurrency Rate
Revolving Loans, and Letter of Credit Fees (Standby Letters of Credit) |
Base Rate
Revolving Loans |
Eurocurrency
Rate Term Loan |
Base Rate
Term Loan |
Letter of
Credit Fees (Documentary Letters of Credit) |
||||||||||||||||
I |
Greater than $500,000,000 | 1.25 | % | 0.25 | % | 2.00 | % | 1.00 | % | 0.625 | % | |||||||||||
II |
Less than or equal to $500,000,000 but greater than $350,000,000 | 1.50 | % | 0.50 | % | 2.25 | % | 1.25 | % | 0.750 | % | |||||||||||
III |
Less than or equal to $350,000,000 | 1.75 | % | 0.75 | % | 2.50 | % | 1.50 | % | 0.875 | % |
The Applicable Margin shall be adjusted quarterly in accordance with the table above on each Adjustment Date for the period beginning on such Adjustment Date based upon the Average Historical Excess Availability for the immediately preceding three-month period as the Administrative Agent shall determine in good faith within ten (10) Business Days after such Adjustment Date and the Administrative Agent shall use reasonable efforts to notify the Borrower promptly after such determination. Any increase or decrease in the Applicable Margin resulting from a change in the Average Historical Excess Availability shall become effective as of the Adjustment Date; provided that , (i) until the Adjustment Date that occurs on February 1, 2019, the Applicable Margin shall be the Applicable Margin set forth in Level I above and (ii) if the Total Leverage Ratio, determined as of the end of the most recently ended Fiscal Year or Fiscal Quarter, as the case may be, for which financial statements have been delivered pursuant to Section 7.1(a) or Section 7.1(b), along with a corresponding Compliance Certificate pursuant to Section 7.2(a), is less than or equal to 3.00:1.00, then, as of the first Business Day after the date on which such Compliance Certificate is so delivered, the Applicable Margin set forth above for Eurocurrency Rate Revolving Loans, Letter of Credit Fees (Standby Letters of Credit) and Base Rate Revolving Loans shall be reduced by 0.125% and the Applicable Margin set forth above for Letter of Credit Fees (Documentary Letters of Credit) shall be reduced by 0.0625%.
2
(c) The definition of Scheduled Termination Date in Section 1.1 of the Credit Agreement is hereby amended by amending and restating such definition in its entirety as follows:
Scheduled Termination Date means August 17, 2023, as may be extended pursuant to Section 12.1(b) , Section 2.17 or Section 2.18 hereof; provided that if such day is not a Business Day, the Scheduled Termination Date shall be the Business Day immediately preceding such day.
(d) Exhibit P to the Credit Agreement ( Compliance Certificate ) is hereby amended by restating such Exhibit with Exhibit P attached hereto.
SECTION 3. Conditions of Effectiveness of this First Amendment . This First Amendment shall become effective on the date when the following conditions shall have been satisfied (or waived):
(a) Holdings, the Borrower, each of the other Loan Parties, the Administrative Agent and each of the Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile or other electronic transmission) the same, no later than 5 p.m. New York time on August 16, 2018, to Morgan Lewis & Bockius LLP, One Federal Street, 32nd Floor, Boston, MA 02110, Attention: Kathleen M. Ryan (Kathleen.ryan@morganlewis.com; facsimile number 617.341.7701), counsel to the Administrative Agent;
(b) the Borrower and the Administrative Agent shall have signed a counterpart of that certain letter agreement, dated August 17, 2018 (the First Amendment Fee Letter ), as to the fees payable in connection with this First Amendment;
(c) the Borrower shall have paid, by wire transfer of immediately available funds, to the Administrative Agent, for the ratable account of each Lender party hereto which delivers a signed counterpart hereof in accordance with Section 3(a) above, a fee in an amount equal to 0.05% of the aggregate amount of the (x) Revolving Credit Commitment and (y) Term Outstandings of such Lender, together with all other amounts payable to the Administrative Agent on the effective date of this First Amendment.
(d) on the First Amendment Effective Date and after giving effect to this First Amendment, (i) no Default or Event of Default shall have occurred and be continuing and (ii) the representations and warranties made by or on behalf of Holdings and the Borrower in this First Amendment and the Credit Agreement, and by or on behalf of each Loan Party in the other Loan Documents shall be true and correct in all material respects on and as of the First Amendment Effective Date (it being understood that (x) any representation or warranty that is qualified by materiality or Material Adverse Effect shall be required to be true and correct in all respects after taking into account such qualification and (y) any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects (or all respects after taking into account such qualification, as the case may be) as of such specified date);
(e) the Administrative Agent shall have received from the Borrower a certificate executed by a Responsible Officer of the Borrower, certifying compliance with the requirements of preceding clause (d);
3
(f) there shall have been delivered to the Administrative Agent (i) such copies of resolutions or other action of each Loan Party approving and authorizing the execution, delivery and performance of this First Amendment, certified as of the First Amendment Effective Date by a Responsible Officer of such Loan Party as being in full force and effect without modification or amendment, (ii) incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof in connection with the Loan Documents (including, this First Amendment) and (iii) either (x) the constitutive documents of each Loan Party, certified as of the First Amendment Effective Date by a Responsible Officer of such Loan Party as being true and complete or (y) a certificate of a Responsible Officer of each Loan Party stating that, since the Effective Date, no amendments or other modifications to the constitutive documents of such Loan Party have been made; and
(g) the Administrative Agent shall have received an opinion from (i) Latham & Watkins LLP, special New York counsel to the Loan Parties and (ii) Feinberg Hanson LLP, special Massachusetts counsel to the Loan Parties, in each case, addressed to the Administrative Agent and the Lenders.
SECTION 4. [Reserved] .
SECTION 5. Costs and Expenses . The Borrower hereby reconfirms its obligations pursuant to Section 12.3 of the Credit Agreement to pay and reimburse the Administrative Agent for all reasonable and documented (in reasonable detail) out-of-pocket costs and expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this First Amendment and all other documents and instruments delivered in connection herewith.
SECTION 6. Remedies . This First Amendment shall constitute a Loan Document.
SECTION 7. Representations and Warranties . To induce the Administrative Agent and the Lenders to enter into this First Amendment, each of Holdings, the Borrower and each other Loan Party represents and warrants to the Administrative Agent, the Co-Collateral Agents, the Issuers and the Lenders on and as of the First Amendment Effective Date that, in each case:
(a) all of the representations and warranties contained in the Credit Agreement or the other Loan Documents are true and correct in all material respects on the First Amendment Effective Date both immediately before and after giving effect to this First Amendment, with the same effect as though such representations and warranties had been made on and as of the First Amendment Effective Date (it being understood that (x) any representation or warranty that is qualified by materiality or Material Adverse Effect shall be required to be true and correct in all respects after taking into account such qualification and (y) any representation or warranty made as of a specific date shall be true and correct in all material respects (or all respects after taking into account such qualification, as the case may be) as of such date); and
4
(b) no Default or Event of Default exists as of the First Amendment Effective Date, both immediately before and after giving effect to this First Amendment.
SECTION 8. Reference to and Effect on the Credit Agreement and the Loan Documents .
(a) On and after the First Amendment Effective Date, each reference in the Credit Agreement to this Agreement, hereunder, hereof or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended by this First Amendment.
(b) The Credit Agreement and each of the other Loan Documents, as specifically amended by this First Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents, in each case, as amended by this First Amendment. In furtherance of the foregoing, as security for the payment or performance, as the case may be, in full of the Secured Obligations (as defined in the Security Agreement), each Loan Party hereby grants to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in, all of such Loan Partys right, title and interest in, to or under any all Article 9 Collateral (as defined in the Security Agreement), whether now owned or at any time hereafter acquired by such Loan Party or in which such Loan Party now has or at any time in the future may acquire any right, title or interest, in each case, other than any Excluded Property (as defined in the Security Agreement), in accordance with Section 3.01 of, and subject to the terms and conditions of, the Security Agreement.
(c) The execution, delivery and effectiveness of this First Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender, the Administrative Agent or any Issuer under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.
(d) Each of the parties hereto hereby agrees, with respect to each Loan Document or Limited Recourse Guaranty (as applicable) to which it is a party, after giving effect to the First Amendment, except with respect to any Excluded Swap Obligations:
(i) all of its obligations, liabilities and indebtedness under each such Loan Document or Limited Recourse Guaranty (as applicable), including guarantee obligations, shall remain in full force and effect on a continuous basis; and
(ii) all of the Liens and security interests created and arising under each such Loan Document remain in full force and effect on a continuous basis, and the perfected status and priority to the extent provided for in Section 5.19 of the Credit Agreement of each such Lien and security interest continues in full force and effect on a continuous basis, unimpaired, uninterrupted and undischarged, after giving effect to the First Amendment as collateral security for its obligations, liabilities and indebtedness under the Credit Agreement and under its guarantees in the Loan Documents or Limited Recourse Guaranty (as applicable), all as provided in such Loan Documents.
5
SECTION 9. Governing Law . THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
SECTION 10. Counterparts . This First Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent.
SECTION 11. Electronic Execution . The words execution, signed, signature, and words of like import in this First Amendment or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
SECTION 12. Administrative Agents Authority. The Issuers and each Lender hereto hereby expressly authorizes the Administrative Agent to enter into any document (including the Mortgage Amendments) and, to take any actions, in order to give effect to the terms of this First Amendment.
[ The remainder of this page is intentionally left blank .]
6
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this First Amendment as of the date first above written.
BJS WHOLESALE CLUB, INC. | ||
By: |
/s/ Kristyn M. Sugrue |
|
Name: | Kristyn M. Sugrue | |
Title: | Senior Vice President and Treasurer |
BJS WHOLESALE CLUB HOLDINGS, INC. , as Holdings | ||
By: |
/s/ Kristyn M. Sugrue |
|
Name: | Kristyn M. Sugrue | |
Title: | Senior Vice President and Treasurer |
BJs - Signature Page to First Amendment (ABL)
BJNH OPERATING CO., LLC | ||
By: |
/s/ Narda E. Shutt |
|
Name: | Narda E. Shutt | |
Title: | Assistant Treasurer | |
BJME OPERATING CORP. | ||
By: |
/s/ Narda E. Shutt |
|
Name: | Narda E. Shutt | |
Title: | Assistant Treasurer | |
NATICK REALTY, INC. | ||
By: |
/s/ Kristyn M. Sugrue |
|
Name: | Kristyn M. Sugrue | |
Title: | Vice President |
BJs - Signature Page to First Amendment (ABL)
WELLS FARGO BANK, NATIONAL ASSOCIATION , as Administrative Agent, a Co-Collateral Agent, Issuer and a Lender | ||
By: | /s/ Joseph Burt | |
Name: Joseph Burt Title: Director |
BANK OF AMERICA, N.A. , as a Lender and an Issuer | ||
By: | /s/ Matthew Potter | |
Name: Matthew Potter Title: Senior Vice President |
DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender | ||
By: | /s/ Marguerite Sutton | |
Name: Marguerite Sutton Title: Vice President |
||
By: | /s/ Alicia Schug | |
Name: Alicia Schug Title: Vice President |
U.S. BANK NATIONAL ASSOCIATION, as Co-Documentation Agent and a Lender | ||
By: | /s/ William Patton | |
Name: William Patton Title: Vice President |
TD BANK, N.A., as a Lender | ||
By: | /s/ Jang Kim | |
Name: Jang Kim Title: Vice President |
BMO Harris Bank N.A., as a Lender | ||
By: | /s/ Kara Goodwin | |
Name: Kara Goodwin Title: Managing Director |
NYCB SPECIALTY FINANCE COMPANY, LLC, as a wholly owned subsidiary of New York Community Bank, as a Lender | ||
By: | /s/ Willard D. Dickerson, Jr. | |
Name: Willard D. Dickerson, Jr. Title: Senior Vice President |
Capital One National Association, as a Lender | ||
By: | /s/ Michael Lockery | |
Name: Michael Lockery Title: Duly Authorized Signatory |
ING CAPITAL LLC , as a Co-Documentation Agent and a Lender | ||
By: | /s/ Jean V. Grasso | |
Name: Jean V. Grasso Title: Managing Director |
||
By: | /s/ Jeff Chu | |
Name: Jeff Chu Title: Vice President |
PNC Bank, National Association, as a Lender | ||
By: | /s/ Jon Sullivan | |
Name: Jon Sullivan Title: Vice President |
CITY NATIONAL BANK, A NATIONAL BANKING ASSOCIATION , as a Lender | ||
By: | /s/ Catherine Chiavetta | |
Name: Catherine Chiavetta Title: Senior Vice President |
The Huntington National Bank, as a Lender | ||
By: | /s/ Lynsey M. Sausaman | |
Name: Lynsey M. Sausaman Title: Assistant Vice President |
Santander Bank, N.A., as a Lender | ||
By: | /s/ Jeffrey G. Millman | |
Name: Jeffrey G. Millman Title: Regional Credit Manager |
||
By: | /s/ Thomas F. McNamara | |
Name: Thomas F. McNamara Title: Senior Vice President |
[Posting Version]
Exhibit P
Form of Compliance Certificate
[See attached]
FORM OF COMPLIANCE CERTIFICATE
[ , 20 ]
Reference is made to the Amended and Restated Credit Agreement, dated as of February 3, 2017 (as the same may be amended, restated, extended, supplemented or otherwise modified from time to time, the Credit Agreement ), by and among, among others, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), Wells Fargo Bank, National Association, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) under the Loan Documents, and each Lender from time to time party thereto (capitalized terms used herein have the meanings attributed thereto in the Credit Agreement unless otherwise defined herein). Pursuant to Section 7.2(a) of the Credit Agreement, the undersigned, solely in his/her capacity as a Responsible Officer of the Borrower, certifies as follows:
1. [Attached hereto as Exhibit A is a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the Fiscal Year ended [ , 20 ], and the related consolidated statements of income or operations, stockholders equity and cash flows for such Fiscal Year together with related notes thereto and managements discussion and analysis describing results of operations, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of PricewaterhouseCoopers LLP, which report and opinion have been prepared in accordance with generally accepted auditing standards and are not subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit. Also attached hereto as Exhibit A are the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.] 1
2. [Attached hereto as Exhibit A is a condensed consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the Fiscal Quarter ended [ , 20 ], and the related (i) condensed consolidated statements of income or operations for such Fiscal Quarter and for the portion of the Fiscal Year then ended and (ii) condensed consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail (collectively, the Financial Statements ), together with managements discussion and analysis describing results of operations. Such Financial Statements fairly present in all material respects the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject to normal year-end adjustments and the absence of footnotes. Also attached hereto as Exhibit A are the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.] 2
3. [Attached hereto as Exhibit B are the Projections required to be delivered pursuant to Section 7.1(d) of the Credit Agreement. Such Projections have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such Projections. Actual results may vary from such Projections and such variations may be material.] 3
1 |
To be included if accompanying annual financial statements only. |
2 |
To be included if accompanying quarterly financial statements only. |
3 |
To be included only in annual compliance certificate (beginning with the fiscal year ending January 28, 2017). |
4. [To my knowledge, except as otherwise disclosed to the Administrative Agent pursuant to the Credit Agreement, no Default has occurred and is continuing.] [If unable to provide the foregoing certification, attach an Annex A specifying the details of the Default that has occurred and is continuing and any action taken or proposed to be taken with respect thereto.]
5. [Attached hereto as Schedule 1 is a reasonably detailed calculation of the Fixed Charge Coverage Ratio of the Borrower and its Restricted Subsidiaries as of the end of the most recent Test Period, which calculation is true and accurate on and as of the date of this Certificate.]
6. [Attached hereto as Schedule 2 are reasonably detailed calculations, which calculations are true and accurate on and as of the date of this Certificate, of the Net Cash Proceeds received during the applicable period ended [ , 20 ] by or on behalf of, Holdings, the Borrower or any of its Restricted Subsidiaries in respect of any Disposition subject to prepayment pursuant to Section 2.9(b) of the Credit Agreement.]
7. Attached hereto as Schedule 3 is a reasonably detailed calculation of the Total Leverage Ratio of the Borrower and its Restricted Subsidiaries as of the end of the most recent Test Period, which calculation is true and accurate on and as of the date of this Certificate.
8. Attached hereto as Annex A is the information required to be delivered pursuant to Section 7.2(d) of the Credit Agreement.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned, solely in his/her capacity as a Responsible Officer of BJs Wholesale Club, Inc., and not in his or her personal or individual capacity and without personal or individual liability, has executed this certificate for and on behalf of BJs Wholesale Club, Inc. and has caused this certificate to be delivered as of the date first set forth above.
BJS WHOLESALE CLUB, INC. |
By: |
|
Name: | ||
Title: |
FINANCIAL COVENANTS SUMMARY
SCHEDULE 1
TO COMPLIANCE CERTIFICATE
Test Period covered by the calculations below: [ , 20 ] to [ , 20 ].
Fixed Charge Coverage Ratio for the Test Period is : : 1:00.
A. |
Fixed Charge Coverage Ratio |
1) Consolidated EBITDA
a) Consolidated Net Income: |
||
(i). the net income (loss) of the Borrower and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP, excluding, without duplication: |
$ | |
a. any net after-tax extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses, and Transaction Expenses, relocation costs, integration costs, facility consolidation and closing costs (other than with respect to Stores), severance costs and expenses and one-time compensation charges; provided that the aggregate amount of cash losses excluded pursuant to this item (A)(1)(a)(i)(a) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(a)); provided further that Net Income for such period shall be reduced by an amount equal to the amount by which (if any) (i) the aggregate amount of cash losses incurred during such Test Period on account of any non-cash loss which was excluded from the calculation of Consolidated Net Income in any prior period pursuant to this item (A)(1)(a)(i)(a) plus (ii) the aggregate amount of cash losses excluded from the calculation of Consolidated Net Income pursuant to the first proviso of this item (A)(1)(a)(i)(a) during such Test Period, exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(a)) |
$ | |
b. the cumulative effect of a change in accounting principles during such period, whether effected through a cumulative effect adjustment or a retroactive application in each case in accordance with GAAP |
$ | |
c. effects of adjustments (including the effect of such adjustments pushed down to the Borrower and the Restricted Subsidiaries) in the Borrowers Consolidated financial statements pursuant to GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes |
$ | |
d. any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed or discontinued operations; provided that the aggregate amount of cash losses excluded pursuant to this item (A)(1)(a)(i)(d) for any Test Period shall not exceed the greater of (x) |
$25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(d)); provided further that Net Income for such period shall be reduced by an amount equal to the amount by which (if any) (i) the aggregate amount of cash losses incurred during such Test Period on account of any non-cash loss which was excluded from the calculation of Consolidated Net Income in any prior period pursuant to this item (A)(1)(a)(i)(d) plus (ii) the aggregate amount of cash losses excluded from the calculation of Consolidated Net Income pursuant to the first proviso of this item (A)(1)(a)(i)(d) during such Test Period, exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(a)(i)(d)) |
$ | |
e. any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower and its Restricted Subsidiaries other than in the ordinary course of business, as determined in good faith by the Borrower |
$ | |
f. the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, provided that Consolidated Net Income of the Borrower and its Restricted Subsidiaries shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by the referent Person to the Borrower or a Restricted Subsidiary thereof in respect of such period |
$ | |
g. (i) any net unrealized gain or loss (after any offset) resulting in such period from obligations in respect of Swap Contracts and the application of Financial Accounting Standards Board Accounting Standards Codification 815 (Derivatives and Hedging), (ii) any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including the net loss or gain (A) resulting from Swap Contracts for currency exchange risk and (B) resulting from intercompany Indebtedness) and all other foreign currency translation gains or losses to the extent such gain or losses are non-cash items, and (iii) any net after-tax income (loss) for such period attributable to the early extinguishment or conversion of (A) Indebtedness, (B) obligations under any Swap Contracts or (C) other derivative instruments |
$ | |
h. any impairment charge or asset write-off, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP |
$ | |
i. any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under the Credit Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in |
fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days) |
$ | |||
j. to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days), expenses, charges or losses with respect to liability or casualty events or business interruption |
$ | |||
k. any non-cash (for such period and all other periods) compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs shall be excluded |
$ | |||
Consolidated Net Income (item (A)(1)(a)(i) minus the sum of items (A)(1)(a)(i)(a)through (k)) |
$ | |||
b) increased by (without duplication, and as determined in accordance with GAAP to the extent applicable): |
|
|||
(i) provision for taxes based on income or profits or capital, plus franchise or similar taxes and foreign withholding taxes, of the Borrower and its Restricted Subsidiaries for such period deducted in computing Consolidated Net Income |
$ | |||
(ii) (A) total interest expense of the Borrower and its Restricted Subsidiaries for such period and (B) bank fees and costs of surety bonds, in each case under this clause (B), in connection with financing activities and, in each case under clauses (A) and (B), to the extent the same was deducted in computing Consolidated Net Income |
$ | |||
(iii) Consolidated Depreciation and Amortization Expense of the Borrower and its Restricted Subsidiaries for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income |
$ | |||
(iv) any expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness permitted to be incurred under the Credit Agreement including a refinancing thereof (whether or not successful) and any amendment or modification to the terms of any such transactions, in each case, deducted in computing Consolidated Net Income |
$ | |||
(v) the amount of any restructuring charge or reserve deducted in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with (A) Permitted Acquisitions after the Effective Date or (B) the closing of any Stores or distribution centers after the Effective Date; provided that the aggregate amount of cash charges added pursuant to this item (A)(1)(b)(vi) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(b)(vi)) |
$ | |||
(vi) the amount of costs relating to pre-opening and opening costs for Stores, signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, consolidation and closing costs for Stores and costs |
incurred in connection with non-recurring product and intellectual property development after the Effective Date, other business optimization expenses (including costs and expenses relating to business optimization programs), and new systems design and implementation costs and project start-up costs; provided that the aggregate amount of all foregoing cash items added pursuant to this item (A)(1)(b)(vi) for any Test Period shall not exceed the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(b)(vi)) |
$ | |
(vii) any other non-cash charges including any write offs or write downs reducing Consolidated Net Income for such period (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, (1) the Borrower may determine not to add back such non-cash charge in the current period and (2) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period) |
$ | |
(viii) the amount of any minority interest expense deducted in calculating Consolidated Net Income |
$ | |
(ix) the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued in such period under the Sponsor Management Agreement or otherwise to the Sponsors to the extent permitted under Section 9.8 of the Credit Agreement and deducted in such period in computing Consolidated Net Income |
$ | |
(x) the amount of net cost savings and synergies (other than any of the foregoing related to Specified Transactions) projected by the Borrower in good faith to result from actions taken, committed to be taken or reasonably expected to be taken no later than twelve (12) months after the end of such period (calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of the period for which Consolidated EBITDA is being determined), net of the amount of actual benefits realized during such period from such actions; provided that (A) such cost savings and synergies are reasonably identifiable and factually supportable, and (B) the aggregate amount of cost savings and synergies added pursuant to this item (A)(1)(b)(x) for any Test Period shall not exceed, after the Effective Date, the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(b)(x)) |
$ | |
(xi) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to item (A)(1)(c) below for any previous period and not added back |
$ | |
(xii) any costs or expenses incurred by the Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or stockholders agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests) |
$ |
(xiii) any fees, premiums, expenses or charges incurred or paid in connection with the Credit Agreement and the Transactions (including the Restatement Effective Date Dividend), in each case, deducted in computing Consolidated Net Income |
$ | |||
c) decreased by (without duplication, and as determined in accordance with GAAP to the extent applicable): |
||||
(i) any non-cash gains increasing Consolidated Net Income of the Borrower and its Restricted Subsidiaries for such period, excluding any gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period (other than such cash charges that have been added back to Consolidated Net Income in calculating Consolidated EBITDA in accordance with the calculation set forth in this Schedule 1) |
$ | |||
(ii) any non-cash gains with respect to cash actually received in a prior period unless such cash did not increase Consolidated EBITDA in such prior period |
$ | |||
(iii) the amount of cash payments made during such Test Period on account of any non-cash charge which was added back to the calculation of Consolidated EBITDA in any prior period pursuant to item (A)(1)(b)(v) above solely to the extent that (A) the aggregate amount of such cash payments during such Test Period plus (B) the aggregate amount of cash charges added back pursuant to item (A)(1)(b)(v) above during such Test Period exceeds the greater of (x) $25,000,000 and (y) 6.50% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this item (A)(1)(c)(iii)) |
$ | |||
d) Consolidated EBITDA (Consolidated Net Income plus the sum of items (A)(1)(b)(i) through (xii) minus the sum of items (A)(1)(c)(i) through (iii)) |
$ | |||
2) Capital Expenditures |
||||
a) (i) all amounts that would be reflected as additions to property, plant or equipment on a Consolidated statement of cash flows of the Borrower and its Restricted Subsidiaries in accordance with GAAP |
$ | |||
(ii) the value of all assets under Capitalized Leases incurred by the Borrower and its Restricted Subsidiaries during such period |
$ | |||
provided that Capital Expenditures shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment or software to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay the Loans pursuant to Section 2.9(b) of the Credit Agreement or the loans under the First Lien Term Facility or the Second Lien Term Facility, (iv) expenditures that are accounted for as capital expenditures by the Borrower or any Restricted Subsidiary and that actually are paid for, or reimbursed to the Borrower or any Restricted Subsidiary in cash or Cash |
|
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Equivalents, by a Person other than the Borrower or any Restricted Subsidiary and for which neither the Borrower nor any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation (other than rent) in respect of such expenditures to such Person or any other Person (whether before, during or after such period), (v) expenditures to the extent constituting any portion of a Permitted Acquisition, (vi) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (A) used or surplus equipment traded in at the time of such purchase and (B) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business, (vii) expenditures relating to the construction, acquisition, replacement, reconstruction, development, refurbishment, renovation or improvement of any property which has been transferred to a Person other than the Borrower or a Restricted Subsidiary during the same Fiscal Year in which such expenditures were made pursuant to a sale-leaseback transaction to the extent of the cash proceeds received by the Borrower or such Restricted Subsidiary pursuant to such sale-leaseback transaction or (viii) expenditures financed with the proceeds of an issuance of Equity Interests of the Borrower or a capital contribution to the Borrower or Indebtedness permitted to be incurred under the Credit Agreement.
Capital Expenditures |
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(iii) the sum of items (A)(2)(a)(i) and (ii) |
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$ |
||
Cash Taxes |
$ | |
c) item (A)(1)(d) minus item (A)(2)(a)(iii) minus item (A)(2)(b) |
$ | |
3) Fixed Charges |
||
with respect to the Borrower and Restricted Subsidiaries for any Test Period, the sum, determined on a Consolidated basis, of: | ||
a) Consolidated Net Cash Interest Expense |
||
(i). with respect to the Borrower and its Restricted Subsidiaries on a Consolidated basis for any period, determined in accordance with GAAP, total interest expense paid or payable in cash in such period (including that attributable to obligations with respect to Capitalized Leases in accordance with GAAP in effect on the Effective Date but excluding any imputed interest as a result of purchase accounting) of the Borrower and its Restricted Subsidiaries on a Consolidated basis and all commissions, discounts and other fees and charges owed with respect to Indebtedness of the Borrower and its Restricted Subsidiaries |
$ | |
provided that Consolidated Net Cash Interest Expense shall not include (i) any non- cash interest or deferred financing costs, (ii) any amortization or write-down of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (iii) any expensing of bridge, commitment and other financing fees and (iv) penalties and interest related to taxes |
||
(ii). interest income of the Borrower and its Restricted Subsidiaries actually received in cash during such period after giving effect to any net payments made or received by the Borrower and its Restricted Subsidiaries with respect to interest rate Swap Contracts. |
$ | |
Consolidated Net Cash Interest Expense | ||
(iii). item (A)(3)(a)(i) minus item (A)(3)(a)(ii) |
$ |
b) Scheduled payments of principal on Indebtedness for borrowed money of the Borrower and Restricted Subsidiaries due and payable during such period |
$ | |||
Fixed Charges | ||||
c) the sum of item (A)(3)(a)(iii) and item (A)(3)(b) |
$ | |||
Fixed Charge Coverage Ratio |
||||
item (2)(c) divided by item (3)(c) |
: 1.00 |
SCHEDULE 2
TO COMPLIANCE CERTIFICATE
B. Net Cash Proceeds |
|
|||||
With respect to any Disposition subject to prepayment pursuant to Section 2.9(b) of the Credit Agreement during the applicable period ended [ , 20 ]: |
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I. The sum of cash and Cash Equivalents received in connection with such Dispositions (including any cash and Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) |
$ | |||||
II. The sum of: |
||||||
a. the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by the asset subject to such Dispositions and that is required to be repaid in connection with such Dispositions (other than Indebtedness under the Loan Documents, the First Lien Term Facility Documentation or any Permitted Refinancing of the Indebtedness under the First Lien Term Facility Documentation or the Second Lien Term Facility Documentation or any Permitted Refinancing of the Indebtedness under the Second Lien Term Facility Documentation ) |
$ | |||||
b. the out-of-pocket fees and expenses (including attorneys fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred by the Borrower or such Restricted Subsidiary in connection with such Dispositions |
$ | |||||
c. taxes or distributions made pursuant to Section 9.6(g)(i) and (g)(iii) of the Credit Agreement paid or reasonably estimated to be payable in connection therewith (including taxes imposed on the distribution or repatriation of any such Net Cash Proceeds) |
$ | |||||
d. in the case of any Disposition by a non-wholly owned Restricted Subsidiary, the pro rata portion of the Net Cash Proceeds thereof (calculated without regard to this clause (d)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Restricted Subsidiary as a result thereof |
$ |
34
e. any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Borrower or any Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, it being understood that Net Cash Proceeds shall include the amount of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in this clause (e) |
$ |
III. |
Net Cash Proceeds : item (B)(I) minus the sum of items (B)(II)(a) through (e) |
$ |
SCHEDULE 3
TO COMPLIANCE CERTIFICATE
Test Period covered by the calculations below: [ , 20 ] to [ , 20 ].
Total Leverage Ratio for the Test Period is : 1:00.
Total Leverage Ratio |
|
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1. Consolidated Total Debt: |
ANNEX A
TO COMPLIANCE CERTIFICATE
Exhibit 10.2
EXECUTION VERSION
$1,925,000,000
FIRST LIEN TERM LOAN CREDIT AGREEMENT,
dated as of February 3, 2017
among
BEACON HOLDING INC.,
as Holdings,
BJS WHOLESALE CLUB, INC.,
as the Borrower,
THE LENDERS PARTY HERETO,
and
NOMURA CORPORATE FUNDING AMERICAS, LLC,
as Administrative Agent and Collateral Agent,
NOMURA SECURITIES INTERNATIONAL, INC. AND JEFFERIES FINANCE LLC,
as Joint Bookrunners and Joint Lead Arrangers
TABLE OF CONTENTS
Page | ||||||
ARTICLE I |
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DEFINITIONS |
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SECTION 1.01. |
Defined Terms | 1 | ||||
SECTION 1.02. |
Terms Generally | 51 | ||||
SECTION 1.03. |
Accounting Terms; GAAP | 51 | ||||
SECTION 1.04. |
Effectuation of Transfers | 52 | ||||
SECTION 1.05. |
Currencies | 52 | ||||
SECTION 1.06. |
Required Financial Statements | 52 | ||||
SECTION 1.07. |
Certain Calculations and Tests | 52 | ||||
SECTION 1.08. |
Cashless Rolls | 53 | ||||
ARTICLE II |
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THE CREDITS |
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SECTION 2.01. |
Term Loans and Borrowings | 53 | ||||
SECTION 2.02. |
Request for Borrowing | 54 | ||||
SECTION 2.03. |
Funding of Borrowings | 54 | ||||
SECTION 2.04. |
Interest Elections | 54 | ||||
SECTION 2.05. |
Promise to Pay; Evidence of Debt | 56 | ||||
SECTION 2.06. |
Repayment of Term Loans | 56 | ||||
SECTION 2.07. |
Optional Prepayment of Term Loans | 57 | ||||
SECTION 2.08. |
Mandatory Prepayment of Term Loans | 57 | ||||
SECTION 2.09. |
Fees | 60 | ||||
SECTION 2.10. |
Interest | 60 | ||||
SECTION 2.11. |
Alternate Rate of Interest | 61 | ||||
SECTION 2.12. |
Increased Costs | 61 | ||||
SECTION 2.13. |
Break Funding Payments | 62 | ||||
SECTION 2.14. |
Taxes | 62 | ||||
SECTION 2.15. |
Payments Generally; Pro Rata Treatment; Sharing of Set-offs | 65 | ||||
SECTION 2.16. |
Mitigation Obligations; Replacement of Lenders | 66 | ||||
SECTION 2.17. |
Illegality | 67 | ||||
SECTION 2.18. |
Incremental Facilities | 67 | ||||
SECTION 2.19. |
Other Term Loans | 69 | ||||
SECTION 2.20. |
Extensions of Term Loans | 70 | ||||
SECTION 2.21. |
Repricing Event | 71 | ||||
ARTICLE III |
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REPRESENTATIONS AND WARRANTIES |
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SECTION 3.01. |
Organization; Powers | 71 | ||||
SECTION 3.02. |
Authorization | 71 | ||||
SECTION 3.03. |
Enforceability | 72 | ||||
SECTION 3.04. |
Governmental Approvals | 72 | ||||
SECTION 3.05. |
Title to Properties; Possession Under Leases | 73 | ||||
SECTION 3.06. |
Subsidiaries | 73 | ||||
SECTION 3.07. |
Litigation; Compliance with Laws | 73 | ||||
SECTION 3.08. |
Federal Reserve Regulations | 74 | ||||
SECTION 3.09. |
Investment Company Act | 74 |
-i-
Page | ||||||
SECTION 3.10. |
Use of Proceeds | 74 | ||||
SECTION 3.11. |
Tax Returns | 74 | ||||
SECTION 3.12. |
No Material Misstatements | 74 | ||||
SECTION 3.13. |
Environmental Matters | 75 | ||||
SECTION 3.14. |
Security Documents | 75 | ||||
SECTION 3.15. |
Location of Real Property and Leased Premises | 76 | ||||
SECTION 3.16. |
Solvency | 76 | ||||
SECTION 3.17. |
No Material Adverse Effect | 76 | ||||
SECTION 3.18. |
Insurance | 76 | ||||
SECTION 3.19. |
USA PATRIOT Act; FCPA; OFAC; Anti-Terrorism | 76 | ||||
SECTION 3.20. |
Intellectual Property; Licenses, Etc. | 77 | ||||
SECTION 3.21. |
Employee Benefit Plans | 77 | ||||
ARTICLE IV |
|
|||||
CONDITIONS OF LENDING |
|
|||||
SECTION 4.01. |
Conditions Precedent | 78 | ||||
ARTICLE V |
|
|||||
AFFIRMATIVE COVENANTS |
|
|||||
SECTION 5.01. |
Existence; Businesses and Properties | 80 | ||||
SECTION 5.02. |
Insurance | 80 | ||||
SECTION 5.03. |
Taxes | 81 | ||||
SECTION 5.04. |
Financial Statements, Reports, etc. | 81 | ||||
SECTION 5.05. |
Litigation and Other Notices | 83 | ||||
SECTION 5.06. |
Compliance with Laws | 83 | ||||
SECTION 5.07. |
Maintaining Records; Access to Properties and Inspections | 83 | ||||
SECTION 5.08. |
Use of Proceeds | 84 | ||||
SECTION 5.09. |
Compliance with Environmental Laws | 84 | ||||
SECTION 5.10. |
Further Assurances; Additional Security | 84 | ||||
SECTION 5.11. |
Credit Ratings | 87 | ||||
SECTION 5.12. |
Preparation of Environmental Reports | 87 | ||||
SECTION 5.13. |
Post-Closing Matters | 87 | ||||
ARTICLE VI |
|
|||||
NEGATIVE COVENANTS |
|
|||||
SECTION 6.01. |
Indebtedness | 87 | ||||
SECTION 6.02. |
Liens | 92 | ||||
SECTION 6.03. |
[Reserved] | 95 | ||||
SECTION 6.04. |
Investments, Loans and Advances | 95 | ||||
SECTION 6.05. |
Mergers, Consolidations, Sales of Assets and Acquisitions | 98 | ||||
SECTION 6.06. |
Restricted Payments | 101 | ||||
SECTION 6.07. |
Transactions with Affiliates | 103 | ||||
SECTION 6.08. |
Business of the Borrower and its Subsidiaries | 105 | ||||
SECTION 6.09. |
Limitation on Payments and Modifications of Indebtedness; Modifications of Certain Other Agreements; etc. | 106 |
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Page | ||||||
ARTICLE VII |
|
|||||
HOLDINGS COVENANT |
|
|||||
SECTION 7.01. |
Holdings Covenant | 108 | ||||
ARTICLE VIII |
|
|||||
EVENTS OF DEFAULT |
|
|||||
SECTION 8.01. |
Events of Default | 109 | ||||
ARTICLE IX |
|
|||||
THE AGENTS |
|
|||||
SECTION 9.01. |
Appointment | 111 | ||||
SECTION 9.02. |
Delegation of Duties | 113 | ||||
SECTION 9.03. |
Exculpatory Provisions | 114 | ||||
SECTION 9.04. |
Reliance by Administrative Agent | 114 | ||||
SECTION 9.05. |
Notice of Default | 115 | ||||
SECTION 9.06. |
Non-Reliance on Agents and Other Lenders | 115 | ||||
SECTION 9.07. |
Indemnification | 115 | ||||
SECTION 9.08. |
Agent in Its Individual Capacity | 116 | ||||
SECTION 9.09. |
Successor Agent | 116 | ||||
SECTION 9.10. |
Arrangers | 116 | ||||
SECTION 9.11. |
Secured Cash Management Agreements and Secured Hedge Agreements. | 116 | ||||
ARTICLE X |
|
|||||
MISCELLANEOUS |
|
|||||
SECTION 10.01. |
Notices; Communications | 117 | ||||
SECTION 10.02. |
Survival of Agreement | 117 | ||||
SECTION 10.03. |
Binding Effect | 118 | ||||
SECTION 10.04. |
Successors and Assigns | 118 | ||||
SECTION 10.05. |
Expenses; Indemnity | 125 | ||||
SECTION 10.06. |
Right of Set-off | 127 | ||||
SECTION 10.07. |
Applicable Law | 127 | ||||
SECTION 10.08. |
Waivers; Amendment | 127 | ||||
SECTION 10.09. |
Interest Rate Limitation | 129 | ||||
SECTION 10.10. |
Entire Agreement | 129 | ||||
SECTION 10.11. |
WAIVER OF JURY TRIAL | 129 | ||||
SECTION 10.12. |
Severability | 129 | ||||
SECTION 10.13. |
Counterparts | 130 | ||||
SECTION 10.14. |
Headings | 130 | ||||
SECTION 10.15. |
Jurisdiction; Consent to Service of Process | 130 | ||||
SECTION 10.16. |
Confidentiality | 130 | ||||
SECTION 10.17. |
Platform; Borrower Materials | 131 | ||||
SECTION 10.18. |
Release of Liens and Guarantees | 132 | ||||
SECTION 10.19. |
USA PATRIOT Act Notice | 132 | ||||
SECTION 10.20. |
Security Documents and Intercreditor Agreement | 132 | ||||
SECTION 10.21. |
No Advisory or Fiduciary Responsibility | 133 | ||||
SECTION 10.22. |
Cashless Settlement | 133 | ||||
SECTION 10.23. |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 133 |
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Page |
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Exhibits and Schedules
Exhibit A | Form of Assignment and Acceptance | |
Exhibit B | Form of Solvency Certificate | |
Exhibit C | Form of Borrowing Request | |
Exhibit D | Form of Interest Election Request | |
Exhibit E | Form of Non-Debt Fund Affiliate Assignment and Acceptance | |
Exhibit F | U.S. Tax Compliance Certificate | |
Exhibit G | Form of Term Note | |
Exhibit H | Form of Notice of Prepayment | |
Exhibit I | Form of First Lien Limited Recourse Guaranty | |
Exhibit J | Form of Term Loan Security Agreement | |
Exhibit K | Form of Term Loan Guaranty Agreement | |
Schedule 1.01S | Specified Sale and Lease-Back Properties | |
Schedule 2.01 | Commitments | |
Schedule 3.04 | Governmental Approvals | |
Schedule 3.05 | Possession under Leases | |
Schedule 3.06 | Subsidiaries | |
Schedule 3.11 | Taxes | |
Schedule 3.13 | Environmental Matters | |
Schedule 3.15(1) | Owned Material Real Property | |
Schedule 3.15(2) | Leased Material Real Property | |
Schedule 3.15(3) | Mortgaged Real Property | |
Schedule 3.18 | Insurance | |
Schedule 3.20 | Intellectual Property | |
Schedule 5.13 | Post-Closing Matters | |
Schedule 6.01 | Indebtedness | |
Schedule 6.02 | Liens | |
Schedule 6.04 | Investments | |
Schedule 6.07 | Transactions with Affiliates | |
Schedule 10.01 | Notice Information |
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FIRST LIEN TERM LOAN CREDIT AGREEMENT, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, this Agreement ), among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding, Inc., a Delaware corporation ( Holdings ), the Lenders party hereto from time to time and Nomura Corporate Funding Americas, LLC, as administrative agent (in such capacity, and as further defined in Section 1.01, the Administrative Agent ) and as collateral agent (in such capacity, and as further defined in Section 1.01, the Collateral Agent ).
RECITALS
(1) The Borrower is party to that certain Credit Agreement (as the same may have been amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements, the Existing First Lien Term Loan Agreement ), dated as of September 30, 2011, by and among, Holdings, the Borrower, Deutsche Bank AG New York Branch, as administrative agent ( DBNY ), and the lenders party thereto under which it has previously borrowed senior secured term loans.
(2) On the Closing Date, the Borrower will obtain the ABL Credit Agreement (as defined herein) providing commitments thereunder in an aggregate amount of $1,000.0 million, and incur ABL Loans (as defined herein) in an aggregate principal amount of $350.0 million or as otherwise available thereunder.
(3) On the Closing Date, the Borrower will obtain the Tranche B Term Loans (as defined herein) in an aggregate principal amount of $1,925.0 million.
(4) On the Closing Date, the Borrower will obtain the Second Lien Term Loans (as defined herein) in an aggregate principal amount of $625.0 million.
(5) On the Closing Date, the Borrower and Holdings will use a portion of the proceeds of the Tranche B Term Loans and the Second Lien Term Loans to repay all indebtedness outstanding under the Existing First Lien Term Loan Agreement and the Existing Second Lien Credit Agreement (as defined herein) (as defined herein) (the Refinancing ).
(6) Within 20 days of the Closing Date, the Borrower and Holdings will make a distribution to the equity holders of up to $803.0 million (the Distribution ).
(7) All fees and expenses in connection with the forgoing will be paid.
The transactions described above are collectively referred to herein as the Transactions .
AGREEMENT
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
ABL Claims means claims of the ABL Secured Parties (as defined in the Intercreditor Agreement) in respect of ABL Obligations (as defined in the Intercreditor Agreement).
ABL Credit Agreement means that certain amended and restated credit agreement, dated as of the Closing Date, by and among the Borrower, the lenders party thereto, Wells Fargo Bank, National Association, as administrative agent, and the other parties thereto, as the same may be amended, restated, modified, supplemented,
extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements (in each case with the same or new lenders, institutional investors or agents), including any agreement extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof, in each case as and to the extent permitted by the Intercreditor Agreement.
ABL Credit Facility means the senior secured asset-based revolving loan facility and the term loan facilities made pursuant to the ABL Credit Agreement.
ABL Loan Documents means the ABL Credit Agreement and the other Loan Documents as defined in the ABL Credit Agreement, as each such document may be amended, restated, supplemented and/or otherwise modified.
ABL Loans means the senior secured asset-based revolving loans and the term loan facilities made on and after the Closing Date from time to time pursuant to the ABL Credit Agreement.
ABL Obligations means the Obligations as defined in the ABL Credit Agreement.
ABL Priority Collateral means the ABL Priority Collateral as defined in the Intercreditor Agreement.
ABL Priority Collateral Asset Sale means any Asset Sale to the extent, and only to the extent, consisting of the disposition of ABL Priority Collateral.
ABR means, for any day, a fluctuating rate per annum equal to the highest of:
(1) the Federal Funds Rate plus 1/2 of 1.00%;
(2) the Prime Rate; and
(3) the Adjusted LIBO Rate for a one month Interest Period commencing on such date (or, if such day is not a Business Day, the preceding Business Day) plus 1.00%.
Any change in the ABR due to a change in the Federal Funds Rate, the prime rate or the LIBO Rate will be effective on the effective date of such change in the Federal Funds Rate, the prime rate or the LIBO Rate, as the case may be.
ABR Borrowing means a Borrowing comprised of ABR Loans.
ABR Loan means any Term Loan bearing interest at a rate determined by reference to the ABR.
Additional Lender means the banks, financial institutions and other institutional lenders and investors (other than natural persons) that become Lenders in connection with an Incremental Term Loan or Other Term Loan; provided that no Disqualified Institution may be an Additional Lender.
Adjusted LIBO Rate means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum equal to the greater of (1) the LIBO Rate in effect for such Interest Period divided by one minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any, and (2) solely in respect of Tranche B Term Loans, 1.00%.
Administrative Agency Fee Letter has the meaning assigned to such term in Section 2.09(1).
Administrative Agent means Nomura Corporate Funding Americas, LLC, in its capacity as administrative agent for itself and the Lenders hereunder, and any duly appointed successor in such capacity.
Administrative Agent Fees has the meaning assigned to such term in Section 2.09(1).
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Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Administrative Agent.
Affiliate means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. For purposes of this Agreement and the other Loan Documents, Jefferies LLC and its Affiliates shall be deemed to be Affiliates of Jefferies Finance LLC and its Affiliates.
Affiliated Lender means each Sponsor, the New Sponsor (from and after a Permitted Change of Control) and each of their respective Affiliates, other than (1) Holdings or any of its Subsidiaries (including the Borrower) and (2) any natural person.
Agents means the Administrative Agent and the Collateral Agent, in their respective capacities as such.
Agreement has the meaning assigned to such term in the introductory paragraph hereof.
Annual Financial Statements has the meaning assigned to such term in Section 5.04(1).
Applicable Margin means:
(1) with respect to any Tranche B Term Loans made on the Closing Date, (i) until delivery of financial statements for the first full fiscal quarter ending after the Closing Date pursuant to Section 5.04(2), (a) for ABR Loans, 2.75% and (b) for Eurocurrency Loans, 3.75%, and (ii) thereafter, the following percentages per annum, based upon the Senior Secured First Lien Net Leverage Ratio as set forth in the most recent officers certificate received by the Administrative Agent pursuant to Section 5.04(3):
Pricing Level |
Senior Secured First
Lien Net Leverage Ratio |
For Eurocurrency
Loans |
For ABR Loans | |||||||
1 |
>4.25:1.00 | 3.75 | % | 2.75 | % | |||||
2 |
< 4.25:1.00 | 3.50 | % | 2.50 | % |
Any increase or decrease in the Applicable Margin pursuant to clause (b) above resulting from a change in the Senior Secured First Lien Net Leverage Ratio shall become effective as of the first Business Day immediately following the date an officers certificate is delivered pursuant to Section 5.04(3); provided that if notification is provided to the Borrower that the Administrative Agent or the Required Lenders have so elected, with respect to Tranche B Term Loans, Pricing Level 1 shall apply (x) as of the first Business Day after the date on which an officers certificate was required to have been delivered pursuant to Section 5.04(3) but was not delivered, and shall continue to so apply to and including the date on which such officers certificate is so delivered (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (y) as of the first Business Day after an Event of Default under Section 8.01(3) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply);
(2) with respect to any Incremental Term Loans, the Applicable Margin set forth in the Incremental Facility Amendment establishing the terms thereof;
(3) with respect to any Other Term Loans, the Applicable Margin set forth in the Refinancing Amendment establishing the terms thereof; and
(4) with respect to any Extended Term Loans, the Applicable Margin set forth in the Extension Amendment establishing the terms thereof.
Approved Fund has the meaning assigned to such term in Section 10.04(2).
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Arrangers means each of Nomura Securities International, Inc. and Jefferies Finance LLC.
Asset Sale means any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition to any Person of any asset or assets of the Borrower or any Restricted Subsidiary.
Asset Sale Proceeds Account means one or more deposit accounts or securities accounts (as such terms are defined in the Uniform Commercial Code) containing only the Net Cash Proceeds of Asset Sales or any Below Threshold Asset Sale Proceeds, any investments thereof in Cash Equivalents and the proceeds thereof, pending the application of such Net Cash Proceeds in accordance with Section 2.08(1), which accounts have been pledged to the Collateral Agent, for the benefit of the Secured Parties, on a first-priority basis pursuant to documentation in form and substance reasonably satisfactory to the Collateral Agent.
Assignee has the meaning assigned to such term in Section 10.04(2).
Assignment and Acceptance means an assignment and acceptance entered into by a Lender and an Assignee, and accepted by the Administrative Agent and the Borrower (if required by Section 10.04), substantially in the form of Exhibit A or such other form that is approved by the Administrative Agent.
Attributable Indebtedness means, on any date, in respect of any capitalized lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
Available Amount means, as of any date, an amount, not less than zero, determined on a cumulative basis, equal to the sum, without duplication, of:
(1) $25.0 million; plus
(2) the Cumulative Retained Excess Cash Flow Amount as of such date (measured annually); plus
(3) the cumulative amount of cash proceeds and the fair market value of property (other than cash) received by the Borrower or any Parent Entity in connection with the sale or issuance of Equity Interests of the Borrower or any Parent Entity after the Closing Date and on or prior to such date (including upon exercise of warrants or options or in connection with a Permitted Acquisition or other Permitted Investment) which, with respect to proceeds or property received in connection with the sale or issuance of Equity Interests of a Parent Entity, have been contributed to the capital of the Borrower or exchanged for Equity Interest of the Borrower, other than the proceeds of Disqualified Stock, Excluded Contributions, any net cash proceeds that are used prior to such date for Restricted Payments under Section 6.06(1) or Section 6.06(2)(b), and equity used to incur Contribution Indebtedness; plus
(4) 100% of the aggregate amount of cash contributions to the capital of the Borrower and the fair market value of property other than cash contributed to the capital of the Borrower after the Closing Date, other than the proceeds of Disqualified Stock, Excluded Contributions, any net cash proceeds that are used prior to such date for Restricted Payments under Section 6.06(1) or Section 6.06(2)(b), and equity used to incur Contribution Indebtedness; plus
(5) 100% of the aggregate principal amount of any Indebtedness (including the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock) of the Borrower or any Restricted Subsidiary issued after the Closing Date (other than Indebtedness (including Disqualified Stock) issued to Holdings, the Borrower or a Restricted Subsidiary), which has been converted into or exchanged for Equity Interests (other than Disqualified Stocks) of the Borrower or any Parent Entity; plus
(6) 100% of the aggregate amount of cash (and the fair market value of property other than cash) received by the Borrower or any Restricted Subsidiary after the Closing Date from (a) the sale (other
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than to Holdings, the Borrower or any Restricted Subsidiary) of the Equity Interests of any Unrestricted Subsidiary or (b) any dividend or other distribution (including any payment on intercompany Indebtedness) by any such Unrestricted Subsidiary; plus
(7) in the event any Unrestricted Subsidiary becomes a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, Holdings, the Borrower or any Restricted Subsidiary, the lesser of (a) the fair market value of the Investments of the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary at the time such Unrestricted Subsidiary becomes a Restricted Subsidiary or at the time of such merger, consolidation, amalgamation, transfer or liquidation (or of the assets transferred or conveyed, as applicable) and (b) the fair market value of the original Investments by the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary, in each case, (i) as determined by a Responsible Officer of the Borrower in good faith and (ii) to the extent the Investment in such Unrestricted Subsidiary was made using the Available Amount; plus
(8) any mandatory prepayment declined by a Lender; minus
(9) the use of such Available Amount since the Closing Date.
Notwithstanding the foregoing, upon the occurrence of the Permitted Change of Control Effective Date, (A) the Available Amount shall be automatically reduced (or if applicable, increased) to $25.0 million and (B) each reference to Closing Date in this definition shall be deemed a reference to Permitted Change of Control Effective Date.
Available Incremental Term Loan Facility Amount has the meaning assigned to such term in Section 2.18(3).
Bail-In Action means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
Bail-In Legislation means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
Below Threshold Asset Sale Proceeds means the cash proceeds of Asset Sales involving aggregate consideration of $5.0 million or less.
Beneficial Owner has the meaning given to that term in Rule 13d-3 and Rule 13d-5 under the Exchange Act. The terms Beneficially Owns , Beneficially Owned and Beneficial Ownership have a corresponding meaning.
Board means the Board of Governors of the Federal Reserve System of the United States of America.
Board of Directors means, as to any Person, the board of directors, board of managers or other governing body of such Person, or if such Person is owned or managed by a single entity, the board of directors, board of managers or other governing body of such entity, and the term directors means members of the Board of Directors.
Borrower has the meaning assigned to such term in the recitals to this Agreement.
Borrower Materials has the meaning assigned to such term in Section 10.17(1).
Borrowing means a group of Term Loans of a single Type made on a single date under a single Term Facility and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect.
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Borrowing Request means a request by the Borrower in accordance with the terms of Section 2.02 and substantially in the form of Exhibit C .
Budget has the meaning assigned to such term in Section 5.04(5).
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided that when used in connection with a Eurocurrency Loan, the term Business Day also excludes any day on which banks are not open for dealings in deposits in the London interbank market.
Capital Expenditures means, for any period, the aggregate of all expenditures incurred by the Borrower and the Restricted Subsidiaries during such period that, in accordance with GAAP, are or should be included in additions to property, plant or equipment or similar items reflected in the consolidated statement of cash flows of the Borrower and its Restricted Subsidiaries for such period; provided that Capital Expenditures will not include:
(1) expenditures to the extent they are made with (a) Equity Interests of any Parent Entity or (b) proceeds of the issuance of Equity Interests of, or a cash capital contribution to, the Borrower after the Closing Date;
(2) expenditures with proceeds of insurance settlements, condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to acquire, maintain, develop, construct, improve, upgrade or repair assets or properties useful in the business of the Borrower and its Subsidiaries;
(3) interest capitalized during such period;
(4) expenditures that are accounted for as capital expenditures of such Person and that actually are paid for by a third party (excluding the Borrower and any Restricted Subsidiary) and for which none of the Borrower or any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other Person (whether before, during or after such period) (it being understood that notwithstanding the foregoing, landlord financed improvements to leased real properties shall be excluded from Capital Expenditures pursuant to this clause (4));
(5) the book value of any asset owned by the Borrower or any Restricted Subsidiary prior to or during such period to the extent that such book value is included as a Capital Expenditure during such period as a result of such Person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; provided that any expenditure necessary in order to permit such asset to be reused will be included as a Capital Expenditure during the period that such expenditure is actually made;
(6) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (a) used or surplus equipment traded in at the time of such purchase or (b) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business;
(7) Investments in respect of a Permitted Acquisition;
(8) [reserved]; or
(9) the purchase of property, plant, equipment or other capital assets to the extent purchased with the proceeds of Asset Sales that are not applied to prepay Term Loans pursuant to Section 2.08.
Capital Lease Obligations means, with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other similar arrangement conveying the right to use) real or personal
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property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for purposes hereof, the amount of such obligations at any time will be the capitalized amount thereof at such time determined in accordance with GAAP.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
Captive Insurance Company means a Wholly Owned Subsidiary of the Borrower created solely for providing self-insurance for the Borrower and its Subsidiaries and engaging in no other activities other than activities ancillary thereto and necessary for the maintenance of corporate existence.
Cash Equivalents means:
(1) Dollars, euros or the national currency of any participating member of the European Union or, in the case of any Foreign Subsidiary, any local currencies held by it from time to time in the ordinary course of business and not for speculation;
(2) direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union or any agency thereof, in each case, with maturities not exceeding two years;
(3) time deposits, eurodollar time deposits, certificates of deposit and money market deposits, in each case, with maturities not exceeding one year from the date of acquisition thereof, and overnight bank deposits, in each case, with any commercial bank having capital, surplus and undivided profits of not less than $250.0 million;
(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above and clause (6) below entered into with a bank meeting the qualifications described in clause (3) above;
(5) commercial paper or variable or fixed rate notes maturing not more than one year after the date of acquisition issued by a corporation rated at least P-1 by Moodys or A 1 by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);
(6) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, having one of the two highest rating categories obtainable from either Moodys or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);
(7) Indebtedness issued by Persons (other than the Sponsors) with a rating of at least A 2 by Moodys or A by S&P (or reasonably equivalent ratings of another internationally recognized rating agency), in each case, with maturities not exceeding one year from the date of acquisition, and marketable short-term money market and similar securities having a rating of at least P-2 or A-2 from either Moodys or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);
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(8) Investments in money market funds with average maturities of 12 months or less from the date of acquisition that are rated Aaa3 by Moodys and AAA by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);
(9) instruments equivalent to those referred to in clauses (1) through (8) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above customarily utilized in the countries where any such Restricted Subsidiary is located or in which such Investment is made; and
(10) shares of mutual funds whose investment guidelines restrict 95% of such funds investments to those satisfying the provisions of clauses (1) through (9) above.
Cash Management Bank means any provider of Cash Management Services that, at the time such Cash Management Obligations were entered into or, if entered into prior to the Closing Date, on the Closing Date, was the Administrative Agent, a Lender or an Affiliate of the foregoing, whether or not such Person subsequently ceases to be the Administrative Agent, a Lender or an Affiliate of the foregoing.
Cash Management Obligations means obligations owed by the Borrower or any Restricted Subsidiary to any Cash Management Bank in respect of or in connection with Cash Management Services and designated by the Cash Management Bank and the Borrower in writing to the Administrative Agent as Cash Management Obligations under this Agreement (but only if such obligations have not been designated as Cash Management Obligations under the ABL Credit Agreement).
Cash Management Services means any agreement or arrangement to provide cash management services, including treasury, depository, overdraft, credit card processing, credit or debit card, purchase card, electronic funds transfer, supply-chain financing with respect to short-term payables and other cash management arrangements.
CFC has the meaning assigned to such term in clause (1) of the definition of Excluded Subsidiary.
Change in Law means:
(1) the adoption of any treaty, law, rule or regulation after the Closing Date;
(2) any change in treaty, law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date; or
(3) compliance by any Lender (or, for purposes of Section 2.12(2), by any Lending Office of such Lender or by such Lenders holding company, if any) with any written request, guideline or directive (whether or not having the force of law) of any Governmental Authority, made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives promulgated thereunder or issued in connection therewith and (b) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case will be deemed to be a Change in Law, regardless of the date enacted, adopted, promulgated or issued.
A Change of Control will be deemed to occur if:
(1) at any time,
(a) Holdings ceases to Beneficially Own, directly or indirectly, 100% of the issued and outstanding Equity Interests of the Borrower; or
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(b) a change of control (or comparable event) occurs under the ABL Credit Agreement or the Second Lien Credit Agreement (in each case, other than as a result of a Permitted Change of Control) or the documentation governing any Permitted Refinancing Indebtedness in respect of any of the foregoing (in each case, other than as a result of a Permitted Change of Control), in each case, if any Indebtedness is outstanding under such agreement;
(2) at any time prior to the consummation of a Qualified IPO, the Permitted Holders, taken together, cease to Beneficially Own, directly or indirectly, Voting Stock representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings; or
(3) at any time after the consummation of a Qualified IPO, any person or group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, but excluding any employee benefit plan of such Person and its subsidiaries and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted Holders, acquires Beneficial Ownership of Voting Stock of a Parent Entity representing (a) more than 35% of the aggregate ordinary voting power for the election of directors represented by the issued and outstanding Equity Interests of such Parent Entity (determined on a fully diluted basis but without giving effect to contingent voting rights that have not yet vested) and (b) more than the percentage of the aggregate ordinary voting power for the election of directors that is at the time Beneficially Owned, directly or indirectly, by the Permitted Holders, taken together (determined on a fully diluted basis but without giving effect to contingent voting rights that have not yet vested);
unless, in the case of preceding clauses (2) and (3), the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of Holdings or a Parent Entity; provided that the occurrence of a Permitted Change of Control shall not be deemed to be a Change of Control.
Charges has the meaning assigned to such term in Section 10.09.
Class means, with respect to a Term Facility, (a) when used with respect to Lenders, the Lenders under such Term Facility, and (b) when used with respect to Term Loans or Borrowings, Term Loans or Borrowings under such Term Facility. As of the Closing Date, there is one Term Facility and one Class of Term Loans, the Tranche B Term Loans.
Closing Date means February 3, 2017.
Code means the Internal Revenue Code of 1986, as amended (unless as specifically provided otherwise).
Collateral means the Collateral as defined in the Security Agreement and also includes all other property that is subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties pursuant to any Security Document.
Collateral Agent means Nomura Corporate Funding Americas, LLC, in its capacity as Collateral Agent for itself and the other Secured Parties, and any duly appointed successor in that capacity.
Commitments means the Tranche B Term Loan Commitments. On the Closing Date, the aggregate amount of Commitments of all Term Loans is $1,925.0 million.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
Connection Income Taxes means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
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Consolidated Debt means, as of any date, the aggregate outstanding principal amount (without duplication) of all Indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of Capital Lease Obligations, Indebtedness for borrowed money, and Disqualified Stock of the Borrower and the Restricted Subsidiaries and all Guarantees of the foregoing, determined on a consolidated basis in accordance with GAAP, based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis.
Consolidated EBITDA means, for any period, the Consolidated Net Income of the Borrower for such period:
(1) increased, in each case (other than clause (m)) to the extent deducted in calculating such Consolidated Net Income (and without duplication), by:
(a) provision for taxes based on income, profits or capital, including state, franchise, excise and similar taxes and foreign withholding taxes paid or accrued, including any penalties and interest relating to any tax examinations, and state taxes in lieu of business fees (including business license fees) and payroll tax credits, income tax credits and similar tax credits, and including an amount equal to the amount of tax distributions actually made to the holders of Equity Interests of the Borrower or any Parent Entity in respect of such period (in each case, to the extent attributable to the operations of the Borrower and its Subsidiaries), which will be included as though such amounts had been paid as income taxes directly by the Borrower; plus
(b) Consolidated Interest Expense; plus
(c) cash dividend payments (excluding items eliminated in consolidation) on any series of preferred stock or Disqualified Stock of the Borrower or any Restricted Subsidiary; plus
(d) all depreciation and amortization charges and expenses; plus
(e) all
(i) losses, charges and expenses relating to the Transactions;
(ii) transaction fees, costs and expenses incurred in connection with the consummation of any transaction that is out of the ordinary course of business (or any transaction proposed but not consummated) permitted under this Agreement, including equity issuances, investments, acquisitions, dispositions, recapitalizations, mergers, option buyouts, Specified Sale and Lease-Back Transactions and the incurrence, modification or repayment of Indebtedness permitted to be incurred under this Agreement (including any Permitted Refinancing Indebtedness in respect thereof) or any amendments, waivers or other modifications under the agreements relating to such Indebtedness or similar transactions, and any Permitted Change of Control Costs; and
(iii) without duplication of any of the foregoing, non-operating or non-recurring professional fees, costs and expenses for such period; plus
(f) any expense or deduction attributable to minority Equity Interests of third parties in any Restricted Subsidiary that is not a Wholly Owned Subsidiary of the Borrower; plus
(g) the amount of management, monitoring, consulting, transaction and advisory fees (including termination fees) and related indemnities, charges and expenses paid or accrued to or on behalf of any Parent Entity or any of the Permitted Holders, in each case, to the extent permitted by Section 6.07; plus
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(h) earn-out obligations incurred in connection with any Permitted Acquisition or other Investment; plus
(i) all charges, costs, expenses, accruals or reserves in connection with the rollover, acceleration or payout of Equity Interests held by officers or employees of the Borrower and all losses, charges and expenses related to payments made to holders of options or other derivative Equity Interests in the common equity of the Borrower or any Parent Entity in connection with, or as a result of, any distribution being made to equityholders of such Person or any of its direct or indirect parents, which payments are being made to compensate such option holders as though they were equityholders at the time of, and entitled to share in, such distribution; plus
(j) all non-cash losses, charges and expenses, including any write-offs or write-downs; provided that if any such non-cash charge represents an accrual or reserve for potential cash items in any future four-fiscal quarter period (i) the Borrower may determine not to add back such non-cash charge in the period for which Consolidated EBITDA is being calculated and (ii) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future four-fiscal quarter period will be subtracted from Consolidated EBITDA for such future four-fiscal quarter period; plus
(k) all costs and expenses in connection with pre-opening and opening of Stores, distribution centers and other facilities that were not already excluded in calculating such Consolidated Net Income; plus
(l) restructuring costs, charges or reserves and costs, charges or reserves incurred in connection with the consolidation or closing of stores or distribution centers; plus
(m) the amount of net cost savings and synergies (other than any of the foregoing related to Specified Transactions) projected by the Borrower in good faith to result from actions taken or expected to be taken no later than twelve (12) months after the end of such period (which net cost savings and synergies shall be subject to certification by a Responsible Officer and calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of the period for which Consolidated EBITDA is being determined), net of the amount of actual benefits realized during such period from such actions; provided that (A) such cost savings and synergies are reasonably identifiable and factually supportable, (B) the aggregate amount of cost savings and synergies added pursuant to this clause (m) for any Test Period shall not exceed, after the Closing Date, the greater of (x) $25,000,000 and (y) 6.5% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (m)) and (C) with respect to any period, no costs savings or synergies shall be added pursuant to this clause (m) to the extent duplicative of any costs savings or synergies that are included in clause (n) below with respect to such period, plus
(n) signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, consolidation and closing costs for Stores and costs incurred in connection with non-recurring product and intellectual property development after the Closing Date, other business optimization expenses (including costs and expenses relating to business optimization programs), and new systems design and implementation costs and project start-up costs in an aggregate amount for all cash items added pursuant to this clause (n) not to exceed the greater of (x) $25,000,000 and (y) 6.5% of Consolidated EBITDA for such Test Period (calculated prior to giving effect to any adjustment pursuant to this clause (n)), plus
(o) the amount of loss or discount on sale of receivables, Securitization Assets and related assets to any Securitization Subsidiary in connection with a Qualified Securitization Financing, and
(2) decreased, without duplication and to the extent increasing such Consolidated Net Income for such period, by non-cash gains (excluding any non-cash gains that represent the reversal of any
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accrual of, or cash reserve for, anticipated cash charges that were deducted (and not added back) in the calculation of Consolidated EBITDA for any prior period ending after the Closing Date).
To the extent items excluded in the calculation of Consolidated Net Income have been excluded on an after-tax basis, these same items shall be excluded on a pre-tax basis for purposes of the calculation of Consolidated EBITDA.
Consolidated First Lien Net Debt means, as of any date, all Consolidated Debt as of such date that is secured by a Lien on the Term Priority Collateral that is pari passu with the Lien securing the Obligations or that is secured by a Lien on the ABL Priority Collateral that is senior to or pari passu with the Lien securing the Obligations, minus all Unrestricted Cash as of such date, in each case, determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis; provided that for purposes of calculating the amount of Consolidated First Lien Net Debt with respect to any Indebtedness being incurred in reliance on compliance with any financial ratio-based incurrence test, Unrestricted Cash will not include any proceeds received from such Indebtedness. For the avoidance of doubt, Indebtedness in respect of the ABL Credit Agreement will constitute Consolidated First Lien Net Debt.
Consolidated Interest Expense means, with respect to any Person for any period, the sum, without duplication, of:
(1) the aggregate interest expense of such Person and its Restricted Subsidiaries for such period, calculated on a consolidated basis in accordance with GAAP, to the extent such expense was deducted in computing Consolidated Net Income (including pay-in-kind interest payments, amortization of original issue discount, the interest component of Capital Lease Obligations and net payments and receipts (if any) pursuant to Hedge Agreements relating to interest rates (other than in connection with the early termination thereof) but excluding any non-cash interest expense attributable to the movement in the mark-to-market valuation of hedging obligations, all amortization and write-offs of deferred financing fees, debt issuance costs, commissions, fees and expenses and expensing of any bridge, commitment or other financing fees, and all discounts, commissions, fees and other charges associated with any Receivables Facility); plus
(2) consolidated capitalized interest of the referent Person and its Restricted Subsidiaries for such period, whether paid or accrued; plus
(3) any amounts paid or payable in respect of interest on Indebtedness the proceeds of which have been contributed to the referent Person and that has been Guaranteed by the referent Person; less
(4) interest income of the referent Person and its Restricted Subsidiaries for such period.
For purposes of this definition, interest on Capital Lease Obligations will be deemed to accrue at the interest rate reasonably determined by a Responsible Officer of the Borrower to be the rate of interest implicit in such Capital Lease Obligations in accordance with GAAP.
Consolidated Net Income means, with respect to any Person for any period, the aggregate of the net income (or loss) of such Person and its Restricted Subsidiaries for such period, calculated on a consolidated basis in accordance with GAAP (adjusted to reflect any charge, tax or expense incurred or accrued by Holdings or any Parent Entity during such period attributable to the operations of the Borrower and its Subsidiaries as though such charge, tax or expense had been incurred by the Borrower, to the extent that the Borrower has made or would be entitled under the Loan Documents to make any Restricted Payment or other payment to or for the account of Holdings in respect thereof) and before any deduction for preferred stock dividends; provided that:
(1) all net after-tax extraordinary, non-recurring or unusual gains, losses, income, expenses and charges, and in any event including all restructuring, severance, relocation, retention, consolidation, integration or other similar charges and expenses, contract termination costs, litigation costs, excess pension charges, system establishment charges, start-up or closure or transition costs, expenses related to any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, fees,
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expenses or charges relating to curtailments or modifications to pension and post-retirement employee benefit plans in connection with a Permitted Change of Control or otherwise, expenses associated with strategic initiatives, facilities shutdown and opening costs, and any fees, expenses, charges or change in control payments related to a Permitted Change of Control or otherwise (including any transition-related expenses incurred before, on or after the Closing Date), will be excluded;
(2) all net after-tax income, loss, expense or charge from abandoned, closed or discontinued operations and any net after-tax gain or loss on the disposal of abandoned, closed or discontinued operations will be excluded;
(3) all net after-tax gain, loss, expense or charge attributable to business dispositions and asset dispositions other than in the ordinary course of business (as determined in good faith by a Responsible Officer of the Borrower) will be excluded;
(4) all net after-tax income, loss, expense or charge attributable to the early extinguishment or cancellation of Indebtedness, Hedge Agreements or other derivative instruments will be excluded;
(5) all non-cash gain, loss, expense or charge attributable to the movement in the mark-to-market valuation of Hedge Agreements or other derivative instruments will be excluded;
(6) (a) the net income for such period of any Person that is not a Restricted Subsidiary of the referent Person, or that is accounted for by the equity method of accounting, will be included only to the extent of the amount of dividends or distributions or other payments that are paid in cash (or converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period; and (b) the net income for such period will include any ordinary course dividends, distributions or other payments in cash received from any such Person during such period in excess of the amounts included in clause (a) hereof;
(7) the cumulative effect of a change in accounting principles during such period will be excluded;
(8) the effects of purchase accounting, fair value accounting or recapitalization accounting adjustments (including the effects of such adjustments pushed down to the referent Person and its Restricted Subsidiaries) resulting from the application of purchase accounting, fair value accounting or recapitalization accounting in relation to a Permitted Change of Control or any acquisition consummated before or after the Closing Date, and the amortization, write-down or write-off of any amounts thereof, net of taxes, will be excluded;
(9) all non-cash impairment charges and asset write-ups, write-downs and write-offs will be excluded;
(10) all non-cash expenses realized in connection with or resulting from stock option plans, employee benefit plans or agreements or post-employment benefit plans or agreements, or grants or sales of stock, stock appreciation or similar rights, stock options, restricted stock, preferred stock or other similar rights will be excluded;
(11) any costs or expenses incurred in connection with the payment of dividend equivalent rights to option holders pursuant to any management equity plan, stock option plan or any other management or employee benefit plan or agreement or post-employment benefit plan or agreement will be excluded;
(12) accruals and reserves for liabilities or expenses that are established or adjusted as a result of a Permitted Change of Control within 24 months after the Permitted Change of Control Effective Date will be excluded;
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(13) all amortization and write-offs of deferred financing fees, debt issuance costs, commissions, fees and expenses and expensing of any bridge, commitment or other financing fees, will be excluded;
(14) any currency translation gains and losses related to changes in currency exchange rates (including remeasurements of Indebtedness and any net loss or gain resulting from Hedge Agreements for currency exchange risk), will be excluded;
(15) (a) the non-cash portion of straight-line rent expense will be excluded and (b) the cash portion of straight-line rent expense that exceeds the amount expensed in respect of such rent expense will be included;
(16) expenses and lost profits with respect to liability or casualty events or business interruption will be disregarded to the extent covered by insurance and actually reimbursed, or, so long as such Person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer, but only to the extent that such amount (a) has not been denied by the applicable carrier in writing and (b) is in fact reimbursed within 365 days of the date on which such liability was discovered or such casualty event or business interruption occurred (with a deduction for any amounts so added back that are not reimbursed within such 365-day period); provided that any proceeds of such reimbursement when received will be excluded from the calculation of Consolidated Net Income to the extent the expense or lost profit reimbursed was previously disregarded pursuant to this clause (16);
(17) losses, charges and expenses that are covered by indemnification or other reimbursement provisions in connection with any asset disposition will be excluded to the extent actually reimbursed, or, so long as such Person has made a determination that a reasonable basis exists for indemnification or reimbursement, but only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days);
(18) (a) cash costs and expenses in connection with pre-opening and opening of Stores, distribution centers and other facilities for any four-quarter period, and all non-cash pre-opening costs and expenses, will be excluded, and (b) all income, loss, charges and expenses associated with Stores, distribution centers and other facilities closed in any period, or scheduled for closure within 12 months of the date on which Consolidated Net Income is being calculated, will be excluded;
(19) non-cash charges for deferred tax asset valuation allowances will be excluded; and
(20) solely for the purpose of determining the amount available for Restricted Payments under Section 6.06(15), the net income (or loss) for such period of any Restricted Subsidiary (other than a Guarantor) will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of such Person will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to such Person or any of its Restricted Subsidiaries in respect of such period, to the extent not already included therein.
Consolidated Secured Net Debt means, as of any date, all Consolidated Debt as of such date that is secured by a Lien on the Collateral, minus all Unrestricted Cash as of such date, in each case, determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis; provided that for purposes of calculating the amount of Consolidated Secured Net Debt with respect to any Indebtedness being incurred in reliance on compliance with any financial ratio-based incurrence test, Unrestricted Cash will not include any proceeds received from such Indebtedness.
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Consolidated Total Assets means, as of any date, the total assets of the Borrower and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis.
Consolidated Total Net Debt means, as of any date, the Consolidated Debt as of such date minus all Unrestricted Cash as of such date, in each case, determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis; provided that for purposes of calculating the Consolidated Total Net Debt with respect to any Indebtedness being incurred in reliance on compliance with any financial ratio-based incurrence test, Unrestricted Cash will not include any proceeds received from such Indebtedness.
continuing means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.
Contribution Indebtedness has the meaning assigned to such term in Section 6.01(16).
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms Controlling and Controlled will have correlative meanings.
Credit Agreement Refinancing Indebtedness means secured or unsecured Indebtedness of the Borrower in the form of one or more series of term loans or notes; provided that:
(1) such Indebtedness is incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance, in whole or part (and such exchange, extension, renewal, replacement or refinancing occurs substantially concurrently with such incurrence or obtainment), Indebtedness ( Refinanced Debt ) that is either Term Loans or other Credit Agreement Refinancing Indebtedness;
(2) such Indebtedness is in an original aggregate principal amount not greater than the principal amount of the Refinanced Debt ( plus the amount of unpaid accrued or capitalized interest and premiums thereon (including tender premiums), underwriting discounts, defeasance costs, fees, commissions and expenses);
(3) the Weighted Average Life to Maturity of such Indebtedness is equal to or longer than the remaining Weighted Average Life to Maturity of the Refinanced Debt, and the final maturity date of such Credit Agreement Refinancing Indebtedness may not be earlier than the final maturity date of such Refinanced Debt;
(4) such Indebtedness may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any mandatory prepayments hereunder; provided that in no event shall such Indebtedness be permitted to be mandatorily prepaid prior to the repayment in full of all Term Facilities, unless accompanied by a ratable prepayment of each Term Facility hereunder;
(5) such Indebtedness is not secured by any assets or property of Holdings, the Borrower or any Restricted Subsidiary that does not constitute Collateral;
(6) such Indebtedness is not guaranteed by any Subsidiary of the Borrower other than a Subsidiary Loan Party;
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(7) if such Indebtedness is secured:
(a) the security agreements relating to such Indebtedness are substantially similar to or the same as the Security Documents (as determined in good faith by a Responsible Officer of the Borrower);
(b) if such Indebtedness is secured on a pari passu basis with the Term Loans, a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is otherwise subject to the provisions of the a First Lien Intercreditor Agreement and, if applicable, the Intercreditor Agreement;
(c) if such Indebtedness is secured on a junior basis to the Term Loans, a Debt Representative, acting on behalf of the holders of such Indebtedness, has become party to or is otherwise subject to the provisions of a Junior Lien Intercreditor Agreement and, if applicable, the Intercreditor Agreement; and
(8) the terms and conditions of such Indebtedness are substantially identical to, or, taken as a whole, no more favorable to the lenders or holders providing such Indebtedness than, those applicable to such Refinanced Debt as determined in good faith by a Responsible Officer of the Borrower; provided that the Borrower will promptly deliver to the Administrative Agent final copies of the definitive credit documentation relating to such Indebtedness (unless the Borrower is bound by a confidentiality obligation with respect thereto, in which case the Borrower will deliver a reasonably detailed description of the material terms and conditions of such Indebtedness in lieu thereof); provided further that this clause (8) will not apply to:
(a) terms addressed in the preceding clauses (1) through (7);
(b) (i) interest rate, fees, funding discounts and other pricing terms; (ii) redemption, prepayment or other premiums; (iii) optional prepayment terms; and (iv) redemption terms;
(c) subordination terms;
(d) covenants and other provisions applicable only to periods after the Latest Maturity Date at the time of incurrence of such Indebtedness; and
(e) terms and conditions consistent with then-prevailing market terms and conditions at the time incurred for one or more series of junior lien notes or term loans that will be secured on a subordinated basis to the Term Facility (as reasonably determined by the Borrower in good faith).
Credit Agreement Refinancing Indebtedness will include any Registered Equivalent Notes issued in exchange therefor.
Cumulative Retained Excess Cash Flow Amount means, as of any date, an amount, not less than zero in the aggregate, determined on a cumulative basis, equal to the Retained Percentage of Excess Cash Flow for all Excess Cash Flow Periods ending after the Closing Date and prior to such date.
Current Assets means, as of any date, all assets (other than Cash Equivalents or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries as current assets (other than amounts related to current or deferred Taxes based on income or profits), determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis.
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Current Liabilities means, as of any date, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries as current liabilities, other than:
(1) the current portion of any Indebtedness;
(2) accruals of Consolidated Interest Expense (excluding Consolidated Interest Expense that is due and unpaid);
(3) accruals for current or deferred Taxes based on income or profits;
(4) accruals, if any, of transaction costs resulting from the Transactions; and
(5) accruals of any costs or expenses related to (a) severance or termination of employees prior to the Closing Date or (b) bonuses, pension and other post-retirement benefit obligations;
in each case, determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis.
CVC means any funds or limited partnerships managed or advised by Affiliates of CVC Capital Partners Limited or their respective direct or indirect Subsidiaries or any investors in such funds or limited partnerships (but excluding, in each case, (i) any portfolio companies in which such funds or limited partnerships hold an investment and (ii) any funds or entities managed or advised by CVC Credit Partners Group Holding Foundation and each of its direct or indirect Subsidiaries and any funds or entities managed or advised by them from time to time) who are investors in such funds or limited partnerships as of the Closing Date, investing directly or indirectly in Holdings.
Debt Fund Affiliate means:
(1) any Affiliate, division or internal group of a Permitted Investor that has the principal purpose of investing in, acquiring or trading commercial loans, bonds or similar extensions of credit in the ordinary course; and
(2) any investment fund or account of a Permitted Investor managed by third parties (including by way of a managed account, a fund or an index fund in which a Permitted Investor has invested) or a division or internal group within a Permitted Investor that is not organized or used primarily for the purpose of making equity investments, in each case, with respect to which a Sponsor does not, directly or indirectly, possess the power to direct or cause the direction of the investment policies of such entity.
Debt Representative means, with respect to any Indebtedness that is secured on a pari passu basis with, or on a junior basis to, the Term Loans, the trustee, administrative agent, collateral agent, security agent or similar agent under the indenture or agreement pursuant to which such Indebtedness is issued, incurred or otherwise obtained, as the case may be, and each of their successors in such capacities.
Default means any event or condition which, but for the giving of notice, lapse of time or both, would constitute an Event of Default.
Defaulting Lender means any Lender whose acts or failure to act, whether directly or indirectly, constitutes a Lender Default.
Designated Non-Cash Consideration means the fair market value of non-cash consideration received by the Borrower or any Restricted Subsidiary in connection with an Asset Sale that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer of the Borrower setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Non-Cash Consideration.
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Disinterested Director means, with respect to any Person and transaction, a member of the Board of Directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction.
Disqualified Institution means:
(1) (a) any Person that is a competitor of the Borrower and identified by the Borrower in writing to the Arrangers and the Administrative Agent on or prior to the Closing Date;
(b) any Person that is a competitor of the Borrower and identified by the Borrower in good faith in writing to the Administrative Agent from time to time after the Closing Date;
(c) together with any Affiliates of such competitors described in the foregoing clauses (a) and (b) that are reasonably identifiable as such (other than any such Affiliate that is a bank, financial institution or fund (other than a Person described in clause (2) below) that regularly invest in commercial loans or similar extensions of credit in the ordinary course of business and for which no personnel involved with the relevant competitor or person referred to in clause (2) below make investment decisions); and
(2) certain banks, financial institutions, other institutional lenders and investors and other entities that are identified by the Borrower in writing to the Arrangers and the Administrative Agent on or prior to the Closing Date together with any Affiliates of such Persons that are (a) identified by the Borrower or any Sponsor in writing from time to time or (b) clearly identifiable on the basis of such Affiliates name.
Notwithstanding anything in the Loan Documents to the contrary, the Administrative Agent shall not be responsible (or have any liability) for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions thereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, the Administrative Agent shall not (1) be obligated to ascertain, monitor or inquire as to whether any Lender or participant or prospective Lender or participant is a Disqualified Institution or (2) have any liability with respect to or arising out of any assignment or participation of Term Loans or commitments, or disclosure of confidential information, to any Disqualified Institution. The list of Disqualified Institutions shall be available to Lenders upon request but shall not otherwise be posted to the Lenders.
Disqualified Stock means, with respect to any Person, any Equity Interests of such Person that, by their terms (or by the terms of any security or other Equity Interests into which they are convertible or for which they are redeemable or exchangeable at the option of the holder thereof), or upon the happening of any event or condition:
(1) mature or are mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale are subject to the prior repayment in full of the Term Loans and all other Obligations that are accrued and payable and the termination of the Commitments);
(2) are redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part;
(3) provide for the scheduled payments of dividends in cash; or
(4) either mandatorily or at the option of the holders thereof, are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock,
in each case, prior to the date that is 91 days after the earlier of (x) the Latest Maturity Date; and (y) the date on which the Term Loans and all other Obligations (other than Obligations in respect of (i) Specified Hedge Agreements and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) are repaid in
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full and the Commitments are terminated; provided that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock; provided , further , that if such Equity Interests are issued to any employee or to any plan for the benefit of employees of Holdings or its Subsidiaries or by any such plan to such employees, such Equity Interests will not constitute Disqualified Stock solely because they may be required to be repurchased by Holdings or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employees termination, death or disability; and provided , further , that any class of Equity Interests of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of Equity Interests that is not Disqualified Stock will not be deemed to be Disqualified Stock.
Distressed Person has the meaning assigned to such term in the definition of Lender-Related Distress Event.
Dollars or $ means lawful money of the United States of America.
Domestic Subsidiary means any Subsidiary of the Borrower that is organized under the laws of the United States, any state thereof or the District of Columbia, and Domestic Subsidiaries means any two or more of them. Unless otherwise indicated in this Agreement, all references to Domestic Subsidiaries will mean Domestic Subsidiaries of the Borrower.
Dutch Auction means an auction of Term Loans conducted:
(1) pursuant to Section 10.04(10) to allow an Affiliated Lender to acquire Term Loans at a discount to par value and on a pro rata basis; or
(2) pursuant to Section 10.04(14) to allow a Purchasing Borrower Party to prepay Term Loans at a discount to par value and on a pro rata basis,
in each case, in accordance with the applicable Dutch Auction Procedures.
Dutch Auction Procedures means, with respect to a purchase of Term Loans in a Dutch Auction, Dutch auction procedures as reasonably agreed upon by the applicable Affiliated Lender or Purchasing Borrower Party, as the case may be, and the Administrative Agent.
EEA Financial Institution means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
EEA Member Country means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
EEA Resolution Authority means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
Enterprise Transformative Event means any merger, acquisition or Investment, in any such case by the Borrower, any Restricted Subsidiary, Holdings or any of the direct or indirect parent companies of Holdings (other than the Sponsors) that results in Consolidated EBITDA for the most recent four fiscal quarter period for which financial statements have been delivered increasing by more than 25% on a Pro Forma Basis for such event.
Environment means ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, and natural resources such as flora and fauna.
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Environmental Laws means all applicable laws (including common law), statutes, rules, regulations, codes, ordinances, orders, binding agreements and final, binding decrees or judgments, in each case, promulgated or entered into by or with any Governmental Authority, relating in any way to the Environment, preservation or reclamation of natural resources, the generation, management, Release or threatened Release of, or exposure to, any Hazardous Material or to occupational health and safety matters (to the extent relating to the Environment or exposure to Hazardous Materials).
Equity Interests means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
ERISA means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, and any final regulations promulgated and the rulings issued thereunder.
ERISA Affiliate means any trade or business (whether or not incorporated) that, together with Holdings or any of its Subsidiaries, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event means:
(1) a Reportable Event, or the requirements of Section 4043(b) of ERISA apply, with respect to a Plan;
(2) a withdrawal by Holdings or any of its Subsidiaries or, to the knowledge of Holdings or the Borrower, any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations by Holdings or any of its Subsidiaries or, to the knowledge of Holdings or the Borrower, any ERISA Affiliate that is treated as such a withdrawal under Section 4062(e) of ERISA;
(3) a complete or partial withdrawal by Holdings or any of its Subsidiaries or, to the knowledge of Holdings or the Borrower, any ERISA Affiliate from a Multiemployer Plan, receipt of written notification by Holdings or any of its Subsidiaries or, to the knowledge of Holdings or the Borrower, any ERISA Affiliate concerning the imposition of Withdrawal Liability or written notification that a Multiemployer Plan is, or is expected to be, insolvent within the meaning of Title IV of ERISA or endangered or in critical status within the meaning of Section 305 of ERISA;
(4) the provision by a Plan administrator or the PBGC of notice of intent to terminate a Plan, to appoint a trustee to administer a Plan, the treatment of a Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer Plan;
(5) the incurrence by Holdings or any of its Subsidiaries or, to the knowledge of Holdings or the Borrower, any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or Multiemployer Plan, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA;
(6) the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Plan;
(7) the imposition of a lien under Section 303(k) of ERISA with respect to any Plan; and
(8) a determination that any Plan is in at risk status (within the meaning of Section 303 of ERISA).
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EU Bail-In Legislation Schedule means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
Eurocurrency Borrowing means a Borrowing comprised of Eurocurrency Loans.
Eurocurrency Loan means any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
Event of Default has the meaning assigned to such term in Section 8.01.
Excess Cash Flow means, for any Excess Cash Flow Period, the Consolidated Net Income of the Borrower for such period, minus , without duplication:
(1) repayments, prepayments and other cash payments made with respect to the principal of any Indebtedness or the principal component of any Capital Lease Obligations of the Borrower or any Restricted Subsidiary during such period (excluding voluntary and mandatory prepayments of Term Loans, voluntary prepayments of Indebtedness described in Section 2.08(2)(b), the amount of any prepayment with Specified Sale and Lease-Back Net Proceeds and prepayments of other revolving Indebtedness (except to the extent accompanied by a corresponding reduction in commitments), but including all premium, make-whole or penalty payments paid in cash (to the extent such payments were not already deducted in calculating Consolidated Net Income and are not otherwise prohibited under this Agreement)); provided that a mandatory prepayment of Indebtedness will only be deducted pursuant to this clause (1) to the extent not already deducted in the computation of Net Cash Proceeds of Asset Sales; minus
(2) (a) cash payments made by the Borrower or any Restricted Subsidiary during such period in respect of Capital Expenditures, Permitted Acquisitions, Investments and Restricted Payments (excluding Restricted Payments made pursuant to Sections 6.06(15), (16), or (17), Investments in Cash Equivalents and other items (including Investments and Restricted Payments) that are eliminated in consolidation) and (b) cash payments that the Borrower or any Restricted Subsidiary is required to make in respect of Capital Expenditures, Permitted Acquisitions and Investments within 365 days after the end of such period pursuant to binding obligations entered into prior to or during such period; provided that amounts described in this clause (b) will not reduce Excess Cash Flow in subsequent periods and, to the extent not so paid, will increase Excess Cash Flow in the subsequent period; minus
(3) cash payments made by the Borrower or any Restricted Subsidiary during such period in respect of (a) long-term liabilities other than Indebtedness or (b) items for which an accrual or reserve was established in a prior period; minus
(4) (a) cash payments made by the Borrower or any Restricted Subsidiary during such period in respect of Taxes (including distributions to any Parent Entity in respect of Taxes), to the extent such payments exceed the amount of tax expense deducted in calculating such Consolidated Net Income (except to the extent financed with any portion of the gross sale proceeds received by the Borrower or a Restricted Subsidiary in respect of the sale component of any Specified Sale and Lease-Back Transaction that is retained for application towards any taxes or distributions made pursuant to Section 6.06(5) or 6.06(6)(a) paid or reasonably estimated to be payable in connection with such sale component of such Specified Sale and Lease-Back Transaction), and (b) cash payments that the Borrower or any Restricted Subsidiary will be required to make in respect of Taxes (including distributions to any Parent Entity in respect of Taxes) within 180 days after the end of such period; provided that amounts described in this clause (b) will not reduce Excess Cash Flow in subsequent periods; minus
(5) all cash payments and other cash expenditures made by the Borrower or any Restricted Subsidiary during such period (a) with respect to items that were excluded in the calculation of such Consolidated Net Income pursuant to clauses (1) through (19) of the definition of Consolidated Net Income or (b) that were not expensed during such period in accordance with GAAP; minus
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(6) all non-cash credits included in calculating such Consolidated Net Income (including insured or indemnified losses referred to in clauses (16) and (17) of Consolidated Net Income to the extent not reimbursed in cash during such period); minus
(7) an amount equal to the sum of (a) the increase in the Working Capital of the Borrower during such period, if any, plus (b) the increase in long-term accounts receivable of the Borrower and the Restricted Subsidiaries, if any (other than any such increases contemplated by clauses (a) and (b) of this clause (7) that are directly attributable to acquisitions of a Person or business unit by the Borrower and the Restricted Subsidiaries during such period); plus
(8) all non-cash charges, losses and expenses of the Borrower or any Restricted Subsidiary that were deducted in calculating such Consolidated Net Income; plus
(9) all cash payments received by the Borrower or any Restricted Subsidiary during such period pursuant to Hedge Agreements that were not treated as revenue or net income under GAAP; plus
(10) an amount equal to the sum of (a) the decrease in Working Capital of the Borrower during such period, if any, plus (b) the decrease in long-term accounts receivable of the Borrower and the Restricted Subsidiaries, if any; plus
(11) all amounts referred to in clauses (1), (2) and (3) above to the extent funded with the proceeds of the issuance or the incurrence of Indebtedness (other than proceeds of revolving loans), the sale or issuance of Equity Interests, Specified Sale and Lease-Back Net Proceeds or any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition to any Person of, any assets.
Excess Cash Flow Period means each fiscal year of the Borrower.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Contributions means, as of any date, the aggregate amount of the net cash proceeds and Cash Equivalents, together with the aggregate fair market value (determined in good faith by a Responsible Officer of the Borrower) of other assets that are used or useful in a business permitted under Section 6.08, received by the Borrower after the Closing Date from:
(1) |
contributions to its common equity capital; or |
(2) |
the sale of Capital Stock of the Borrower; |
in each case, designated as Excluded Contributions pursuant to a certificate of a Responsible Officer of the Borrower on the date such contribution is made or such Capital Stock is sold; provided that the proceeds of Disqualified Stock and any net cash proceeds that are used prior to such date (A) to make Restricted Payments under Section 6.06(1) or Section 6.06(2)(b), (B) to make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(15) or a payment in respect of Junior Financing under Section 6.09(2)(a), in each case utilizing the Available Amount or (C) for Contribution Indebtedness, will not be treated as Excluded Contributions.
Excluded Equity Interests means Excluded Equity Interests as defined in the Security Agreement.
Excluded Indebtedness means all Indebtedness not incurred in violation of Section 6.01.
Excluded Property means Excluded Property as defined in the Security Agreement.
Excluded Subsidiary means any direct or indirect Subsidiary of the Borrower (if and to the extent such Subsidiary is not a borrower or guarantor under the Second Lien Credit Agreement or the ABL Credit Agreement) that:
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(1) is a Foreign Subsidiary (and, for the avoidance of doubt, all Foreign Subsidiaries will be excluded from any requirement to be a Guarantor, regardless of whether any such Foreign Subsidiary also constitutes a controlled foreign corporation within the meaning of section 957(a) of the Code (a CFC ));
(2) has no material assets other than the capital stock or capital stock and debt of one or more Foreign Subsidiaries (a FSHCO ) and/or one or more other FSHCOs;
(3) is a Domestic Subsidiary of a Foreign Subsidiary or of a FSHCO;
(4) is not wholly-owned, directly or indirectly, by the Borrower;
(5) is an Unrestricted Subsidiary;
(6) is a Captive Insurance Company;
(7) is a not-for-profit entity;
(8) is a special purpose entity used for securitization facilities (including any Receivables Subsidiary) or like special purposes;
(9) is an Immaterial Subsidiary;
(10) is prohibited or restricted by applicable law or binding contractual obligation (so long as such obligation is not incurred in anticipation of the Closing Date or, in the case of an acquisition of a Subsidiary, such obligation is not incurred in contemplation of such acquisition), including any requirement to obtain the consent of any Governmental Authority or third party (other than a Loan Party), unless such consent has been obtained; or
(11) if such Subsidiary guarantees the Obligations under the Tranche B Term Loan Facility, the cost of such guarantee would be excessive relative to the expected benefits to be obtained by the Tranche B Term Loan Lenders and other Secured Parties from such guarantee (as reasonably determined by the Borrower and the Administrative Agent in good faith); or
(12) would be an Immaterial Subsidiary except for its fee simple ownership interest in Real Property; provided that such Subsidiary (x) complies with the requirements of Section 5.10(2) with respect to any such Real Property and (y) provides a Limited Recourse Guaranty.
Notwithstanding the foregoing, the Borrower may elect, in consultation with the Administrative Agent, to cause any Excluded Subsidiary (other than an Unrestricted Subsidiary or any Subsidiary that is not a Wholly Owned Subsidiary of the Borrower) to become a Guarantor; provided that with respect to any Subsidiary that is not a Domestic Subsidiary, the Required Lenders shall have granted their consent to such Subsidiary becoming a Guarantor taking into account the local laws and regulations in the jurisdiction of such Subsidiarys organization and operations, and the availability and enforceability of guarantees and security to be provided by such Subsidiary, and all documentation of such guarantees and security and related filings (if applicable) shall be in form and substance satisfactory to the Required Lenders.
Excluded Swap Obligation means, with respect to any Guarantor or any Limited Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Guarantor or the Limited Recourse Guaranty of such Limited Guarantor, as applicable, of, or the grant by such Guarantor of a security interest to secure or the grant by such Limited Guarantor of a Mortgage to secure, such Swap Obligation (or any Guarantee or Limited Recourse Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantors or Limited Guarantors, as applicable, failure for any reason to constitute an eligible contract participant as defined in the Commodity Exchange Act and the regulations thereunder at the time the
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guarantee of such Guarantor or Limited Guarantor, as applicable, or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee, Limited Recourse Guarantee or security interest is or becomes illegal.
Excluded Taxes means, with respect to any Recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder:
(1) Taxes imposed on or measured by its net income (however denominated) or franchise Taxes imposed in lieu of net income Taxes, and branch profits Taxes, in each case, (a) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (b) that are Other Connection Taxes;
(2) any U.S. federal withholding Tax imposed on amounts payable hereunder to or for the account of a Recipient under any law applicable at the time such Recipient becomes a party to this Agreement (other than pursuant to an assignment request by the Borrower pursuant to Section 2.16 or in the case of a Lender, under any law applicable at the time such Lender changes its Lending Office), except to the extent that the Recipients assignor (if any), at the time of assignment (or such Lender immediately before it changed its Lending Office), was entitled to receive additional amounts from the Loan Party with respect to any withholding Tax pursuant to Section 2.14(1) or Section 2.14(3);
(3) Taxes that are attributable to such Lenders or Administrative Agents failure to comply with Section 2.14(5) or Section 2.14(6); and
(4) any Taxes imposed under FATCA.
Executive Order has the meaning assigned to such term in Section 3.19(3)(a).
Existing ABL Credit Agreement means that certain ABL Credit Agreement (as the same may have been amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements prior to the Closing Date), dated as of September 30, 2011, by and among, the Borrower, Holdings, General Electric Capital Corporation (GECC), as administrative agent, GECC and Wells Fargo Bank, National Association, as co-collateral agents and the lenders party thereto from time to time.
Existing First Lien Term Loan Agreement has the meaning assigned to such term in the recitals hereto.
Existing Second Lien Credit Agreement means that certain Second Lien Credit Agreement (as the same may have been amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements prior to the Closing Date), dated as of September 30, 2011, by and among, the Borrower, Holdings, DBNY, as administrative agent and the lenders party thereto from time to time.
Extended Term Loan Installment Date has the meaning assigned to such term in Section 2.06(2).
Extended Term Loans has the meaning assigned to such term in Section 2.20(1).
Extending Term Lender has the meaning assigned to such term in Section 2.20(1).
Extension has the meaning assigned to such term in Section 2.20(1).
Extension Amendment has the meaning assigned to such term in Section 2.20(2).
Extension Offer has the meaning assigned to such term in Section 2.20(1).
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FATCA means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code as of the date of this Agreement (or any amended or successor version as described above), and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
FCPA has the meaning assigned to such term in Section 3.19(2).
Federal Funds Rate means, for any day, the rate calculated by the Federal Reserve Board of New York based on such days federal funds transactions by depositary institutions, as determined in such manner as the Federal Reserve Board of New York shall set forth on its public website from time to time, and published on the next succeeding Business Day by the Federal Reserve Board of New York as the federal funds rate, or, if such rate is not so published for any Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1.00%) of the quotations for such day for such transactions received by the Administrative Agent from three U.S. banks of recognized standing selected by it.
Fees means the Administrative Agent Fees and all other fees payable to a Lender, the Administrative Agent, or any Arranger, in each case, with respect to Term Loans.
Financial Officer means, with respect to any Person, the chief financial officer, president, principal accounting officer, director of financial services, treasurer, assistant treasurer or controller of such Person.
First Lien Intercreditor Agreement means a pari passu intercreditor agreement in form and substance reasonably satisfactory to the Collateral Agent. Upon the request of the Borrower, the Administrative Agent and Collateral Agent will execute and deliver a First Lien Intercreditor Agreement with the Loan Parties and one or more Debt Representatives for Indebtedness permitted hereunder that is permitted to be secured on a pari passu basis with the Term Loans.
Fixed Amounts has the meaning assigned to such term in Section 1.07(b).
Flood Certificate means a life of loan Standard Flood Hazard Determination Form of the Federal Emergency Management Agency and any successor Governmental Authority performing a similar function.
Flood Program means the National Flood Insurance Program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act of 1994, the Flood Insurance Reform Act of 2004, and the Biggert-Waters Flood Insurance Reform Act of 2012, in each case as amended from time to time, and any successor statutes.
Flood Zone means areas having special flood hazards as described in the National Flood Insurance Act of 1968, as amended from time to time, and any successor statute.
Foreign Lender means any Lender that is organized under the laws of a jurisdiction other than the United States of America. For purposes of this definition, the United States of America, each state thereof and the District of Columbia will be deemed to constitute a single jurisdiction.
Foreign Subsidiary means any Subsidiary that is not a Domestic Subsidiary.
FSHCO has the meaning assigned to such term in clause (2) of the definition of Excluded Subsidiary.
GAAP means generally accepted accounting principles in the United States of America as in effect from time to time, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the
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accounting profession (but excluding the policies, rules and regulations of the SEC applicable only to public companies).
Notwithstanding anything to the contrary above or in the definition of Capital Lease Obligations or Capital Expenditures, in the event of a change under GAAP (or the application thereof) requiring any leases to be capitalized that are not required to be capitalized as of the Closing Date, only those leases that would result or would have resulted in Capital Lease Obligations or Capital Expenditures on the Closing Date (assuming for purposes hereof that they were in existence on the Closing Date) will be considered capital leases and all calculations under this Agreement will be made in accordance therewith.
Governmental Authority means any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body.
Guarantee of or by any Person (the guarantor ) means:
(1) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect:
(a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligations;
(b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof;
(c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation;
(d) entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part); or
(e) as an account party in respect of any letter of credit, bank guarantee or other letter of credit guaranty issued to support such Indebtedness or other obligation; or
(2) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other Person, whether or not such Indebtedness or other obligation is assumed by the guarantor;
provided, that the term Guarantee will not include endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted by this Agreement (other than such obligations with respect to Indebtedness).
The amount of any Guarantee will be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.
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Guarantor means (1) Holdings; (2) each Subsidiary Loan Party; and (3) each Parent Entity or Restricted Subsidiary (other than any Restricted Subsidiary that is not a Wholly Owned Subsidiary) that the Borrower may elect in its sole discretion, from time to time, upon written notice to the Administrative Agent, to cause to Guarantee the Obligations until such date that the Borrower has informed the Administrative Agent that it elects not to have such Person Guarantee the Obligations; provided that, in the case of this clause (3), the Guarantee and the security interest provided by such Person is full and unconditional and fully enforceable in the jurisdiction of organization of such Person.
Guaranty Agreement means the Term Loan Guaranty Agreement substantially in the form of Exhibit K , dated as of the Closing Date, among Holdings, each Subsidiary Loan Party and the Collateral Agent, as amended, supplemented and/or otherwise modified from time to time.
Hazardous Materials means all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum byproducts or distillates, friable asbestos or friable asbestos-containing materials, polychlorinated biphenyls or radon gas, in each case, that are regulated or would reasonably be expected to give rise to liability under any Environmental Law.
Hedge Agreement means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, in each case, not entered into for speculative purposes; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings or any of its Subsidiaries will be a Hedge Agreement.
Holdings has the meaning assigned to such term in the introductory paragraph hereof.
Immaterial Subsidiary means, as of any date, any Subsidiary that (i) did not, as of the last day of the most recent fiscal quarter of the Borrower for which Required Financial Statements have been delivered (or were required to be delivered), have assets with a value in excess of 2.50% of the Consolidated Total Assets or revenues representing in excess of 2.50% of total revenues of the Borrower and the Restricted Subsidiaries for the period of four consecutive fiscal quarters for which Required Financial Statements have been delivered (or were required to be delivered), calculated on a consolidated basis in accordance with GAAP; and (ii) taken together with all Immaterial Subsidiaries as of the last day of the most recent fiscal quarter of the Borrower for which Required Financial Statements have been delivered (or were required to be delivered), did not have assets with a value in excess of 5.00% of Consolidated Total Assets or revenues representing in excess of 5.00% of total revenues of the Borrower and the Restricted Subsidiaries on a consolidated basis for such four-quarter period.
Incremental Equivalent Term Debt means secured or unsecured Indebtedness of the Borrower in the form of term loans or notes; provided that:
(1) either (x) the aggregate outstanding principal amount of such Indebtedness incurred, when taken together with the aggregate principal amount of Incremental Term Loans incurred in reliance on the Non-Ratio Based Incremental Facility Cap, does not exceed the Non-Ratio Based Incremental Facility Cap or (y) (I) with respect to any such Indebtedness secured on a pari passu basis with the Tranche B Term Loans, the Senior Secured First Lien Net Leverage Ratio (determined on the date on which the Incremental Equivalent Term Debt is incurred (and after giving effect to such incurrence) and after giving effect to any acquisition or other transaction consummated in connection with the incurrence of such Incremental Equivalent Term Debt) is equal to or less than 4.60 to 1.00, (II) with respect to any such Indebtedness to be secured on a junior basis to the Tranche B Term Loans, the Total Secured Net Leverage Ratio (determined on the date on which the Incremental Equivalent Term Debt is incurred (and after giving effect to such incurrence) and after giving effect to any acquisition or other transaction consummated in connection with the incurrence of such Incremental Equivalent Term Debt) is equal to or less than 5.90 to 1.00 and (III) with respect to any such Indebtedness that is unsecured, the Total Net Leverage Ratio (determined on the date on which the applicable Incremental Equivalent Term Debt is incurred (and after giving effect to such incurrence) and after giving effect to any acquisition or other transaction consummated in connection
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with the incurrence of such Incremental Equivalent Term Debt) is equal to or less than 5.90 to 1.00; provided that, for the avoidance of doubt, amounts under clause (x) and clause (y) may be incurred in the same transaction and that amounts under clause (y) may be utilized prior to amounts under clause (x);
(2) except for interim or bridge financings that provide for automatic conversion, subject to customary conditions, to Indebtedness meeting the requirement for this clause (2), the final maturity date of such Incremental Equivalent Term Debt may not be earlier than the Latest Maturity Date of the Tranche B Term Loans (and in the case of any junior secured or unsecured Incremental Equivalent Term Debt, the final maturity date may not be earlier than the date that is 91 days after the Latest Maturity Date of the Tranche B Term Loans);
(3) except for interim or bridge financings that provide for automatic conversion, subject to customary conditions, to Indebtedness meeting the requirement for this clause (3), the Weighted Average Life to Maturity of such Incremental Equivalent Term Debt may be no shorter than the longest remaining Weighted Average Life to Maturity of the Tranche B Term Loans;
(4) if such Indebtedness is secured on a pari passu basis with the Tranche B Term Loans: (a) such Indebtedness consist of notes, (b) a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is otherwise subject to the provisions of a First Lien Intercreditor Agreement and, if applicable, the Intercreditor Agreement, (c) such Indebtedness is not secured by any assets or property of Holdings, the Borrower or any Restricted Subsidiary that does not constitute Collateral and (d) such Indebtedness is not guaranteed by any Subsidiary of the Borrower other than a Subsidiary Loan Party; and
(5) if such Indebtedness is secured on a junior basis to the Tranche B Term Loans: (a) a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is otherwise subject to the provisions of a Junior Lien Intercreditor Agreement and, if applicable, the Intercreditor Agreement, (b) such Indebtedness is not secured by any assets or property of Holdings, the Borrower or any Restricted Subsidiary that does not constitute Collateral and (c) such Indebtedness is not guaranteed by any Subsidiary of the Borrower other than a Subsidiary Loan Party.
Incremental Equivalent Term Debt will include any Registered Equivalent Notes issued in exchange therefor.
Incremental Facility has the meaning assigned to such term in Section 2.18(1).
Incremental Facility Amendment has the meaning assigned to such term in Section 2.18(5).
Incremental Lenders has the meaning assigned to such term in Section 2.18(5).
Incremental Term Loan Installment Date has the meaning assigned to such term in Section 2.06(2).
Incremental Term Loans has the meaning assigned to such term in Section 2.18(1).
Incremental Yield has the meaning assigned to such term in Section 2.18(8).
Indebtedness means, with respect to any Person, without duplication:
(1) all obligations of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments;
(3) all obligations of such Person under conditional sale or title retention agreements relating to property or assets purchased by such Person;
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(4) all obligations of such Person issued or assumed as the deferred purchase price of property or services, to the extent the same would be required to be shown as a long-term liability on a balance sheet prepared in accordance with GAAP;
(5) all Capital Lease Obligations of such Person;
(6) all net payments that such Person would have to make in the event of an early termination, on the date Indebtedness of such Person is being determined, in respect of outstanding Hedge Agreements;
(7) the principal component of all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and bank guarantees;
(8) the principal component of all obligations of such Person in respect of bankers acceptances;
(9) all Attributable Indebtedness;
(10) all Guarantees by such Person of Indebtedness described in clauses (1) through (9) above; and
(11) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock);
provided that Indebtedness will not include:
(a) trade payables, accrued expenses and intercompany liabilities arising in the ordinary course of business;
(b) prepaid or deferred revenue arising in the ordinary course of business;
(c) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the seller of such asset; or
(d) earn-out obligations until such obligations become a liability on the balance sheet of such Person in accordance with GAAP.
The Indebtedness of any Person will include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person in respect thereof.
Indemnified Taxes means (1) all Taxes other than Excluded Taxes, imposed on or with respect to any payment, made by or on account of any obligation of any Loan Party under any Loan Document; and (2) to the extent not otherwise described in clause (1), Other Taxes.
Indemnitee has the meaning assigned to such term in Section 10.05(2).
Initial ABL Borrowing means one or more borrowings of loans or issuances or deemed issuances of letters of credit under the ABL Credit Facilities on the Closing Date.
Initial Second Lien Borrowing means the borrowing of term loans under the Second Lien Credit Facility on the Closing Date.
Intellectual Property Rights has the meaning assigned to such term in Section 3.20(1).
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Intellectual Property Security Agreements has the meaning set forth in Section 3.14(1).
Intercreditor Agreement means the Intercreditor Agreement, dated as of the Closing Date, by and among the Administrative Agent, the Collateral Agent, Jefferies Finance LLC, as administrative and collateral agent under the Second Lien Credit Agreement and Wells Fargo Bank, National Association, as administrative agent and collateral agent under the ABL Credit Agreement, and acknowledged by the Loan Parties, as amended, restated, supplemented and/or otherwise modified from time to time.
Interest Coverage Ratio means, as of any date, the ratio of (1) the Consolidated EBITDA for the most recent period of four consecutive fiscal quarters for which Required Financial Statements have been delivered, calculated on a Pro Forma Basis, to (2) the sum of (a) the Consolidated Interest Expense of the Borrower for such period, calculated on a Pro Forma Basis, and (b) all cash dividend payments (excluding items eliminated in consolidation) on any series of Disqualified Stock of the Borrower or preferred stock of any of the Restricted Subsidiaries, in each case, made during such period.
Interest Election Request means a written request by the Borrower to convert or continue a Borrowing in accordance with Section 2.04.
Interest Payment Date means (1) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Term Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such Borrowing; and (2) with respect to any ABR Loan, the last Business Day of each fiscal quarter of the Borrower commencing with the last Business Day of the first full fiscal quarter of the Borrower after the Closing Date.
Interest Period means, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.04 or repaid or prepaid in accordance with Section 2.06, 2.07 or 2.08; provided that:
(1) if any Interest Period would end on a day other than a Business Day, such Interest Period will be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period will end on the next preceding Business Day;
(2) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) will end on the last Business Day of the calendar month at the end of such Interest Period;
(3) no Interest Period will extend beyond the applicable Maturity Date. Interest will accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period; and
(4) the initial Interest Period, commencing on the Closing Date, will end on March 3, 2017.
Interpolated Screen Rate means, at any day, with respect to any Eurocurrency Loan denominated in any currency for any Interest Period, a rate per annum which results from interpolating on a linear basis between (a) the applicable Screen Rate for the longest maturity for which a Screen Rate is available that is shorter than such Interest Period and (b) the applicable Screen Rate for the shortest maturity for which a Screen Rate is available that is longer than such Interest Period, in each case, as of approximately 11:00 a.m. (London time) on such day.
Investment has the meaning assigned to such term in Section 6.04.
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Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB- (or the equivalent) by S&P (or reasonably equivalent ratings of another internationally recognized rating agency).
Investment Grade Securities means:
(1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents);
(2) securities that have an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Borrower and its Restricted Subsidiaries;
(3) corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition; and
(4) investments in any fund that invests at least 95.0% of its assets in investments of the type described in clauses (1) and (2) above which fund may also hold immaterial amounts of cash pending investment and/or distribution.
Junior Financing means (1) any Indebtedness permitted to be incurred hereunder that is contractually subordinated in right of payment to the Obligations or secured by Liens that are contractually subordinated to the Liens securing the Obligations (other than the ABL Obligations), (2) the Second Lien Term Loans or (3) any Permitted Refinancing Indebtedness in respect of any of the foregoing.
Junior Lien Intercreditor Agreement means a junior lien intercreditor agreement in form and substance reasonably satisfactory to the Collateral Agent, or, if requested by the providers of Indebtedness to be secured on a junior basis to the Tranche B Term Loans, another lien subordination agreement satisfactory to the Collateral Agent. Upon the request of the Borrower, the Administrative Agent and Collateral Agent will execute and deliver a Junior Lien Intercreditor Agreement with the Loan Parties and one or more Debt Representatives for Indebtedness permitted hereunder that is permitted to be secured on a junior basis to the Tranche B Term Loans.
Latest Maturity Date means, as of any date of determination, the latest Maturity Date of the Term Facilities in effect on such date.
LCA Election has the meaning assigned to such term in Section 1.07(a).
Leased Material Real Property has the meaning assigned to such term in Section 3.15(2).
Lender means each Tranche B Term Loan Lender listed on Schedule 2.01 (other than any such Person that has ceased to be a party hereto pursuant to an Assignment and Acceptance in accordance with Section 10.04), as well as any Person that becomes a Lender hereunder pursuant to Section 10.04 and any Additional Lender.
Lender Default means:
(1) the refusal (which has not been retracted) or failure of any Lender to make available its portion of any Borrowing;
(2) any Lender has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations under the Term Facility or under other similar agreements in which it commits to extend credit;
(3) the admission by any Lender in writing that it is insolvent or such Lender becoming subject to a Lender-Related Distress Event; or
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(4) any Lender becoming subject to a Bail-In Action.
Lender-Related Distress Event means, with respect to any Lender or any Person that directly or indirectly controls a Lender (each, a Distressed Person ), as the case may be, a voluntary or involuntary case with respect to such Distressed Person under any debt relief law, or a custodian, conservator, receiver or similar official is appointed for such Distressed Person or any substantial part of such Distressed Persons assets, or such Distressed Person or any Person that directly or indirectly controls such Distressed Person is subject to a forced liquidation, or such Distressed Person makes a general assignment for the benefit of creditors or is otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such Distressed Person or its assets to be, insolvent or bankrupt; provided that a Lender-Related Distress Event will not be deemed to have occurred solely by virtue of the ownership or acquisition of any Equity Interests in any Lender or any Person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof; provided , further , that the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator with respect to an Agent or Lender or any person that directly or indirectly controls such Agent or Lender under the Dutch Financial Supervision Act 2007 (as amended from time to time and including any successor legislation) shall not be a Lender-Related Distress Event with respect to such Agent or Lender or any person that directly or indirectly controls such Agent or Lender.
Lending Office means, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Term Loans.
LGP means Leonard Green & Partners, L.P. and any of its Affiliates and funds or partnerships managed or advised by any of them or any of their respective Affiliates but not including, however, any portfolio company of any of the foregoing.
LIBO Rate means with respect to any Eurocurrency Borrowing for any Interest Period, the London interbank offered rate as administered by the ICE Benchmark Administration Interest Settlement Rates (or by reference to the rates provided by any Person that takes over the administration of such rate if the ICE Benchmark Administration is no longer making a LIBO Rate rate available) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent that has been nominated by the ICE Benchmark Administration (or any successor or substitute agency thereto) as an authorized information vendor for the purpose of displaying such rates) (the Screen Rate ); provided that if such Screen Rate is not available at such time for any reason, the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, LIBO Rate shall be the interest rate per annum equal to the Interpolated Screen Rate; further provided , however , if the LIBO Rate is less than zero, then the LIBO Rate shall be zero.
Lien means, with respect to any asset (1) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar encumbrance in or on such asset; or (2) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event will an operating lease, any capital lease in respect of Real Property permitted hereunder, or an agreement to sell be deemed to constitute a Lien.
Limited Condition Acquisition means (a) any Permitted Change of Control and (b) any acquisition, including by way of merger, by the Borrower or one or more Restricted Subsidiaries permitted pursuant to the Loan Documents whose consummation is not conditioned on the availability of, or on obtaining, third party financing, or a Permitted Change of Control.
Limited Guarantor means each Restricted Subsidiary that is a limited guarantor under a Limited Recourse Guaranty, in its capacity as limited guarantor thereunder.
Limited Recourse Guaranty means each First Lien Term Limited Recourse Guaranty substantially in the form of Exhibit I between the Restricted Subsidiary identified therein, as limited guarantor, and the Administrative Agent.
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Loan Documents means this Agreement, the Security Documents, the Intercreditor Agreement, any First Lien Intercreditor Agreement, any Junior Lien Intercreditor Agreement and any Note.
Loan Parties means Holdings, the Borrower and the Subsidiary Loan Parties.
Management Agreement means (i) at any time prior to a Permitted Change of Control, the Sponsor Management Agreement and (ii) thereafter any monitoring, management, fee or similar or related agreements providing for the payment (or accrual) of an annual monitoring, management or similar fee to the Sponsors or any Affiliate of Sponsors in an aggregate amount equal to or less than $8.0 million per annum for any period commencing on or after the Permitted Change of Control Effective Date (with prorated amounts payable for any partial year periods and any amounts not paid in any period beginning on the Closing Date accruing and payable upon request of the Sponsors in future periods).
Management Group means (i) at any time prior to a Permitted Change of Control, the group consisting of the directors, executive officers and other management personnel of Holdings, the Borrower or the Restricted Subsidiaries on the Closing Date and (ii) thereafter, the group consisting of directors, executive officers and other management personnel of Holdings, the Borrower or the Restricted Subsidiaries on the Permitted Change of Control Effective Date (after giving effect to such Permitted Change of Control).
Margin Stock has the meaning assigned to such term in Regulation U.
Material Adverse Effect means a material adverse effect on:
(1) the business, financial condition or results of operations, in each case, of the Borrower and the Restricted Subsidiaries (taken as a whole);
(2) the ability of the Borrower and the Guarantors (taken as a whole) to perform their payment obligations under the Loan Documents; or
(3) the rights and remedies of the Administrative Agent and the Lenders (taken as a whole) under the Loan Documents.
Material Indebtedness means Indebtedness (other than the Term Loans) of the Borrower or any Subsidiary Loan Party in an aggregate outstanding principal amount exceeding $35.0 million.
Material Subsidiary means any Restricted Subsidiary other than an Immaterial Subsidiary.
Maturity Date means, as the context may require:
(1) with respect to all Term Loans (including all Tranche B Term Loans) existing on the Closing Date, February 3, 2024;
(2) with respect to any Incremental Term Loans, the final maturity date specified therefor in the applicable Incremental Facility Amendment;
(3) with respect to any Other Term Loans, the final maturity date specified therefor in the applicable Refinancing Amendment; and
(4) with respect to any Extended Term Loans, the final maturity date specified therefor in the applicable Extension Amendment.
Maximum Rate has the meaning assigned to such term in Section 10.09.
MNPI means any material Nonpublic Information regarding Holdings and the Subsidiaries that has not been disclosed to the Lenders generally (other than Lenders who elect not to receive such information). For purposes
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of this definition material Nonpublic Information means nonpublic information that would reasonably be expected to be material to a decision by any Lender to assign or acquire any Term Loans or to enter into any of the transactions contemplated thereby.
Moodys means Moodys Investors Service, Inc.
Mortgage Policies has the meaning assigned to such term in Section 5.10(2)(c).
Mortgaged Properties means the Real Property described on Schedule 3.15(3) and all additional Real Property as to which the Collateral Agent for the benefit of the Secured Parties shall be granted a Lien pursuant to the Mortgages.
Mortgages means each of the mortgages and deeds of trust made by any Loan Party, reasonably acceptable to the Administrative Agent, in favor of, or for the benefit of, the Collateral Agent for the benefit of the Secured Parties, as the same may be amended, supplemented, replaced and/or otherwise modified from time to time.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which Holdings, the Borrower or any Restricted Subsidiary or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.
Net Cash Proceeds means the aggregate cash proceeds (using the fair market value of any Cash Equivalents) received by the Borrower or any Restricted Subsidiary in respect of any Asset Sale (including any cash received in respect of or upon the sale or other disposition of any Designated Non-Cash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, and including any proceeds received as a result of unwinding any related Hedge Agreements in connection with such transaction but excluding the assumption by the acquiring Person of Indebtedness relating to the disposed assets or other consideration received in any other non-cash form), net of the direct cash costs relating to such Asset Sale and the sale or disposition of such Designated Non-Cash Consideration (including legal, accounting and investment banking fees, and brokerage and sales commissions), and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements related thereto), amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness required to be paid as a result of such transaction that is secured by a Permitted Lien that is prior or senior to the Lien securing the Obligations, any costs associated with unwinding any related Hedge Agreements in connection with such transaction and any deduction of appropriate amounts to be provided by the Borrower or any of the Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Borrower or any of the Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction; provided that such reserved amounts will be deemed to be Net Cash Proceeds to the extent and at the time of any reversal thereof (to the extent not applied to the satisfaction of any applicable liabilities in cash in a corresponding amount). For purposes of Section 2.08(1), no cash proceeds realized in connection with a transaction or series of related transactions constituting an Asset Sale will be deemed to be Net Cash Proceeds unless (a) such net cash proceeds exceed $20,000,000 and (y) the aggregate amount of all net cash proceeds in such fiscal year exceeds $30,000,000 (and thereafter only net cash proceeds in excess of such amount shall constitute Net Cash Proceeds); provided further , that Net Cash Proceeds shall not include, or apply to, the proceeds of the sale component of any Specified Sale and Lease-Back Transaction, which proceeds shall be governed by the definition of Specified Sale and Lease-Back Net Proceeds.
New Sponsor means any entity or group of entities with committed capital or assets under management in excess of $1,000,000,000 or otherwise reasonably acceptable to the Required Lenders, in either case, together with any co-investors.
New York Courts has the meaning assigned to such term in Section 10.15(1).
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No MNPI Representation means, with respect to any Person, a customary representation that such Person is not in possession of any MNPI.
Non-Consenting Lender has the meaning assigned to such term in Section 2.16(3).
Non-Debt Fund Affiliate means any Affiliated Lender other than a Debt Fund Affiliate.
Non-Debt Fund Affiliate Assignment and Acceptance has the meaning assigned to such term in Section 10.04(10)(b).
Nonpublic Information means information that is not publicly available for or of a type that would be publicly available if the borrower was a public company.
Non-Ratio Based Incremental Facility Cap has the meaning assigned to such term in Section 2.18(3). Unless the Borrower elects otherwise, each Incremental Facility and all Incremental Equivalent Term Debt shall be deemed incurred first under the Available Incremental Term Loan Facility Amount or clause (1)(y) of the definition of Incremental Equivalent Term Debt , respectively, to the extent permitted, with the balance incurred under the Non-Ratio Based Incremental Facility Cap.
Note has the meaning assigned to such term in Section 2.05(5).
Obligations means:
(1) all amounts owing to any Agent or any Lender pursuant to the terms of this Agreement or any other Loan Document, including all interest and expenses accrued or accruing (or that would, absent the commencement of an insolvency or liquidation proceeding, accrue) after the commencement by or against any Loan Party of any proceeding under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law naming such Loan Party as the debtor in such proceeding, in accordance with and at the rate specified in this Agreement, whether or not the claim for such interest or expense is allowed or allowable as a claim in such proceeding;
(2) any Specified Hedge Obligations; and
(3) any Cash Management Obligations;
provided that:
(a) the Obligations of the Loan Parties under any Specified Hedge Agreement and Cash Management Obligations will be secured and Guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and Guaranteed;
(b) any release of Collateral or Guarantors effected in the manner permitted by this Agreement or any Security Document will not require the consent of any Cash Management Bank or Qualified Counterparty pursuant to any Loan Document; and
(c) Obligations of any Guarantor shall not, in any event, include any Excluded Swap Obligation with respect to such Guarantor.
OFAC has the meaning assigned to such term in Section 3.19(3)(e).
Original Term Loan Installment Date has the meaning assigned to such term in Section 2.06(1).
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Other Connection Taxes means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising solely from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Term Loan or Loan Document).
Other First Lien Indebtedness has the meaning assigned to such term in Section 2.08(1)(c).
Other Taxes means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.16(2)).
Other Term Loan Installment Date has the meaning assigned to such term in Section 2.06(2).
Other Term Loans has the meaning assigned to such term in Section 2.19(1).
Owned Material Real Property has the meaning assigned to such term in Section 3.15(1).
Parent Entity means any direct or indirect parent of the Borrower.
Participant has the meaning assigned to such term in Section 10.04(4)(a).
Participant Register has the meaning assigned to such term in Section 10.04(4)(a).
Payment Office means the office of the Administrative Agent located at 309 West 49 th Street, 5 th Floor, New York, New York 10019, Attention: US Loan Support (Facsimile: (646) 587-1328; Telephone: (212) 667-1324), or such other office as the Administrative Agent may designate to the Borrower and the Lenders from time to time.
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto.
Perfection Certificate means the Perfection Certificate with respect to the Loan Parties in a form substantially similar to that delivered on the Closing Date.
Permitted Acquisition means any acquisition of all or substantially all the assets of, or a majority of the Equity Interests in, or merger, consolidation or amalgamation with, a Person or division or line of business of a Person (or any subsequent investment made in a Person, division or line of business previously acquired in a Permitted Acquisition) if (1) no Event of Default is continuing immediately prior to making such Investment or would result therefrom; and (2) immediately after giving effect thereto, with respect to acquisitions of entities that do not become Subsidiary Loan Parties, the aggregate fair market value of all Investments made in such entities since the Closing Date (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value), when taken together with the aggregate amount of payments made with respect to Investments pursuant to Section 6.04(6), will not exceed the greater of (a) $100.0 million and (b) 3.00% of Consolidated Total Assets as of the date any such acquisition is made.
Permitted Amendment means any Incremental Facility Amendment, Refinancing Amendment or Extension Amendment.
Permitted Change of Control means any transaction or series of related transactions which otherwise may constitute a Change of Control in which a New Sponsor acquires, either directly or indirectly, through one or more holding companies, Beneficial Ownership of Equity Interests representing 50% or more of the aggregate ordinary voting power in Holdings or conveying the right to nominate a majority of the board of directors of Holdings
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(whether directly or indirectly through the right to direct the vote of such Equity Interests) and the following additional conditions are met:
(a) the Borrower shall be in compliance, on a Pro Forma Basis after giving effect to such transactions or series of related transactions (including any Indebtedness assumed or permitted to exist or incurred, issued or otherwise obtained in connection therewith), with (x) a Total Net Leverage Ratio of not greater than 6.10:1.00 and (y) a Senior Secured First Lien Net Leverage Ratio of not greater than 4.80:1.00;
(b) the New Sponsor shall have made, or substantially concurrently therewith, shall make, cash equity contributions directly or indirectly to the New Sponsors acquisition vehicle (which shall be used to consummate a Permitted Change of Control) on or prior to the Permitted Change of Control Effective Date in an aggregate amount equal to, when combined with the fair market value of any Equity Interests of any of the management and other existing equity holders of Holdings (or any direct or indirect parent company of Holdings) and its Subsidiaries rolled over or invested in connection with such Permitted Change of Control (such cash equity contributed by the New Sponsor, taken together with the fair market value of any Equity Interests rolled over or invested in connection with the Permitted Change of Control, the Permitted Change of Control Equity Capitalization), at least 25.0% of the sum of (i) Consolidated Total Net Debt and (ii) the Permitted Change of Control Equity Capitalization;
(c) (i) at least 15 Business Days prior to the Permitted Change of Control Effective Date, the Borrower shall have delivered notice to the Administrative Agent of such Permitted Change of Control and of the identity of the New Sponsor and (ii) not later than two (2) Business Days prior to the Permitted Change of Control Effective Date, the New Sponsor shall have provided all customary information about its acquisition vehicle that shall have been reasonably requested by the Administrative Agent in writing at least ten (10) Business Days prior to the Permitted Change of Control Effective Date and that the Administrative Agent reasonably determines is required by United States regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including the PATRIOT Act (and, upon any request made by a Lender to the Administrative Agent, the Administrative Agent will provide the Lenders with all such information made available to it);
(d) on the Permitted Change of Control Effective Date, the Administrative Agent shall have received an officers certificate from the Borrower stating that the conditions described in clauses (a) through (b) above and the definition of New Sponsor have been satisfied; and
(e) after giving effect to a Permitted Change of Control, New Sponsor shall have a majority of the voting power for the election of directors, managers or other governing board of the Borrower.
For the avoidance of doubt and notwithstanding anything to the contrary herein, only one Permitted Change of Control shall be permitted to be consummated under this Agreement and any Permitted Change of Control must be consummated prior to the date that is 24 months after the Closing Date.
Permitted Change of Control Costs means all reasonable fees, costs and expenses incurred or payable by Holdings (or any direct or indirect parent of Holdings), the Borrower or any of its Restricted Subsidiaries in connection with a Permitted Change of Control.
Permitted Change of Control Effective Date means the date of consummation of a Permitted Change of Control; provided that there shall only be one Permitted Change of Control Effective Date.
Permitted Debt has the meaning assigned thereto in Section 6.01.
Permitted Holders means each of:
(1) the Sponsors;
(2) any member of the Management Group (or any controlled Affiliate thereof);
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(3) any other holder of a direct or indirect equity interest in Holdings that either (a) holds such interest as of the Closing Date and is disclosed to the Arrangers prior to the Closing Date or (b) becomes a holder of such interest prior to the three-month anniversary of the Closing Date and is a limited partner of a Sponsor on the Closing Date; provided that the limited partners that become holders of equity interests pursuant to this clause (b) do not own in the aggregate more than 20% of the Voting Stock of Holdings as of such three-month anniversary;
(4) any group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of which Persons described in the foregoing clauses (1), (2) or (3) are members; provided that, without giving effect to the existence of such group or any other group, the Persons described in clauses (1), (2) and (3), collectively, Beneficially Own Voting Stock representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings (determined on a fully diluted basis but without giving effect to contingent voting rights not yet vested) then held by such group; and
(5) any Permitted Parent.
Permitted Holdings Debt means unsecured Indebtedness of Holdings that:
(1) is not subject to any Guarantee by the Borrower or any Restricted Subsidiary;
(2) does not mature prior to the date that is ninety-one (91) days after the Latest Maturity Date as of the date of incurrence thereof;
(3) no Event of Default has occurred and is continuing immediately after the issuance or incurrence thereof or would result therefrom;
(4) has no scheduled amortization or payments of principal prior to the date that is ninety-one (91) days after the Latest Maturity Date (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemption provisions satisfying the requirements of clause (6) hereof);
(5) does not require any payments in cash of interest or other amounts in respect of the principal thereof prior to the date that is ninety-one (91) days after the Latest Maturity Date; and
(6) has mandatory prepayment, repurchase or redemption, covenant, default and remedy provisions customary for senior discount notes of an issuer that is the parent of a borrower under senior secured credit facilities, and in any event, with respect to covenant, default and remedy provisions, no more restrictive than those set forth in the Second Lien Credit Agreement taken as a whole (other than provisions customary for senior discount notes of a holding company), in each case as determined in good faith by a Responsible Officer of the Borrower;
provided that clauses (4) and (5) will not restrict payments that are necessary to prevent such Indebtedness from being treated as an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code; provided , further that the Borrower will deliver to the Administrative Agent final copies of the definitive credit documentation relating to such Indebtedness (unless the Borrower is bound by a confidentiality obligation with respect thereto, in which case the Borrower will deliver a reasonably detailed description of the material terms and conditions of such Indebtedness in lieu thereof).
Permitted Investment has the meaning assigned to such term in Section 6.04.
Permitted Investor means:
(1) each of the Sponsors;
(2) each of their respective Affiliates and investment managers;
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(3) any fund or account managed or controlled by any of the Persons described in clause (1) or (2) of this definition;
(4) any employee benefit plan of Holdings or any of its Subsidiaries and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan; and
(5) investment vehicles of members of management of Holdings or the Borrower that invest in, acquire or trade commercial loans but excluding natural persons.
Permitted Liens has the meaning assigned to such term in Section 6.02.
Permitted Parent means (a) any Parent Entity that at the time it became a Parent Entity was a Permitted Holder pursuant to clauses (1), (2) and (3) of the definition thereof; provided that such Parent Entity was not formed in connection with, or in contemplation of, a transaction (other than the Transactions) that would otherwise constitute a Change in Control and (b) Holdings, so long as it is controlled by one or more Persons that are Permitted Holders pursuant to clause (1), (2), (3) or (4) of the definition thereof.
Permitted Refinancing Indebtedness means any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, Refinance ) the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (
plus
unpaid accrued interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs,
fees, commissions and expenses);
provided,
that with respect to (a) the Second Lien Obligations, the principal amount of any Permitted Refinancing Indebtedness in respect thereof shall be subject only to Section 6.01(3)(b), and
(b) the ABL Obligations, the principal amount of any Permitted Refinancing Indebtedness in respect thereof shall be subject only to
Section 6.01(2);
(2) the Weighted Average Life to Maturity of such Permitted Refinancing Indebtedness is greater than or equal to the shorter of (a) the Weighted Average Life to Maturity of the Indebtedness being Refinanced and (b) the Weighted Average Life to Maturity that would result if all payments of principal on the Indebtedness being Refinanced that were due on or after the date that is one year following the Latest Maturity Date were instead due on the date that is one year following the Latest Maturity Date; provided that no Permitted Refinancing Indebtedness incurred in reliance on this subclause (b) will have any scheduled principal payments due prior to the Latest Maturity Date in excess of, or prior to, the scheduled principal payments due prior to such Latest Maturity Date for the Indebtedness being Refinanced;
(3) if the Indebtedness being Refinanced is subordinated in right of payment to any Obligations under this Agreement, such Permitted Refinancing Indebtedness is subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders (as determined in good faith by a Responsible Officer of the Borrower) as those contained in the documentation governing the Indebtedness being Refinanced;
(4) no Permitted Refinancing Indebtedness may have different obligors, or greater Guarantees or security, than the Indebtedness being Refinanced; provided that, with respect to a Refinancing of the Second Lien Obligations or the ABL Obligations, the Liens, if any, securing such Permitted Refinancing Indebtedness will be on terms not materially less favorable to the Lenders than those contained in the documentation governing the Second Lien Credit Agreement and the ABL Credit Agreement, as determined in good faith by a Responsible Officer of the Borrower;
(5) in the case of a Refinancing of Indebtedness that is secured on a pari passu basis with the Tranche B Term Loans with Indebtedness that is secured on a pari passu basis with the Tranche B Term Loans, a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is
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otherwise subject to the provisions of a First Lien Intercreditor Agreement and, if applicable, the Intercreditor Agreement;
(6) in the case of a Refinancing of Indebtedness that is secured on a pari passu basis with, or on a junior basis to, the Tranche B Term Loans with Indebtedness that is secured on a junior basis, to the Tranche B Term Loans, a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is otherwise subject to the provisions of a Junior Lien Intercreditor Agreement and, if applicable, the Intercreditor Agreement; and
(7) in the case of a Refinancing of the ABL Obligations, the Liens, if any, securing such Permitted Refinancing Indebtedness are subject to the Intercreditor Agreement or another intercreditor agreement that is substantially consistent with, and no less favorable to the Lenders in any material respect than, the Intercreditor Agreement as determined in good faith by a Responsible Officer of the Borrower and as certified by a Responsible Officer of the Borrower.
Permitted Refinancing Indebtedness may not be incurred to Refinance Indebtedness that is secured on a junior basis to the Tranche B Term Loans with Indebtedness that is secured on a pari passu basis with the Tranche B Term Loans.
Indebtedness constituting Permitted Refinancing Indebtedness will not cease to constitute Permitted Refinancing Indebtedness as a result of the subsequent extension of the Latest Maturity Date after the date of original incurrence thereof.
Person means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company, government, individual or family trust, Governmental Authority or other entity of whatever nature.
Plan means any employee pension benefit plan as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) that is (1) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA; and (2) either (a) sponsored or maintained (at the time of determination or at any time within the five years prior thereto) by Holdings or any of its Subsidiaries or any ERISA Affiliate or (b) in respect of which Holdings or any of its Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Plan of Reorganization has the meaning assigned to such term in Section 9.01(5).
Platform has the meaning assigned to such term in Section 10.17(1).
Pledged Collateral means Pledged Collateral as defined in the Security Agreement.
Prime Rate means, at any time, the rate of interest per annum as set forth or otherwise identified from time to time by The Wall Street Journal as its prime rate. In the event that such rate does not appear in such copy of The Wall Street Journal, the Prime Rate shall be determined by reference to such other publicly available service or publication for displaying such rates as may be agreed upon by the Administrative Agent and the Borrower.
Pro Forma Basis or Pro Forma means, with respect to the calculation of Consolidated EBITDA, the Senior Secured First Lien Net Leverage Ratio, the Total Secured Net Leverage Ratio, the Total Net Leverage Ratio, the Interest Coverage Ratio, or any other calculation under any applicable provision of the Loan Documents, as of any date, that (1) pro forma effect will be given to the Transactions, any Permitted Acquisition or Investment, any issuance, incurrence, assumption or permanent repayment of Indebtedness (including Indebtedness issued, incurred or assumed as a result of, or to finance, any relevant transaction and for which any such financial ratio or other calculation is being calculated), all sales, transfers and other dispositions or discontinuance of any Subsidiary, line of business, division or Store, or any conversion of a Restricted Subsidiary to an Unrestricted Subsidiary or of an Unrestricted Subsidiary to a Restricted Subsidiary and restructuring, strategic and other cost savings initiatives, in each case that have occurred during the four consecutive fiscal quarter period of the Borrower being used to calculate
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such financial ratio (the Reference Period ), or subsequent to the end of the Reference Period but prior to such date or prior to or simultaneously with the event for which a determination under this definition is made (including any such event occurring at a Person who became a Restricted Subsidiary after the commencement of the Reference Period), as if each such event occurred on the first day of the Reference Period, and (2) pro forma effect will be given to factually supportable and identifiable pro forma cost savings related to operational efficiencies, strategic initiatives or purchasing improvements and other synergies, in each case, reasonably expected by the Borrower and the Restricted Subsidiaries to be realized based upon actions reasonably expected to be taken within 18 months of the date of such calculation (without duplication of the amount of actual benefit realized during such period from such actions), which cost savings, improvements and synergies can be reasonably computed, as certified in writing by the chief financial officer of the Borrower; provided that any such pro forma adjustments in respect of such cost savings, improvements and synergies shall not exceed 20% of Consolidated EBITDA (before giving effect to all such adjustments) for any four-quarter period. For the avoidance of doubt, no pro forma adjustment will be made subsequent to the relevant measurement date for borrowings incurred or repayments made under the Second Lien Credit Agreement or the ABL Credit Agreement in the ordinary course of business and unrelated to any of the events described in this definition.
Projections means all projections (including financial estimates, financial models, forecasts and other forward-looking information) furnished to the Lenders or the Administrative Agent by or on behalf of Holdings or any of the Subsidiaries on or prior to the Closing Date.
Public Lender has the meaning assigned to such term in Section 10.17(2).
Purchasing Borrower Party
means Holdings or any Subsidiary of Holdings that becomes an Assignee or Participant
pursuant to
Section 10.04(14).
Qualified Counterparty means any counterparty to any Specified Hedge Agreement that, at the time such Specified Hedge Agreement was entered into or on the Closing Date, was an Agent, an Arranger, a Lender or an Affiliate of the foregoing, whether or not such Person subsequently ceases to be an Agent, an Arranger, a Lender or an Affiliate of the foregoing.
Qualified Equity Interests means any Equity Interests other than Disqualified Stock.
Qualified IPO means an underwritten public offering (other than a public offering pursuant to a registration statement on Form S-4 or Form S 8) of the Equity Interests of any Parent Entity which generates cash proceeds of at least $200.0 million.
Qualified Receivables Financing means any Receivables Financing of a Receivables Subsidiary that meets the following conditions:
(1) the Board of Directors of the Borrower has determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other provisions) is, in the aggregate, economically fair and reasonable to the Borrower and the Restricted Subsidiaries;
(2) all sales of accounts receivable and related assets by the Borrower or any Restricted Subsidiary to the Receivables Subsidiary are made at fair market value (as determined in good faith by a Responsible Officer of the Borrower); and
(3) the financing terms, covenants, termination events and other provisions thereof will be market terms (as determined in good faith by a Responsible Officer of the Borrower) and may include Standard Securitization Undertakings.
The grant of a security interest in any accounts receivable of the Borrower or any Restricted Subsidiary (other than a Receivables Subsidiary or a customary backup security interest in accounts receivable conveyed to a Receivables Subsidiary) to secure any Indebtedness will not be deemed a Qualified Receivables Financing.
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Quarterly Financial Statements has the meaning assigned to such term in Section 5.04(2).
Ratio Debt has the meaning assigned to such term in Section 6.01.
Real Property means, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Loan Party, together with, in each case, all easements, hereditaments and appurtenances relating thereto, and all improvements and appurtenant fixtures incidental to the ownership or lease thereof.
Receivables Facility means one or more receivables financing facilities, as amended, supplemented, modified, extended, renewed, restated, refunded, replaced or refinanced from time to time, the Indebtedness of which is non-recourse (except for standard representations, warranties, covenants and indemnities made in connection with such facilities) to the Borrower and the Restricted Subsidiaries pursuant to which the Borrower or any Restricted Subsidiary sells its accounts receivable to either (1) a Person that is not a Restricted Subsidiary; or (2) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.
Receivables Financing means any transaction or series of transactions that may be entered into by the Borrower or any Restricted Subsidiary pursuant to which the Borrower or any Restricted Subsidiaries may sell, convey or otherwise transfer to:
(1) a Receivables Subsidiary (in the case of a transfer by the Borrower or any Restricted Subsidiary that is not a Receivables Subsidiary); and
(2) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Borrower or any Restricted Subsidiary, and any assets related thereto including all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and any Hedge Agreements entered into by the Borrower or any such Restricted Subsidiary in connection with such accounts receivable.
Receivables Repurchase Obligation means any obligation of a seller of receivables in a Qualified Receivables Financing to repurchase receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.
Receivables Subsidiary means a Wholly Owned Subsidiary of the Borrower (or another Person formed solely for the purposes of engaging in a Qualified Receivables Financing with the Borrower and to which the Borrower or any Restricted Subsidiary transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable of the Borrower and its Restricted Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of the Borrower (as provided below) as a Receivables Subsidiary and:
(1) no portion of the Indebtedness or any other obligations (contingent or otherwise):
(a) is guaranteed by the Borrower or any Restricted Subsidiary (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings);
(b) is recourse to or obligates the Borrower or any Restricted Subsidiary in any way other than pursuant to Standard Securitization Undertakings; or
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(c) subjects any property or asset of the Borrower or any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings;
(2) with which neither the Borrower nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding other than on terms which the Borrower reasonably believes to be no less favorable to the Borrower or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Borrower; and
(3) to which neither the Borrower nor any other Restricted Subsidiary has any obligation to maintain or preserve such entitys financial condition or cause such entity to achieve certain levels of operating results.
Any such designation by the Board of Directors of the Borrower will be evidenced to the Administrative Agent by filing with the Administrative Agent a certified copy of the resolution of the Board of Directors of the Borrower giving effect to such designation and a certificate of a Responsible Officer of the Borrower certifying that such designation complied with the foregoing conditions.
Recipient means the Administrative Agent and any Lender, as applicable.
Refinance has the meaning assigned to such term in the definition of Permitted Refinancing Indebtedness, and the terms Refinanced will have a correlative meaning.
Refinancing has the meaning assigned to such term in the recitals to this Agreement.
Refinancing Amendment means an amendment to this Agreement (and, as necessary, each other Loan Document) executed by each of (1) the Borrower and Holdings; (2) the Administrative Agent; and (3) each Lender that agrees to provide any portion of the Other Term Loans in accordance with Section 2.19.
Register has the meaning assigned to such term in Section 10.04(2)(d).
Registered Equivalent Notes means, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act, substantially identical notes (having the same Guarantees and collateral provisions) issued by the Borrower in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.
Regulation T means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Reinvestment Deferred Amount means, with respect to any Reinvestment Event, the aggregate amount of Net Cash Proceeds received by the Borrower or a Restricted Subsidiary in connection therewith that are not applied to prepay the Term Loans as a result of the delivery of a Reinvestment Notice.
Reinvestment Event means any Asset Sale in respect of which the Borrower has delivered a Reinvestment Notice.
Reinvestment Notice means a written notice executed by a Responsible Officer stating that the Borrower or any Restricted Subsidiary intends and expects to use an amount of funds not to exceed the amount of Net Cash
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Proceeds of an Asset Sale to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets used or useful in the Borrowers or a Restricted Subsidiarys business.
Reinvestment Prepayment Amount means, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended by the Borrower or a Restricted Subsidiary prior to the relevant Reinvestment Prepayment Date to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets used or useful in the Borrowers or a Restricted Subsidiarys business.
Reinvestment Prepayment Date means, with respect to any Reinvestment Event, the date occurring one year after such Reinvestment Event or, if the Borrower or a Restricted Subsidiary has entered into a legally binding commitment within one year after such Reinvestment Event to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets used or useful in the Borrowers or a Restricted Subsidiarys business, the date occurring two years after such Reinvestment Event.
Related Parties means, with respect to any specified Person, such Persons Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such Person and such Persons Affiliates.
Release means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating in, into, upon, onto or through the Environment.
Reportable Event means any reportable event within the meaning of Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30 day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code).
Repricing Event means (1) any prepayment of any Class of Tranche B Term Loans with the proceeds of, or any conversion of such Tranche B Term Loans into, any new or replacement tranche of debt financing bearing interest at an effective yield that is less than the effective yield applicable to such Class of Tranche B Term Loans and (2) any amendment to any Term Facility that, directly or indirectly, reduces the yield applicable to the Tranche B Term Loans in such Term Facility (in each case, calculating such yield consistent with the methodology for calculating the yield of any Tranche B Term Loans and any Incremental Yield pursuant to the terms of Section 2.18(8)(b)); provided that no Repricing Event will be deemed to occur in connection with a Change of Control, Permitted Change of Control, Qualified IPO or Enterprise Transformative Event (including any financing or amendment undertaken in connection with a Permitted Change of Control or otherwise not for the primary purpose of reducing the interest on the Tranche B Term Loans).
Required Financial Statements has the meaning assigned to such term in Section 5.04(2).
Required Lender Consent Items has the meaning assigned to such term in Section 10.04(12)(c).
Required Lenders means, at any time, Lenders having Term Loans outstanding and unused Commitments that, taken together, represent more than 50.0% of the sum of all Term Loans outstanding and Commitments at such time. The Term Loans and Commitments of any Defaulting Lender will be disregarded in determining Required Lenders; provided that subject to the Borrowers right to replace Defaulting Lenders as set forth herein, Defaulting Lenders will be included in determining Required Lenders with respect to:
(1) any amendment that would disproportionately affect the obligation of the Borrower to make payment of the Term Loans or Commitments of such Defaulting Lender as compared to other Lenders holding the same Class of Term Loans or Commitments;
(2) any amendment relating to:
(a) increases in the Commitment of such Defaulting Lender;
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(b) reductions of principal, interest, fees or premium applicable to the Class of Term Loans held by such Defaulting Lender or Commitments of such Defaulting Lender; and
(c) extensions of final maturity or the due date of any amortization, interest, fee or premium payment applicable to the Class of Term Loans held by such Defaulting Lender or Commitments of such Defaulting Lender; and
(3) matters requiring the approval of each Lender under subclauses (v) and (vi) of Section 10.08(2).
Required Percentage means, with respect to any Excess Cash Flow Period, the percentage set forth in the table below based on Senior Secured First Lien Net Leverage Ratio determined as of the last day of such Excess Cash Flow Period:
Senior Secured First Lien Net Leverage Ratio |
Required Percentage | |||
Greater than 4.00 to 1.00 |
50.00 | % | ||
Less than or equal to 4.00 to 1.00 but greater than 3.50 to 1.00 |
25.00 | % | ||
Less than or equal to 3.50 to 1.00 |
0.00 | % |
Responsible Officer means, with respect to any Loan Party, the chief executive officer, president, vice president, secretary, assistant secretary or any Financial Officer of such Loan Party or any other individual designated in writing to the Administrative Agent by an existing Responsible Officer of such Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party will be conclusively presumed to have been authorized by all necessary corporate, partnership or other action on the part of such Loan Party and such Responsible Officer will be conclusively presumed to have acted on behalf of such Loan Party.
Restricted Payments has the meaning assigned to such term in Section 6.06.
Restricted Subsidiary means any Subsidiary of a Person other than an Unrestricted Subsidiary of such Person. Unless otherwise indicated in this Agreement, all references to Restricted Subsidiaries will mean Restricted Subsidiaries of the Borrower.
Retained Percentage means, with respect to any Excess Cash Flow Period, 100% minus the Required Percentage with respect to such Excess Cash Flow Period.
S&P means S&P Global Ratings or any successor entity thereto.
Screen Rate has the meaning assigned to such term in the definition of LIBO Rate.
SEC means the Securities and Exchange Commission or any successor thereto.
Second Lien Credit Agreement means that certain second lien credit agreement, dated as of the Closing Date, by and among the Borrower, Holdings, the lenders party thereto, Jefferies Finance LLC, as administrative agent and collateral agent and the other parties party thereto.
Second Lien Credit Facility means the second lien loan facility consisting of term loans made to the Borrower.
Second Lien Loan Documents means the Second Lien Credit Agreement and the other Loan Documents as defined in the Second Lien Credit Agreement, as each document may be amended, restated, supplemented and/or otherwise modified.
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Second Lien Obligations mean the Obligations as defined in the Second Lien Credit Agreement.
Second Lien Term Loans means the secured term loans made to the Borrower on the Closing Date pursuant to the Second Lien Credit Agreement.
Secured Parties means, collectively, the Administrative Agent, the Collateral Agent, the Lenders, each Cash Management Bank, each Qualified Counterparty and each co-agent or subagent appointed by the Administrative Agent from time to time pursuant to Section 9.02.
Securities Act means the Securities Act of 1933, as amended.
Security Agreement means the Term Loan Security Agreement substantially in the form of Exhibit J , dated as of the Closing Date, among the Loan Parties and the Collateral Agent, as amended, supplemented and/or otherwise modified from time to time.
Security Documents means the collective reference to the Security Agreement, the Guaranty Agreement, the Mortgages, the Intellectual Property Security Agreements and each of the security agreements and other instruments and documents executed and delivered by any Loan Party pursuant thereto or pursuant to Section 5.10.
Senior Secured First Lien Net Leverage Ratio means, as of any date, the ratio of Consolidated First Lien Net Debt as of such date to Consolidated EBITDA for the most recent four fiscal quarter period for which Required Financial Statements have been delivered, calculated on a Pro Forma Basis.
Specified Event of Default means any Event of Default under Section 8.01(2), 8.01(3)(a), 8.01(8) or 8.01(9).
Specified Hedge Agreement means any Hedge Agreement entered into or assumed between or among the Borrower or any other Subsidiary and any Qualified Counterparty and designated by the Qualified Counterparty and the Borrower in writing to the Administrative Agent as a Specified Hedge Agreement under this Agreement (but only if such Hedge Agreement has not been designated as a Specified Hedge Agreement under the ABL Credit Agreement).
Specified Hedge Obligations means all amounts owing to any Qualified Counterparty under any Specified Hedge Agreement.
Specified Representations means the representations and warranties of each of the Borrower and the other Loan Parties set forth in the following sections of this Agreement:
(1) Section 3.01(1) and (4) (but solely with respect to its organizational existence and status and organizational power and authority as to the execution, delivery and performance of this Agreement and the other Loan Documents);
(2) Section 3.02(1) (but solely with respect to its authorization of this Agreement and the other Loan Documents);
(3) Section 3.02(2)(a)(i) (but solely with respect to non-conflict of this Agreement and the other Loan Documents with its certificate or article of incorporation or other charter document);
(4) Section 3.03 (but solely with respect to execution and delivery by it, and enforceability against it, of this Agreement and the other Loan Documents);
(5) Section 3.08(2);
(6) Section 3.09;
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(7) Section 3.14(1) (subject to Permitted Liens);
(8) Section 3.16; and
(9) Section 3.19.
Specified Sale and Lease-Back Net Proceeds means with respect to the sale component of any Specified Sale and Lease-Back Transaction, the excess, if any, of (i) the sum of cash and Cash Equivalents received as purchase consideration in connection with such Specified Sale and Lease-Back Transaction sale component pursuant to the applicable purchase and sale agreement over (ii) the sum of (A) the out-of-pocket fees and expenses (including attorneys fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred or required to be paid by the Borrower or any Restricted Subsidiary on behalf of a purchaser by the Borrower or any Restricted Subsidiary in connection with such Specified Sale and Lease-Back Transaction, (B) taxes (including transfer taxes) or distributions made pursuant to Section 6.06(5) or 6.06(6)(a) paid or reasonably estimated to be payable in connection therewith (including taxes imposed on the distribution or repatriation of any such Specified Sale and Lease-Back Net Proceeds), and (C) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Borrower or any Restricted Subsidiary after such Specified Sale and Lease-Back Transaction, including liabilities related to environmental matters or against any indemnification obligations associated with such Specified Sale and Lease-Back Transaction, it being understood that Specified Sale and Lease-Back Net Proceeds shall include the amount of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in this clause (C).
Specified Sale and Lease-Back Transaction means a sale and leaseback transaction with respect to all or any portion of any real property owned by the Borrower or any Restricted Subsidiary as of the Closing Date and set forth on Schedule 1.01S that is consummated as of or after the Closing Date.
Specified Transaction means any Investment (including any Limited Condition Acquisition), Permitted Change of Control, disposition, incurrence or repayment of Indebtedness, Restricted Payment, Subsidiary designation, Incremental Facility that by the terms of this Agreement requires such test to be calculated on a Pro Forma Basis; provided that any increase in the Commitments (including, for this purpose, any Commitment in respect of any Incremental Term Loan or Extended Term Loan) above the amount of Commitments in effect on the Closing Date, for purposes of this Specified Transaction definition, shall be deemed to be fully drawn; provided, further, that, at the Borrowers election, any such Specified Transaction (other than a Restricted Payment) having an aggregate value of less than $5.0 million shall not be calculated on a Pro Forma Basis.
Sponsor Management Agreement means the management services agreement by and among Leonard Green & Partners, L.P. and CVC Capital Partners Advisory (U.S.), Inc. or certain of the management companies associated with either of them or their advisors and the Borrower, as the same may be amended, modified, supplemented or otherwise modified from time to time in accordance with its terms, but only to the extent that any such amendment, modification, supplement or other modification does not, directly or indirectly, increase the obligation of Holdings, the Borrower or any of its Restricted Subsidiaries to make any payments thereunder.
Sponsor Termination Fees means the one-time payment under the Sponsor Management Agreement of a termination fee to one or more of the Sponsors in the event of a Change of Control, Permitted Change of Control or the completion of a Qualifying IPO.
Sponsors means (i) at any time prior to the Permitted Change of Control Effective Date, any of CVC and LGP and any of their respective Affiliates and funds or partnerships managed, advised or controlled by any of them or any of their respective Affiliates, but not including any operating portfolio company of any of the foregoing and (ii) at any time on or after the Permitted Change of Control Effective Date, New Sponsor and any of its (or their) respective Affiliates and funds or partnerships managed, advised or controlled by any of them or any of their respective Affiliates, but not including any operating portfolio company of any of the foregoing.
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Standard Securitization Undertakings means representations, warranties, covenants, indemnities and Guarantees of performance entered into by the Borrower or any Subsidiary of the Borrower that a Responsible Officer of the Borrower has determined in good faith to be customary in a Receivables Financing including those relating to the servicing of the assets of a Receivables Subsidiary, it being understood that any Receivables Repurchase Obligation will be deemed to be a Standard Securitization Undertaking.
Statutory Reserves means, with respect to any currency, any reserve, liquid asset or similar requirements established by any Governmental Authority of the United States of America or of the jurisdiction of such currency or any jurisdiction in which Term Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Term Loans in such currency are determined.
Store means any retail store or retail warehouse (which includes any real property, fixtures, equipment, inventory and other property related thereto) operated, or to be operated, by the Borrower or any Restricted Subsidiary.
Subagent has the meaning assigned to such term in Section 9.02.
Subsidiary means, with respect to any Person, any corporation, partnership, limited liability company or other entity of which (1) Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors of such corporation, partnership, limited liability company or other entity are at the time owned by such Person; or (2) more than 50.0% of the Equity Interests are at the time owned by such Person. Unless otherwise indicated in this Agreement, all references to Subsidiaries will mean Subsidiaries of the Borrower.
Subsidiary Loan Parties means (1) each Wholly Owned Domestic Subsidiary of the Borrower on the Closing Date (other than any Excluded Subsidiary); and (2) each Wholly Owned Domestic Subsidiary (other than any Excluded Subsidiary) of the Borrower that becomes, or is required to become, a party to the Security Agreement or the Guaranty Agreement after the Closing Date. It is understood and agreed that no Limited Recourse Guarantor shall be deemed to be a Subsidiary Loan Party (or Guarantor) solely as a result of its Limited Recourse Guaranty unless and until it provides a full Guaranty of the Secured Obligations, becomes a party to the Security Agreement or the Guaranty Agreement and otherwise complies with the requirements hereunder applicable to Subsidiary Loan Parties.
Swap Obligation means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the Commodity Exchange Act.
Taxes means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding) or similar charges imposed by any Governmental Authority and any and all interest and penalties related thereto.
Term Facility means the facility and commitments utilized in making Term Loans hereunder. On the Closing Date, there is one Term Facility, the Tranche B Term Loan Facility. Following the establishment of any Incremental Term Loans (other than an increase to an existing Term Facility), Other Term Loans or Extended Term Loans, such Incremental Term Loans, Other Term Loans or Extended Term Loans will be considered a separate Term Facility hereunder.
Term Loan Installment Date means, as the context requires, an Original Term Loan Installment Date, an Incremental Term Loan Installment Date, an Other Term Loan Installment Date or an Extended Term Loan Installment Date.
Term Loans means the Tranche B Term Loans made to the Borrower on the Closing Date pursuant hereto, any Incremental Term Loans, any Other Term Loans and any Extended Term Loans, collectively (or if the context so requires, any of them individually).
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Term Priority Collateral means Term Priority Collateral as defined in the Intercreditor Agreement.
Title Company has the meaning assigned to such term in Section 5.10(2)(c).
Title Policy has the meaning assigned to such term in Section 5.10(2)(c).
Total Net Leverage Ratio means, as of any date, the ratio of Consolidated Total Net Debt as of such date to Consolidated EBITDA for the most recent four fiscal quarter period for which Required Financial Statements have been delivered, calculated on a Pro Forma Basis.
Total Secured Net Leverage Ratio means, as of any date, the ratio of Consolidated Secured Net Debt as of such date to Consolidated EBITDA for the most recent four fiscal quarter period for which Required Financial Statements have been delivered, calculated on a Pro Forma Basis.
Tranche B Term Loan Commitments means with respect to each Lender, the commitment of such Lender to make Tranche B Term Loans as set forth on Schedule 2.01 . On the Closing Date, the aggregate amount of Tranche B Term Loan Commitments is $1,925.0 million.
Tranche B Term Loan Facility means the term loan facility consisting of Tranche B Term Loans made to the Borrower.
Tranche B Term Loan Lender means each financial institution listed on Schedule 2.01 (other than any such Person that has ceased to be a party hereto pursuant to an Assignment and Acceptance in accordance with Section 10.04), as well as any Person that becomes a Lender hereunder pursuant to Section 10.04 by assignment of any Tranche B Term Loans.
Tranche B Term Loans means the term loans made to the Borrower on the Closing Date pursuant to Section 2.01(1).
Transactions has the meaning assigned to such term in the recitals to this Agreement.
Type means, when used in respect of any Term Loan or Borrowing, the Rate by reference to which interest on such Term Loan or on the Term Loans comprising such Borrowing is determined. For purposes hereof, the term Rate means Adjusted LIBO Rate or ABR, as applicable.
Uniform Commercial Code or UCC means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
Unrestricted Cash means, as of any date, all cash and Cash Equivalents of the Borrower and its Restricted Subsidiaries as of such date that would not appear as restricted on the Required Financial Statements, determined on a consolidated basis in accordance with GAAP, determined based upon the most recent month-end financial statements available internally as of the date of determination, and calculated on a Pro Forma Basis.
Unrestricted Subsidiary means any Subsidiary of Holdings (other than the Borrower) designated by the Borrower as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent; provided that the Borrower will only be permitted to so designate a new Unrestricted Subsidiary after the Closing Date or subsequently re-designate any such Unrestricted Subsidiary as a Restricted Subsidiary (by written notice to the Administrative Agent) if:
(1) no Event of Default is continuing; provided, that if such Subsidiary is being designated as an Unrestricted Subsidiary in connection with a Limited Condition Acquisition, (i) the date of determination of such condition shall be the LCA Test Date and (ii) on the date such Subsidiary is designated as an Unrestricted Subsidiary, no Specified Event of Default shall have occurred and be continuing or would exist immediately after such designation;
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(2) such designation or re-designation would not cause an Event of Default; provided , that if such Subsidiary is being designated as an Unrestricted Subsidiary in connection with a Limited Condition Acquisition, (i) the date of determination of such condition shall be the LCA Test Date and (ii) on the date such Subsidiary is designated as an Unrestricted Subsidiary, such designation or re-designation would not cause a Specified Event of Default; and
(3) compliance with a minimum Interest Coverage Ratio of 2.0 to 1.0, determined on a Pro Forma Basis; provided , that if such Subsidiary is being designated as an Unrestricted Subsidiary in connection with a Limited Condition Acquisition, the date of determination of such condition shall be the LCA Test Date.
The designation of any Restricted Subsidiary as an Unrestricted Subsidiary will constitute an Investment for purposes of Section 6.04. The redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary will be deemed to be an incurrence at the time of such designation of Indebtedness of such Unrestricted Subsidiary and the Liens on the assets of such Unrestricted Subsidiary, in each case outstanding on the date of such redesignation.
USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107 56 (signed into law October 26, 2001)).
U.S. Person means any Person that is a United States Person as defined in Section 7701(a)(30) of the Code.
Voting Stock means, as of any date, the Capital Stock of any Person that is at the time entitled to vote (without regard to the occurrence of any contingency) in the election of the Board of Directors of such Person.
Weighted Average Life to Maturity means, when applied to any Indebtedness as of any date, the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal (excluding nominal amortization), including payment at final maturity, in respect thereof by (b) the number of years (calculated to the nearest 1/12) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness.
Wholly Owned Domestic Subsidiary means, with respect to any Person, a Domestic Subsidiary of such Person that is a Wholly Owned Subsidiary. Unless otherwise indicated in this Agreement, all references to Wholly Owned Domestic Subsidiaries will mean Wholly Owned Domestic Subsidiaries of the Borrower.
Wholly Owned Subsidiary means, with respect to any Person, a subsidiary of such Person, all of the Equity Interests of which (other than directors qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such Person or another Wholly Owned Subsidiary of such Person. Unless otherwise indicated in this Agreement, all references to Wholly Owned Subsidiaries will mean Wholly Owned Subsidiaries of the Borrower.
Withdrawal Liability means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Working Capital means, with respect to the Borrower and its Subsidiaries on a consolidated basis as of any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in Working Capital will be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) reclassification after the Closing Date in accordance with GAAP of assets or liabilities, as applicable, between current and non-current or (b) the effects of purchase accounting.
Write-Down and Conversion Powers means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for
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the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
SECTION 1.02. Terms Generally . The definitions set forth or referred to in Section 1.01 will apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. Unless the context requires otherwise,
(1) the words include, includes and including will be deemed to be followed by the phrase without limitation;
(2) in the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding and the word through means to and including;
(3) the word will will be construed to have the same meaning and effect as the word shall;
(4) the word incur will be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words incurred and incurrence will have correlative meanings);
(5) any reference to any Person will be construed to include such Persons legal successors and permitted assigns; and
(6) the words asset and property will be construed to have the same meaning and effect.
All references herein to Articles, Sections, Exhibits and Schedules will be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context otherwise requires. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document or organizational document of the Loan Parties means such document as amended, restated, supplemented and/or otherwise modified from time to time (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document). Any reference to any law will include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation means, unless otherwise specified, such law or regulation as amended, modified or supplemented from time to time. Whenever this Agreement refers to the knowledge of the Borrower or any Loan Party, such reference will be construed to mean the knowledge of the chief executive officer, president, chief financial officer, treasurer or controller of such Person.
SECTION 1.03. Accounting Terms; GAAP .
(a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature will be construed in accordance with GAAP, as in effect from time to time; provided that, notwithstanding anything to the contrary herein, all accounting or financial terms used herein will be construed, and all financial computations pursuant hereto will be made, without giving effect to any election under Statement of Financial Accounting Standards Board Accounting Standards Codification 825 10 (or any other Statement of Financial Accounting Standards Board Accounting Standards Codification having a similar effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at fair value, as defined therein. In the event that any Accounting Change (as defined below) occurs and such change results in a change in the method of calculation of financial ratios, standards or terms in this Agreement, then upon the written request of the Borrower or the Administrative Agent (acting upon the request of the Required Lenders), the Borrower, the Administrative Agent and the Lenders will enter into good faith negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrowers financial condition will be the same after such Accounting Change as if such Accounting Change had not occurred; provided that provisions of this Agreement in effect on the date of such Accounting Change will remain in effect until the effective date of such amendment. Ac counting Change means (1) any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or (2) any change in the application of GAAP by Holdings or the Borrower.
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(b) As used herein, the term fiscal quarter shall mean each period ending on the date that is thirteen (13) weeks after the fiscal year end of the Borrower. Prior to the end of each fiscal year of the Borrower, the Borrower shall provide written notice to the Administrative Agent identifying the date of each fiscal year end. The Borrower may, upon written notice to the Administrate Agent, change any fiscal quarter.
SECTION 1.04. Effectuation of Transfers . Each of the representations and warranties of Holdings and the Borrower contained in this Agreement (and all corresponding definitions) is made after giving effect to the Transactions (assuming that the payment of the Distribution occurs on the Closing Date), unless the context otherwise requires.
SECTION 1.05. Currencies . Unless otherwise specifically set forth in this Agreement, monetary amounts are in Dollars. Notwithstanding anything to the contrary herein, no Default or Event of Default will arise as a result of any limitation or threshold set forth in Dollars being exceeded solely as a result of changes in currency exchange rates.
SECTION 1.06. Required Financial Statements . With respect to the determination of the Senior Secured First Lien Net Leverage Ratio, the Total Secured Net Leverage Ratio, the Total Net Leverage Ratio, the Interest Coverage Ratio, or under any other applicable provision of the Loan Documents (including the definition of Immaterial Subsidiary) made on or prior to the date on which Required Financial Statements have been delivered for the first fiscal quarter ending after the Closing Date, such calculation will be determined for the period of four consecutive fiscal quarters most recently ended prior to the Closing Date, and calculated on a Pro Forma Basis. Notwithstanding anything to the contrary herein, for purposes of determining compliance with any test contained in this Agreement with respect to any period during which any Specified Transaction occurs, the Senior Secured First Lien Net Leverage Ratio, the Total Secured Net Leverage Ratio, the Total Net Leverage Ratio, the Interest Coverage Ratio or under any other applicable provision of the Loan Documents (including the definition of Immaterial Subsidiary) shall be calculated with respect to such period and such Specified Transaction on a Pro Forma Basis.
SECTION 1.07. Certain Calculations and Tests .
(a) Notwithstanding anything in this Agreement or any Loan Document to the contrary, when calculating any applicable ratio or determining other compliance with this Agreement (including the determination of compliance with any provision of this Agreement which requires that no Default or Event of Default has occurred, is continuing or would result therefrom) in connection with a Specified Transaction undertaken in connection with the consummation of a Limited Condition Acquisition, the date of determination of such ratio and determination of whether any Default or Event of Default has occurred, is continuing or would result therefrom or other applicable covenant or condition shall, at the option of the Borrower (the Borrowers election to exercise such option in connection with any Limited Condition Acquisition, an LCA Election ), be deemed to be the date the definitive acquisition agreement for such Limited Condition Acquisition are entered into (the LCA Test Date ) and if, after such ratios and other provisions are measured or tested on a Pro Forma Basis after giving effect to such Limited Condition Acquisition and the other Specified Transactions to be entered into in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) as if they occurred at the beginning of the four consecutive fiscal quarter period being used to calculate such financial ratio ending prior to the LCA Test Date, the Borrower could have taken such action on the relevant LCA Test Date in compliance with such ratios and provisions, such provisions shall be deemed to have been complied with. For the avoidance of doubt, (x) if any of such ratios are exceeded as a result of fluctuations in such ratio (including due to fluctuations in Consolidated EBITDA of the Borrower) at or prior to the consummation of the relevant Limited Condition Acquisition, such ratios and other provisions will not be deemed to have been exceeded as a result of such fluctuations solely for purposes of determining whether the Limited Condition Acquisition is permitted hereunder and (y) such ratios and other provisions shall not be tested at the time of consummation of such Limited Condition Acquisition or related Specified Transactions. If the Borrower has made an LCA Election for any Limited Condition Acquisition, then in connection with any subsequent calculation of any ratio or basket availability with respect to any other Specified Transaction on or following the relevant LCA Test Date and prior to the earlier of the date on which such Limited Condition Acquisition is consummated or the date that the definitive acquisition agreement for such Limited Condition Acquisition is terminated or expires without consummation of such Limited Condition Acquisition, any such ratio or basket shall be calculated on (1) a Pro Forma Basis assuming such Limited Condition Acquisition and other transactions in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) have been consummated and (2) on
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a Pro Forma Basis but without giving effect to such Limited Condition Acquisition and other transactions in connection therewith (including any incurrence of Indebtedness and use of proceeds thereof).
(b) Notwithstanding anything to the contrary herein, with respect to any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement under any covenant that does not require compliance with a financial ratio or test (including, without limitation, pro forma compliance with any Senior Secured First Lien Net Leverage Ratio test, Total Secured Net Leverage Ratio test, Total Net Leverage Ratio test and/or any Interest Coverage Ratio test) (any such amounts including the Non-Ratio Based Incremental Facilities Cap, the Fixed Amounts ) substantially concurrently with any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement under the same covenant as such Fixed Amount that requires compliance with any such financial ratio or test (any such amounts, the Incurrence Based Amounts ), it is understood and agreed that the Fixed Amounts being substantially concurrently incurred (other than, in the case of any Fixed Amounts contained in Section 6.01 or Section 6.02, any refinancings of any Indebtedness that was previously incurred) and any substantially concurrent borrowings under the Second Lien Credit Agreement, the ABL Credit Agreement or any Permitted Refinancing Indebtedness in respect thereof (and any cash proceeds thereof) shall be disregarded in the calculation of the financial ratio or test applicable to the Incurrence Based Amounts in connection with such substantially concurrent incurrence.
SECTION 1.08. Cashless Rolls . Notwithstanding anything to the contrary contained in this Agreement or in any other Loan Document, to the extent that any Lender extends the maturity date of, or replaces, renews or refinances, any of its then-existing Term Loans with Incremental Term Loans, Other Term Loans, Extended Term Loans or loans incurred under a new credit facility, in each case, to the extent such extension, replacement, renewal or refinancing is effected by means of a cashless roll by such Lender, such extension, replacement, renewal or refinancing shall be deemed to comply with any requirement hereunder or any other Loan Document that such payment be made in Dollars or the relevant alternate currency, in immediately available funds, in Cash or any other similar requirement.
ARTICLE II
The Credits
SECTION 2.01. Term Loans and Borrowings .
(1) Subject to the terms and conditions set forth herein, each Tranche B Term Loan Lender severally agrees to make to the Borrower Tranche B Term Loans denominated in Dollars equal to such Tranche B Term Loan Lenders Tranche B Term Loan Commitment on the Closing Date. The Tranche B Term Loans will be funded to the Borrower net of an upfront fee of 0.25% of the principal amount thereof which will be retained by each funding Tranche B Term Loan Lender for its own account.
The failure of any Lender to make any Term Loan required to be made by it will not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender will be responsible for any other Lenders failure to make Term Loans as required. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.
(2) Subject to Sections 2.04(7) and 2.11, each Borrowing will be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any ABR Loan or Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Term Loan; provided that any exercise of such option will not affect the obligation of the Borrower to repay such Term Loan in accordance with the terms of this Agreement, and such Lender will not be entitled to any amounts payable under Section 2.12 or 2.14 solely in respect of increased costs resulting from, and existing at the time of, such exercise.
(3) Notwithstanding any other provision of this Agreement, the Borrower will not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
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SECTION 2.02. Request for Borrowing . The Borrower will deliver to the Administrative Agent a Borrowing Request not later than: (a) in the case of an ABR Borrowing, 11:00 a.m., New York City time, one Business Day prior to the anticipated Closing Date (or such later time as the Administrative Agent may agree in its sole discretion) or (b) in the case of a Eurocurrency Borrowing, 11:00 a.m., New York City time, one Business Day prior to the anticipated Closing Date (or such later time as the Administrative Agent may agree in its sole discretion), requesting that the Lenders make Term Loans on the Closing Date. The Borrowing Request must specify:
(1) the principal amount of Tranche B Term Loans to be borrowed;
(2) the requested date of the Borrowing (which will be a Business Day);
(3) the Type of Tranche B Term Loans to be borrowed;
(4) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which will be a period contemplated by the definition of the term Interest Period; and
(5) the location and number of the Borrowers account to which funds are to be disbursed.
If no election as to the Type of Borrowing is specified in the applicable Borrowing Request, then the Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurocurrency Borrowing is specified in the applicable Borrowing Request, then the Borrower will be deemed to have selected an Interest Period of one-months duration. Upon receipt of such Borrowing Request, the Administrative Agent will promptly notify each Lender thereof. The proceeds of the Term Loans requested under this Section 2.02 will be disbursed by the Administrative Agent in immediately available funds by wire transfer to such bank account or accounts as designated by the Borrower in the Borrowing Request.
SECTION 2.03. Funding of Borrowings .
(1) Each Lender will make each Tranche B Term Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 10:00 a.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. Upon receipt of all requested funds, the Administrative Agent will make such Term Loans available to the Borrower by promptly wiring the amounts so received, in like funds, to an account of the Borrower as specified in the Borrowing Request (or as otherwise directed by the Borrower).
(2) Unless the Administrative Agent has received written notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (1) of this Section 2.03 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent, forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent at (a) in the case of such Lender, the greater of (i) the Federal Funds Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (b) in the case of the Borrower, the interest rate applicable to ABR Loans at such time. If such Lender pays such amount to the Administrative Agent then such amount will constitute such Lenders Term Loan included in such Borrowing.
SECTION 2.04. Interest Elections .
(1) Each Borrowing initially will be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, will have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section
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2.04. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion will be allocated ratably among the Lenders holding the Term Loans comprising such Borrowing, and the Term Loans comprising each such portion will be considered a separate Borrowing; provided that the Term Loans comprising any Borrowing will be in an aggregate principal amount that is an integral multiple of $500,000 and not less than $1,000,000; provided, further, that there shall not be more than ten Eurocurrency Borrowings outstanding hereunder at any time.
(2) To make an election pursuant to this Section 2.04 following the Closing Date, the Borrower will notify the Administrative Agent of such election in writing (a) in the case of an election to convert to or continue a Eurocurrency Borrowing, not later than 2:00 p.m., New York City time, three Business Days before the effective date of such election or (b) in the case of an election to convert to an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day prior to such election ( provided that, to make an election to convert any Eurocurrency Borrowing to an ABR Borrowing prior to the end of the effective Interest Period of such Eurocurrency Borrowing, the Borrower must notify the Administrative Agent not later than 2:00 p.m., two Business Days before the effective date of such election).
(3) Each written Interest Election Request will be irrevocable and will be substantially in the form of Exhibit D and signed by the Borrower and will specify the following information:
(a) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (c) and (d) below will be specified for each resulting Borrowing);
(b) the effective date of the election made pursuant to such Interest Election Request, which will be a Business Day;
(c) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and
(d) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which will be a period contemplated by the definition of Interest Period.
(4) If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower will be deemed to have selected a Eurocurrency Borrowing having an Interest Period of one months duration.
(5) Promptly following receipt of an Interest Election Request, the Administrative Agent will advise each applicable Lender of the details thereof and of such Lenders portion of each resulting Borrowing.
(6) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing will be automatically converted into an ABR Borrowing.
(7) Any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurocurrency Borrowing.
(8) Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders, so notifies the Borrower, then, so long as such Event of Default is continuing, (a) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (b) unless repaid, each Eurocurrency Borrowing will be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
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SECTION 2.05. Promise to Pay; Evidence of Debt .
(1) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.06.
(2) Each Lender will maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Term Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(3) The Administrative Agent will maintain accounts in which it will record (a) the amount of each Term Loan made hereunder, the Type thereof and the Interest Period (if any) applicable thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lenders share thereof.
(4) The entries made in the accounts maintained pursuant to paragraph (2) or (3) of this Section 2.05 will be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein will not in any manner affect the obligation of the Borrower to repay the Term Loans in accordance with the terms of this Agreement. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
(5) Any Lender may request that Term Loans made by it be evidenced by a promissory note (a Note) substantially in the form of Exhibit G . In such event, the Borrower will prepare, execute and deliver to such Lender a Note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent and reasonably acceptable to the Borrower. Thereafter, the Term Loans evidenced by such Note and interest thereon will at all times (including after assignment pursuant to Section 10.04) be represented by one or more Notes in such form payable to the payee named therein (or, if requested by such payee, to such payee and its registered assigns).
SECTION 2.06. Repayment of Term Loans .
(1) The Borrower will repay to the Administrative Agent for the ratable account of the applicable Lenders with Tranche B Term Loans on the last Business Day of each fiscal quarter of the Borrower, commencing with the last Business Day of the fiscal quarter of the Borrower ending on or about July 31, 2017, an aggregate principal amount equal to 0.25% of the aggregate principal amount of the Tranche B Term Loans funded on the Closing Date, which payments will be reduced as a result of the application of prepayments of Tranche B Term Loans in accordance with the order of priority set forth in Section 2.07 or 2.08, as applicable (each such date being referred to as an Original Term Loan Installment Date );
(2) (a) In the event that any Incremental Term Loans are made, the Borrower will repay Borrowings consisting of Incremental Term Loans on the dates (each an Incremental Term Loan Installment Date ) and in the amounts set forth in the applicable Incremental Facility Amendment, (b) in the event that any Other Term Loans are made, the Borrower will repay Borrowings consisting of Other Term Loans on the dates (each an Other Term Loan Installment Date ) and in the amounts set forth in the applicable Refinancing Amendment and (c) in the event that any Extended Term Loans are made, the Borrower will repay Borrowings consisting of Extended Term Loans on the dates (each an Extended Term Loan Installment Date ) and in the amounts set forth in the applicable Extension Amendment; and
(3) to the extent not previously paid, all outstanding Term Loans will be due and payable on the applicable Maturity Date;
together, in each case, with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.
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SECTION 2.07. Optional Prepayment of Term Loans . The Borrower may at any time and from time to time prepay the Tranche B Term Loans and/or any other Term Loans of any Class, in whole or in part, without premium or penalty (except as provided in Section 2.21 and subject to Section 2.13), in an aggregate principal amount, (1) in the case of Eurocurrency Loans, that is an integral multiple of $1.0 million and not less than $5.0 million, and (2) in the case of ABR Loans, that is an integral multiple of $1.0 million and not less than $5.0 million, or, in each case, if less, the amount outstanding. The Borrower will notify the Administrative Agent in writing of such election not later than 11:00 a.m., New York City time, (a) in the case of a Eurocurrency Borrowing, three Business Days before the anticipated date of such prepayment and (b) in the case of an ABR Borrowing, one Business Day before the anticipated date of such prepayment. Each such notice of prepayment will specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid and shall be substantially in the form of Exhibit H . All prepayments under this Section 2.07 will be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment. Any such notice may be revocable or conditioned on a refinancing of all or any portion of the Term Facility or any other transaction permitted by this Agreement. Any optional prepayments of Tranche B Term Loans and/or other Term Loans of any Class pursuant to this Section 2.07 will be applied to the remaining scheduled amortization payments of such applicable Class of Term Loans as directed by the Borrower (or in the absence of such direction, in direct order of maturity, to the amortization payments of such applicable Class of Term Loans) and will be applied ratably to the Term Loans of such Class included in the prepaid Borrowing.
SECTION 2.08. Mandatory Prepayment of Term Loans .
(1) The Borrower will apply all Net Cash Proceeds received in an Asset Sale made pursuant to Section 6.05(2) (other than Net Cash Proceeds attributable to any ABL Priority Collateral Asset Sale) to prepay Term Loans within ten Business Days following receipt of such Net Cash Proceeds, unless the Borrower has delivered a Reinvestment Notice on or prior to such tenth Business Day; provided that:
(a) if any Event of Default has occurred and is continuing, on or prior to the tenth Business Day following receipt thereof, such Net Cash Proceeds will be deposited in an Asset Sale Proceeds Account;
(b) subject to the other provisions of this Section 2.08(1), on each Reinvestment Prepayment Date the Borrower will apply an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event to the prepayment of the Term Loans (together with accrued interest thereon); and
(c) if at the time that any such prepayment would be required, the Borrower is required to, or to offer to, repurchase, redeem, repay or prepay Indebtedness secured on a pari passu basis with the Term Loans (any such Indebtedness, Other First Lien Indebtedness ), then the Borrower may apply such Net Cash Proceeds to redeem, repurchase, repay or prepay all Classes of Term Loans and Other First Lien Indebtedness on a pro rata basis (determined on the basis of the aggregate outstanding principal amount of the Term Loans and Other First Lien Indebtedness at such time);
provided, further, that the portion of such Net Cash Proceeds allocated to the Other First Lien Indebtedness will not exceed the amount of such Net Cash Proceeds required to be allocated to the Other First Lien Indebtedness pursuant to the terms thereof, and the remaining amount, if any, of such Net Cash Proceeds will be allocated to the prepayment of the Term Loans (in accordance with the terms hereof) and to the repurchase or repayment of Other First Lien Indebtedness, and the amount of the prepayment of the Term Loans that would have otherwise been required pursuant to this clause (1) will be reduced accordingly; provided, further, that to the extent the holders of Other First Lien Indebtedness decline to have such Indebtedness repurchased, redeemed, repaid or prepaid with such Net Cash Proceeds, the declined amount of such Net Cash Proceeds will promptly (and in any event within ten Business Days after the date of such rejection) be applied to prepay the Term Loans in accordance with the terms hereof (to the extent such Net Cash Proceeds would otherwise have been required to be so applied if such Other First Lien Indebtedness was not then outstanding).
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(2) Commencing with the Excess Cash Flow Period ending on or around January 31, 2018, not later than 110 days after the end of each Excess Cash Flow Period, the Borrower will calculate Excess Cash Flow for such Excess Cash Flow Period and will apply the following amount to the prepayment of Term Loans:
(a) the Required Percentage of such Excess Cash Flow; minus
(b) the amount of any voluntary prepayments during such Excess Cash Flow Period or on or prior to the 110th day after the end of such Excess Cash Flow Period of:
(i) Term Loans (including Incremental Term Loans, Other Term Loans and Extended Term Loans; provided that if any Incremental Term Loans, Other Term Loans or Extended Term Loans are optionally prepaid on a greater than pro rata basis with the Tranche B Term Loans, such excess optional prepayment shall not reduce the amount of the Required Percentage of Excess Cash Flow for such period that is required to be applied to prepay Tranche B Term Loans), including any assignment of Term Loans to any Purchasing Borrower Party pursuant to (and in accordance with the terms of) Section 10.04(14); provided further that only the amount paid by the relevant Purchasing Borrower Party with respect to any such assignment (if less than the par amount of Term Loans so assigned) shall be taken into account for purposes of calculating the amount of voluntary prepayments during the relevant Excess Cash Flow Period pursuant to this Section 2.08(2);
(ii) Second Lien Term Loans to the extent such voluntary prepayments are permitted hereunder;
(iii) ABL Loans (to the extent accompanied by a corresponding reduction in the commitments);
(iv) Other First Lien Indebtedness (and, in the case of any revolving indebtedness, to the extent accompanied by a corresponding reduction in the commitments); or
(v) Permitted Refinancing Indebtedness incurred to Refinance any of the foregoing Indebtedness (or Permitted Refinancing Indebtedness described in this clause (v)), in each case that is secured on a pari passu basis with the Term Loans (and, in the case of any revolving indebtedness, to the extent accompanied by a corresponding reduction in the commitments);
in each case, to the extent not financed with the proceeds of the issuance or the incurrence of Indebtedness (other than proceeds of revolving loans), the sale or issuance of Equity Interests, Specified Sale and Lease-Back Net Proceeds or Asset Sales; provided that any such voluntary prepayment that is made on or prior to the 110th day after the end of such Excess Cash Flow Period will not reduce Excess Cash Flow for the next succeeding Excess Cash Flow Period pursuant to this clause (b).
Not later than the date on which the Borrower is required to deliver financial statements with respect to the end of each Excess Cash Flow Period under Section 5.04(1), the Borrower will deliver to the Administrative Agent a certificate signed by a Financial Officer of the Borrower setting forth the amount, if any, of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail.
(3) The Borrower will apply 100% of the net cash proceeds from the incurrence, issuance or sale by the Borrower or any Restricted Subsidiary of any Indebtedness that is not Excluded Indebtedness to the prepayment of Term Loans, on or prior to the date which is five Business Days after the receipt of such net cash proceeds.
(4) Notwithstanding anything in this Section 2.08 to the contrary, any Lender may elect, by written notice to the Administrative Agent at least two Business Days prior to the required prepayment date, to decline all or any portion of any mandatory prepayment of its Term Loans pursuant to this Section 2.08 (other than clause (3) of this Section 2.08), in which case the aggregate amount of the prepayment that would have been applied to prepay Term Loans but was so declined may, subject to the terms of the Second Lien Credit Agreement, be retained by the
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Borrower and applied for any permitted purpose hereunder. Such prepayments will be applied on a pro rata basis to the then outstanding Term Loans of all Classes being prepaid irrespective of whether such outstanding Term Loans are ABR Loans or Eurocurrency Loans; provided that if no Lenders exercise the right to waive a given mandatory prepayment of the Term Loans pursuant to this Section 2.08(4), then, with respect to such mandatory prepayment, the amount of such mandatory prepayment will be applied first to Term Loans that are ABR Loans to the full extent thereof before application to Term Loans that are Eurocurrency Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.13.
(5) The Borrower will deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.08, (a) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (b) to the extent practicable, at least three Business Days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Term Loan being prepaid, the principal amount of each Term Loan (or portion thereof) to be prepaid, and the Section, sub-section or clause of this Agreement pursuant to which such prepayment is being made. Prepayment of the Term Loans pursuant to this Section 2.08 will be made without premium or penalty, accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment, and applied as directed by the Borrower or, absent such direction, to reduce scheduled amortization payments of Term Loans under Section 2.06(1) in direct order of maturity; provided that any prepayment of Incremental Term Loans, Other Term Loans or Extended Term Loans will be applied in the order specified in the applicable Permitted Amendment. No payments under Section 2.13 will be required in connection with a prepayment of Term Loans pursuant to this Section 2.08. In the event of any prepayment of Term Loans pursuant to this Section 2.08 at a time when Term Loans of more than one Class remain outstanding, the aggregate amount of such prepayment will be allocated between each Class of Term Loans pro rata based on the aggregate principal amount of outstanding Term Loans of each such Class (except as otherwise provided in the applicable Permitted Amendment, in each case with respect to the applicable Class of Term Loans).
(6) If the Borrower or any of its Restricted Subsidiaries enters into a Specified Sale and Lease-Back Transaction after the Closing Date, which results in the receipt by the Borrower or such Restricted Subsidiary of Specified Sale and Lease-Back Net Proceeds, the Borrower shall prepay on or prior to the date which is ten Business Days after the date of receipt of such Specified Sale and Lease-Back Net Proceeds an aggregate principal amount of Term Loans equal to 100.0% of such Specified Sale and Lease-Back Net Proceeds (other than Net Cash Proceeds attributable to any ABL Priority Collateral Asset Sale).
(7) Notwithstanding any provisions of this Section 2.08 to the contrary,
(a) to the extent that any or all of the Net Cash Proceeds or Excess Cash Flow giving rise to a prepayment event pursuant to this Section 2.08 is prohibited or delayed by (i) applicable local law (including laws related to financial assistance, corporate benefit, thin capitalization, capital maintenance, liquidity maintenance and similar legal principles, and in respect of restrictions on upstreaming of cash intra-group and the fiduciary and statutory duties of the Board of Directors of the applicable Restricted Subsidiaries) or (ii) material organizational document restrictions as a result of minority ownership, in each case from being repatriated to the United States, the portion of such Net Cash Proceeds or Excess Cash Flow so affected will not be required to be applied to prepay Term Loans at the times provided in this Section 2.08, but may be retained by the Borrower or the applicable Subsidiary for so long, but only so long, as the applicable local law or restriction will not permit repatriation to the United States. Once such repatriation of any of such affected Net Cash Proceeds or Excess Cash Flow is permitted under the applicable local law or restriction, such repatriation will be effected promptly and such repatriated Net Cash Proceeds or Excess Cash Flow will be promptly applied (net of additional taxes payable or reserved against as a result thereof) to the prepayment of the Term Loans pursuant to this Section 2.08 to the extent provided herein; provided that the Borrower hereby agrees, and will cause any applicable Subsidiary, to promptly take all commercially reasonable actions required by applicable local law to permit any such repatriation; or
(b) to the extent that a Responsible Officer of the Borrower has reasonably determined in good faith that repatriation of any of or all the Net Cash Proceeds or Excess Cash Flow giving rise to a prepayment event pursuant to this Section 2.08 would have an adverse tax cost consequence, the Net Cash Proceeds or Excess Cash Flow so affected will not be required to be applied to prepay Term Loans at the
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times provided in this Section 2.08, but may be retained by the Borrower or the applicable Subsidiary without being repatriated; provided that, in the case of this subclause (b), on or before the date on which any Net Cash Proceeds so retained would otherwise have been required to be applied to reinvestments or prepayments pursuant to this Section 2.08 (or such Excess Cash Flow would have been so required if it were Net Cash Proceeds to be applied to a prepayment):
(i) the Borrower applies an amount equal to such Net Cash Proceeds or Excess Cash Flow to such reinvestments or prepayments as if such Net Cash Proceeds or Excess Cash Flow had been repatriated, less the amount of additional taxes that would have been payable or reserved against if such Net Cash Proceeds or Excess Cash Flow had been repatriated; or
(ii) such Net Cash Proceeds or Excess Cash Flow are applied towards the permanent extinguishment (including, in the case of a revolving facility, a permanent reduction of commitments only) of Indebtedness of any Subsidiary.
For purposes of this Section 2.08(7), references to law mean, with respect to any Person, (1) the common law and any federal, state, local, foreign, multinational or international statutes, laws, treaties, judicial decisions, standards, rules and regulations, guidances, guidelines, ordinances, rules, judgments, writs, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, governmental agreements and governmental restrictions (including administrative or judicial precedents or authorities), in each case whether now or hereafter in effect, and (2) the interpretation or administration thereof by, and other determinations, directives, requirements or requests of, any Governmental Authority, in each case whether or not having the force of law and that are applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
SECTION 2.09. Fees .
(1) The Borrower agrees to pay to the Administrative Agent, for its own account, the fees set forth in that certain Administrative Agency Fee Letter, dated as of February 3, 2017 (the Administrative Agency Fee Letter ), by and between the Borrower and Administrative Agent, at the times and on the terms specified therein (the Administrative Agent Fees ).
(2) The Administrative Agent Fees will be paid on the dates due and payable, in immediately available funds, to the Administrative Agent at the Payment Office for distribution, if and as appropriate, among the Lenders. Once paid, none of the Administrative Agent Fees will be refundable under any circumstances.
SECTION 2.10. Interest .
(1) The Term Loans comprising each ABR Borrowing will bear interest at the ABR plus the Applicable Margin.
(2) The Term Loans comprising each Eurocurrency Borrowing will bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.
(3) Following the occurrence and during the continuation of a Specified Event of Default, the Borrower will pay interest on overdue amounts hereunder at a rate per annum equal to (i) in the case of overdue principal of, or interest on, any Term Loan, 2.00% plus the rate otherwise applicable to such Term Loan as provided in the preceding paragraphs of this Section 2.10 or (ii) in the case of any other overdue amount, 2.00% plus the rate applicable to ABR Loans as provided in clause (1) of this Section 2.10.
(4) Accrued interest on each Term Loan will be payable in arrears (i) on each Interest Payment Date for such Term Loan and (ii) on the applicable Maturity Date; provided that (A) interest accrued pursuant to paragraph (3) of this Section 2.10 will be payable on demand, (B) in the event of any repayment or prepayment of any Term Loan, accrued interest on the principal amount repaid or prepaid will be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Term Loan will be payable on the effective date of such conversion.
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(5) All interest hereunder will be computed on the basis of a year of 360 days, except that interest computed by reference to the ABR at times when the ABR is based on the prime rate, will be computed on the basis of a year of 365 days (or 366 days in a leap year), and, in each case, will be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable ABR, Adjusted LIBO Rate or LIBO Rate will be determined by the Administrative Agent, and such determination will be conclusive absent manifest error.
SECTION 2.11. Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurocurrency Borrowing:
(1) the Administrative Agent determines (which determination will be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(2) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Term Loans included in such Borrowing for such Interest Period;
then the Administrative Agent will give notice thereof to the Borrower and the applicable Lenders by telephone, facsimile transmission or e mail as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (a) any Interest Election Request that requests the conversion of any applicable Borrowing to, or continuation of any such Borrowing as, a Eurocurrency Borrowing will be ineffective and such Borrowing will be converted to or continued as on the last day of the Interest Period applicable thereto an ABR Borrowing and (b) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing will be made as an ABR Borrowing.
SECTION 2.12. Increased Costs .
(1) If any Change in Law:
(a) imposes, modifies or deems applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate);
(b) imposes on any Lender or the London interbank market any other condition (other than Taxes), costs or expense affecting this Agreement or Eurocurrency Loans made by such Lender; or
(c) subjects any Recipient to any Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in clauses (2) through (4) of the definition of Excluded Taxes and (iii) Connection Income Taxes) with respect to its loans, loan principal, letters of credit, commitments or other obligations, or deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Term Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(2) If any Lender determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lenders capital or on the capital of such Lenders holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Term Loans made by such Lender, to a level below that which such Lender or such Lenders holding company could have achieved but for such Change in Law (taking into consideration such Lenders policies and the policies of such Lenders holding company with respect to capital adequacy or liquidity), then from time to time the Borrower will
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pay to such Lender such additional amount or amounts as will compensate such Lender or such Lenders holding company for any such reduction suffered.
(3) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as applicable, as specified in paragraph (1) or (2) of this Section 2.12 will be delivered to the Borrower and will be conclusive absent manifest error. The Borrower will pay such Lender the amount shown as due on any such certificate within ten days after receipt thereof.
(4) Promptly after any Lender has determined that it will make a request for increased compensation pursuant to this Section 2.12, such Lender will notify the Borrower thereof. Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.12 will not constitute a waiver of such Lenders right to demand such compensation; provided that the Borrower will not be required to compensate a Lender pursuant to this Section 2.12 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders intention to claim compensation therefor; provided, further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180 day period referred to above will be extended to include the period of retroactive effect thereof.
SECTION 2.13. Break Funding Payments . Except as otherwise set forth herein, the Borrower will compensate each Lender for the actual out-of-pocket loss, cost and expense (excluding loss of anticipated profits) attributable to the following events:
(1) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default);
(2) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto;
(3) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto; or
(4) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.16.
A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.13 will be delivered to the Borrower and will be conclusive absent manifest error. The Borrower will pay such Lender the amount shown as due on any such certificate within ten days after receipt thereof.
SECTION 2.14. Taxes .
(1) Any and all payments by or on account of any obligation of any Loan Party hereunder will be made free and clear of and without deduction for any Taxes, except as required by applicable law; provided that if any Taxes are required to be deducted by any applicable withholding agent under any applicable law from such payments (as determined in the good faith discretion of the Loan Party or the applicable withholding agent), then (a) the applicable withholding agent will make such deductions; (b) the applicable withholding agent will timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law, and (c) if such Tax is an Indemnified Tax, the sum payable by the Loan Party will be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) the Administrative Agent or any Lender, as applicable, receives an amount equal to the amount it would have received had no such deductions been made.
(2) In addition, the Loan Parties will pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
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(3) The Loan Parties will indemnify the Administrative Agent and each Lender, within ten days after written demand therefor, for the full amount of any Indemnified Taxes paid by the Administrative Agent or such Lender on or with respect to any payment by or on account of any obligation of such Loan Party hereunder (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.14) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to such Loan Party by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, will be conclusive absent manifest error.
(4) As soon as practicable after any payment of Indemnified Taxes by a Loan Party to a Governmental Authority pursuant to this Section 2.14, such Loan Party will deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(5)
(a) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any
Loan Document will deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower
or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, will deliver such other
documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.14(5)(b), 2.14(5)(c)
and
2.14(6) below) will not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or
commercial position of such Lender.
(b) Without limiting the effect of Section 2.14(5)(a) above, each Lender that is a U.S. Person will deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), original copies of Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax.
(c) Without limiting the effect of Section 2.14(5)(a) above, each Foreign Lender will, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the Recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), two original copies of whichever of the following is applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN or W-8BENE, as applicable (or any subsequent versions thereof or successors thereto), claiming eligibility for benefits of an income tax treaty to which the United States of America is a party;
(ii) duly completed copies of Internal Revenue Service Form W-8ECI (or any subsequent versions thereof or successors thereto);
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 871(h) or 881(c) of the Code, (A) a certificate substantially in the form of the applicable Exhibit F to the effect that such Foreign Lender is not:
(x) a bank within the meaning of Section 881(c)(3)(A) of the Code;
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(y) a 10 percent shareholder of the Borrower within the meaning of Section 871(h)(3) or 881(c)(3)(B) of the Code; or
(z) a controlled foreign corporation described in Section 881(c)(3)(C) of the Code; and
(B) duly completed copies of Internal Revenue Service Form W 8BEN or W-8BEN-E, as applicable (or any subsequent versions thereof or successors thereto);
(iv) duly completed copies of Internal Revenue Service Form W-8IMY, together with forms and certificates described in clauses (i) through (iii) above (and any additional Form W-8IMYs) as may be required; or
(v) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made.
In addition, each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(6) If a payment made to a Recipient under any Loan Document would be subject to any Tax imposed by FATCA if such Recipient were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Recipient will deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Recipient has complied with such Recipients obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (6), FATCA will include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it will update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(7) Each Lender hereby authorizes the Administrative Agent to deliver to the Loan Parties and to any successor Administrative Agent any documentation by such Lender to the Administrative Agent pursuant to Section 2.14(5) and 2.14(6).
(8) If the Administrative Agent or any Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by a Loan Party or with respect to which such Loan Party has paid additional amounts pursuant to this Section 2.14, it will pay over promptly an amount equal to such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.14 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (including any Taxes imposed with respect to such refund), and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of the Administrative Agent or such Lender, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party pursuant to this Section 2.14(8) ( plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section 2.14(8) will not be construed to require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems, in good faith, to be confidential) to the Loan Parties or any other Person.
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(9) Each partys obligations under this Section 2.14 will survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
(10) For purposes of this Section 2.14, the term applicable law includes FATCA.
SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs .
(1) Unless otherwise specified, (a) the Borrower will make each payment required to be made by it hereunder (whether of principal, interest, fees or otherwise) prior to 2:00 p.m., New York City time, at the Payment Office, except that payments pursuant to Sections 2.12, 2.13, 2.14 and 10.05 will be made directly to the Persons entitled thereto; and (b) each such payment will be made, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. The Administrative Agent will distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof and will make settlements with the Lenders with respect to other payments at the times and in the manner provided in this Agreement. Except as otherwise provided herein, if any payment hereunder is due on a day that is not a Business Day, the date for payment will be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon will be payable for the period of such extension. Any payment required to be made by the Administrative Agent hereunder will be deemed to have been made by the time required if the Administrative Agent, at or before such time, has taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.
(2) Except as otherwise provided in this Agreement, if (a) at any time insufficient funds are received by and available to the Administrative Agent from the Borrower to pay fully all amounts of principal, interest and fees then due from the Borrower hereunder or (b) at any time an Event of Default shall have occurred and be continuing and the Administrative Agent will receive proceeds of Term Priority Collateral in connection with the exercise of remedies, such funds will be applied in accordance with Section 5.02 of the Security Agreement (subject to the application of proceeds provisions contained in the Intercreditor Agreement).
(3) Except as otherwise provided in this Agreement, if any Lender, by exercising any right of set-off or counterclaim or otherwise, obtains payment in respect of any principal of or interest on any of its Term Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Term Loans than the proportion received by any other Lender, then the Lender receiving such greater proportion will purchase (for cash at face value) participations in the Term Loans of other Lenders to the extent necessary so that the benefit of all such payments will be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Term Loans; provided that (a) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations will be rescinded and the purchase price restored to the extent of such recovery, without interest, and (b) the provisions of this paragraph (3) will not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender or a Disqualified Institution) or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Term Loans to any assignee or participant. The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
(4) Unless the Administrative Agent has received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the
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Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(5) If any Lender fails to make any payment required to be made by it pursuant to Section 2.03(1) or 2.15(3), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lenders obligations under Section 2.03(1) or 2.15(3), as applicable, until all such unsatisfied obligations are fully paid.
SECTION 2.16. Mitigation Obligations; Replacement of Lenders .
(1) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any Indemnified Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender will use reasonable efforts to designate a different Lending Office for funding or booking its Term Loans hereunder or assign its rights and obligations hereunder to another of its offices, branches or Affiliates if, in the reasonable judgment of such Lender, such designation or assignment (a) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as applicable, in the future and (b) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(2) If any Lender requests compensation under Section 2.12 or is a Defaulting Lender, or if the Borrower is required to pay any Indemnified Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then the Borrower may, at its sole expense, upon notice to such Lender and the Administrative Agent, either (a) prepay such Lenders outstanding Term Loans hereunder in full on a non- pro rata basis without premium or penalty (including with respect to the processing and recordation fee referred to in Section 10.04(2)(b)(ii)) or (b) require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that will assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) in the case of clause (b) above, the Borrower has received the prior written consent of the Administrative Agent, which consent will not unreasonably be withheld, if a consent by the Administrative Agent would be required under Section 10.04 for an assignment of Term Loans to such assignee, (ii) such Lender has received payment of an amount equal to the outstanding principal of its Term Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments thereafter. Nothing in this Section 2.16 will be deemed to prejudice any rights that the Borrower may have against any Lender that is a Defaulting Lender.
(3) If any Lender (such Lender, a Non-Consenting Lender ) has failed to consent to a proposed amendment, waiver, discharge or termination that, pursuant to the terms of Section 10.08, requires the consent of such Lender and with respect to which the Required Lenders have granted their consent, then the Borrower will have the right (unless such Non-Consenting Lender grants such consent) at its sole expense, to either (a) prepay such Lenders outstanding Term Loans hereunder in full on a non- pro rata basis without premium or penalty (including with respect to the processing and recordation fee referred to in Section 10.04(2)(b)(ii)) or (b) replace such Non-Consenting Lender by deeming such Non-Consenting Lender to have assigned its Term Loans and its Commitments hereunder to one or more assignees reasonably acceptable to the Administrative Agent if a consent by the Administrative Agent would be required under Section 10.04 for an assignment of Term Loans to such Assignee; provided that (i) all Obligations of the Borrower owing to such Non-Consenting Lender (including accrued Fees and any amounts due under Section 2.12, 2.13, 2.14 or 2.21) being removed or replaced will be paid in full to such Non-Consenting Lender concurrently with such removal or assignment and (ii) in the case of clause (b) above, the replacement Lender will purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. No action by or consent of the Non-Consenting Lender will be necessary in connection with such removal or assignment, in the case of clause (b) above, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment, the Borrower, the Administrative Agent, such Non-Consenting Lender and the replacement Lender will
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otherwise comply with Section 10.04; provided that if such Non-Consenting Lender does not comply with Section 10.04 within three Business Days after the Borrowers request, compliance with Section 10.04 will not be required to effect such assignment.
SECTION 2.17. Illegality . If any Lender reasonably determines that any change in law has made it unlawful, or if any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable Lending Office to make or maintain any Eurocurrency Loans, then, upon notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans or to convert ABR Borrowings to Eurocurrency Borrowings will be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower will upon demand from such Lender (with a copy to the Administrative Agent), either convert all Eurocurrency Borrowings of such Lender to ABR Borrowings, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Term Loans. Upon any such prepayment or conversion, the Borrower will also pay accrued interest on the amount so prepaid or converted.
SECTION 2.18. Incremental Facilities .
(1) Notice . At any time and from time to time, on one or more occasions, subject to the terms and conditions set forth herein, the Borrower may, by written notice to the Administrative Agent, increase the aggregate principal amount of any outstanding Class of Term Loans or add one or more additional Classes of term loans under the Loan Documents (the Incremental Term Loans ; each such increase or tranche, an Incremental Facility ).
(2) Ranking . Incremental Term Loans shall be secured on a pari passu basis with all other Tranche B Term Loans.
(3) Size . The principal amount of Incremental Facilities incurred pursuant to the Non-Ratio Based Incremental Facility Cap and Incremental Equivalent Term Debt incurred in reliance on the Non-Ratio Based Incremental Facility Cap will not exceed, in the aggregate, an amount equal to (x) (I) $475.0 million less (II) the aggregate principal amount of any free and clear incremental indebtedness incurred under the Second Lien Credit Facility, plus (y) the aggregate principal amount of voluntary prepayments of Term Loans or voluntary prepayments of ABL Loans under the ABL Credit Facility (if accompanied by a corresponding reduction in commitments under the ABL Credit Agreement) (the Non-Ratio Based Incremental Facility Cap ); provided that the Borrower may incur additional Incremental Facilities without regard to the Non-Ratio Based Incremental Facility Cap so long as the Senior Secured First Lien Net Leverage Ratio (determined on the date on which the applicable Incremental Facilities is incurred (and after giving effect to such incurrence) and after giving effect to any acquisition or other transaction consummated in connection with the incurrence of such Incremental Facility) is equal to or less than 4.60 to 1.00 (collectively, the Available Incremental Term Loan Facility Amount ).
Each tranche of Incremental Term Loans will be in an integral multiple of $1.0 million and in an aggregate principal amount that is not less than $10.0 million (or such lesser minimum amount approved by the Administrative Agent in its reasonable discretion); provided that such amount may be less than the applicable minimum amount or integral multiple amount if such amount represents all the remaining availability under the Available Incremental Term Loan Facility Amount or the Non-Ratio Based Incremental Facility Cap.
(4) Incremental Lenders . Incremental Term Loans may be provided by any existing Lender (it being understood that no existing Lender will have an obligation to provide Incremental Term Loans) or any Additional Lender; provided that the Administrative Agent shall have consented (such consent not to be unreasonably withheld, delayed or conditioned) to any Additional Lenders providing such Incremental Term Loans if such consent by the Administrative Agent would be required under Section 10.04 for an assignment of Term Loans to such Additional Lender.
(5) Incremental Facility Amendments . Each Incremental Facility will become effective pursuant to an amendment (each, an Incremental Facility Amendment ) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender or Additional Lender providing such Incremental Facility (the Incremental Lenders ) and the Administrative Agent. The Administrative Agent will promptly notify each Lender
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as to the effectiveness of each Incremental Facility Amendment. Any Incremental Amendment may, without the consent of any Person other than the Administrative Agent, the Borrower and the Incremental Lender, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate to effect the provisions of this Section 2.19 and reflect the existence and terms of the Incremental Facility and the Incremental Term Loans evidenced thereby and each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Facility Amendment, this Agreement and the other Loan Documents, as applicable, will be deemed amended to the extent (but only to the extent) necessary to effect the provisions of this Section 2.19 and reflect the existence and terms of the Incremental Facility and the Incremental Term Loans evidenced thereby. This Section 2.19 supersedes any provisions in Section 10.08 to the contrary.
(6) Conditions . The availability of Incremental Term Loans will be subject solely to the following conditions:
(a) no Default or Event of Default shall have occurred and be continuing on the date such Incremental Term Loans are incurred or would exist immediately after giving effect thereto; provided, that if the Incremental Facility is being incurred in connection with a Limited Condition Acquisition, (i) the date of determination of such condition shall be the LCA Test Date and (ii) on the date such Incremental Facility is incurred (or commitments in respect thereof are provided), no Specified Event of Default shall have occurred and be continuing or would exist immediately after giving effect thereto;
(b) the representations and warranties in the Loan Documents will be true and correct in all material respects (except for representations and warranties that are already qualified by materiality, which representations and warranties will be accurate in all respects) immediately prior to, and immediately after giving effect to, the incurrence of such Incremental Term Loans; provided, that if the Incremental Facility is being incurred in connection with a Limited Condition Acquisition, (i) the date of determination of such condition shall be the LCA Test Date and (ii) on the date of incurrence of such Incremental Facility (or the date on which commitments in respect thereof are provided), the only representations and warranties that will be required to be true and correct in all material respects shall be the Specified Representations; and
(c) such other conditions (if any) as may be required by the Incremental Lenders providing such Incremental Term Loans, unless such other conditions are waived by such Incremental Lenders.
(7) Terms . Each notice delivered pursuant to this Section 2.18 will set forth the amount and proposed terms of the relevant Incremental Term Loans. The terms of each tranche of Incremental Term Loans will be as agreed between the Borrower and the Incremental Lenders providing such Incremental Term Loans; provided that:
(a) except for interim or bridge financings that provide for automatic conversion, subject to customary conditions, to Indebtedness meeting the requirements of this subclause (a) the final maturity date of such Incremental Term Loans will be no earlier than the Latest Maturity Date of the Tranche B Term Loans;
(b) except for interim or bridge financings that provide for automatic conversion, subject to customary conditions, to Indebtedness meeting the requirements of this subclause (b) the Weighted Average Life to Maturity of such Incremental Term Loans will be no shorter than the longest remaining Weighted Average Life to Maturity of the Tranche B Term Loans;
(c) such Incremental Term Loans may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any mandatory repayments or prepayments of the Tranche B Term Loans; and
(d) subject to clauses (a) and (b) above, the amortization schedules applicable to such Incremental Term Loans will be as determined by the Borrower and the Incremental Lenders providing such Incremental Term Loans.
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(8) Pricing .
(a) Subject to clause (b) below, (i) the interest rate, fees and original issue discount for any Incremental Term Loans will be as determined by a Responsible Officer of the Borrower and the Incremental Lenders providing such Incremental Term Loans;
(b) If the yield (as determined below) on any such Incremental Term Loans (such yield, the Incremental Yield ) exceeds the yield (as determined below) on the Tranche B Term Loans by more than 50 basis points, then the interest margins for the Tranche B Term Loans will automatically be increased to a level such that the yield on the Tranche B Term Loans will be 50 basis points below the Incremental Yield on such Incremental Term Loan. Any increase in yield on the Tranche B Term Loans required pursuant to this Section 2.18(8)(b) and resulting from the application of an Adjusted LIBO Rate or ABR floor on any Incremental Term Loans will be effected solely through an increase in such floor (or an implementation thereof, as applicable) in respect of the Tranche B Term Loans. In determining whether the Incremental Yield on Incremental Term Loans exceeds the yield on the Tranche B Term Loans by more than 50 basis points, (A) such determination will take into account interest margins (and any coupon payable, if applicable), minimum Adjusted LIBO Rate, minimum ABR, upfront fees and original issue discount on the applicable Term Loans, with upfront fees and original issue discount being equated to interest margins or coupon based on an assumed four-year life to maturity, but will exclude any arrangement, syndication, structuring, commitment, ticking, placement, underwriting, or other fees payable in connection therewith that is not shared among the applicable lenders or holders of such Indebtedness on a pro rata basis and (B) with respect to the Tranche B Term Loans, to the extent the Adjusted LIBO Rate on the closing date of the Incremental Facility is less than any LIBO Rate floor then applicable to the Tranche B Term Loans, the amount of such difference shall be deemed added to the applicable rate for such Tranche B Term Loans solely for the purposes of determining whether an increase in the interest margins for such Tranche B Term Loans shall be required.
SECTION 2.19. Other Term Loans .
(1) Other Term Loans . Credit Agreement Refinancing Indebtedness may, at the election of the Borrower, take the form of new Term Loans under an additional Term Facility hereunder ( Other Term Loans ) pursuant to a Refinancing Amendment.
(2) Refinancing Amendments . The effectiveness of any Refinancing Amendment will be subject only to the satisfaction on the date thereof of such of the conditions set forth in Section 4.01 as may be requested by the providers of Other Term Loans. The Administrative Agent will promptly notify each Lender as to the effectiveness of each Refinancing Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement will be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Other Term Loans incurred pursuant thereto (including any amendments necessary to treat the Term Loans subject thereto as Other Term Loans).
(3) Required Consents . Any Refinancing Amendment may, without the consent of any Person other than the Administrative Agent, the Borrower and the Lenders or Additional Lenders providing Other Term Loans, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.19. This Section 2.19 supersedes any provisions in Section 10.08 to the contrary.
(4) Providers of Other Term Loans . Any Lender approached to provide all or a portion of Other Term Loans may elect or decline, in its sole discretion, to provide such Other Term Loans (it being understood that there is no obligation to approach any existing Lenders to provide Other Term Loans). The consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned) will be required in respect of any Person providing Other Term Loans if such consent would be required under Section 10.04 for an assignment of Term Loans to such Person.
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SECTION 2.20. Extensions of Term Loans .
(1) Extension Offers . Pursuant to one or more offers (each, an Extension Offer ) made from time to time by the Borrower to all Lenders of Term Loans with a like Maturity Date, the Borrower may, by written notice to the Administrative Agent from time to time, request an extension of the Maturity Date of Term Loans and otherwise modify the terms of Term Loans pursuant to the terms set forth in the relevant Extension Offer (each, an Extension ). Each Extension Offer will specify the minimum amount of Term Loans with respect to which an Extension Offer may be accepted, which will be an integral multiple of $1.0 million and an aggregate principal amount that is not less than $50.0 million (or (a) if less, the aggregate principal amount of such Term Loans or (b) such lesser minimum amount as is approved by the Administrative Agent, such consent not to be unreasonably withheld, conditioned or delayed), and will be made on a pro rata basis to all Lenders of Term Loans of the applicable Class. If the aggregate outstanding principal amount of Term Loans (calculated on the face amount thereof) in respect of which Lenders have accepted an Extension Offer exceeds the maximum aggregate principal amount of Term Loans offered to be extended pursuant to an Extension Offer, then the Term Loans of such Lenders will be extended ratably up to such maximum amount based on the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer. No Extension Offer or Extension Amendment (defined as follows) shall be required to be subject to any most favored nation pricing provisions. Each Lender accepting an Extension Offer is referred to herein as an Extending Term Lender , and the Term Loans held by such Lender accepting an Extension Offer is referred to herein as Extended Term Loans .
(2) Extension Amendments . The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Agreement and the other Loan Documents (an Extension Amendment ) with the Borrower as may be necessary in order to establish new Classes in respect of Term Loans extended pursuant to an Extension Offer and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches. This Section 2.20 supersedes any provisions in Section 10.08 to the contrary. Except as otherwise set forth in an Extension Offer, there will be no conditions to the effectiveness of an Extension Amendment. Extensions will not constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.
(3) Terms of Extension Offers and Extension Amendments . The terms of any Extended Term Loans will be set forth in an Extension Offer and as agreed between the Borrower and the Extending Term Lenders accepting such Extension Offer; provided that:
(a) the final maturity date of such Extended Term Loans will be no earlier than the Latest Maturity Date of the Term Loans subject to such Extension Offer;
(b) the Weighted Average Life to Maturity of such Extended Term Loans will be no shorter than the remaining Weighted Average Life to Maturity of the Term Loans subject to such Extension Offer;
(c) such Extended Term Loans may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any mandatory prepayments of Term Loans;
(d) such Extended Term Loans shall not be secured by any assets or property that do not constitute Collateral;
(e) such Extended Term Loans are not guaranteed by any Subsidiary of the Borrower other than a Subsidiary Loan Party; and
(f) except as to pricing terms (interest rate, fees, funding discounts and prepayment premiums) and maturity, the terms and conditions of such Extended Term Loans are substantially identical to (including as to ranking and priority), or, taken as a whole, no more favorable to the lenders or holders providing such Indebtedness than, those applicable to the Term Loans subject to such Extension Offer, as determined in good faith by a Responsible Officer of the Borrower.
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Any Extended Term Loans will constitute a separate Class of Term Loans from the Term Loans held by Lenders that did not accept the applicable Extension Offer.
(4) Required Consents . No consent of any Lender or any other Person will be required to effectuate any Extension, other than the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or condition), the Borrower and the applicable Extending Term Lender. The transactions contemplated by this Section 2.20 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Term Loans on such terms as may be set forth in the relevant Extension Offer) will not require the consent of any other Lender or any other Person, and the requirements of any provision of this Agreement (including Sections 2.08 and 2.15) or any other Loan Document that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.20 will not apply to any of the transactions effected pursuant to this Section 2.20.
SECTION 2.21. Repricing Event . In the event that, prior to the six month anniversary of the Closing Date, the Borrower refinances or makes any prepayment of, or amends the terms of, any Class of Term Loans in connection with any Repricing Event (or causes any Class of Term Loans to be mandatorily assigned pursuant to the terms of Sections 2.16(3) or 10.04(7) hereof, in each case, in connection with a Repricing Event), the Borrower will pay to the Administrative Agent, for the ratable account of each applicable Lender, a payment of 1.00% of the aggregate principal amount of any such Term Loans so refinanced, prepaid or amended (or subject to mandatory assignment), as the case may be.
ARTICLE III
Representations and Warranties
With respect to any Borrowing made on the Closing Date (or after the Closing Date pursuant to Section 2.18, to the extent required by Section 2.18(6)), the Borrower, with respect to itself and each of the Restricted Subsidiaries, and Holdings, solely with respect to Sections 3.01, 3.02, 3.03, 3.04 and 3.19, will represent and warrant to each Agent and to each of the Lenders that:
SECTION 3.01. Organization; Powers . Each of Holdings, the Borrower and each Restricted Subsidiary:
(1) is a partnership, limited liability company, corporation, or trust duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization (to the extent such status or an analogous concept applies to such an organization);
(2) has all requisite power and authority to own its property and assets and to carry on its business as now conducted;
(3) is qualified to do business in each jurisdiction where such qualification is required, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect; and
(4) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder.
SECTION 3.02. Authorization . The execution, delivery and performance by the Loan Parties of each of the Loan Documents to which it is a party, the Borrowings hereunder and the Transactions:
(1) have been duly authorized by all corporate, stockholder, partnership, limited liability company or other applicable action required to be taken by the Loan Parties; and
(2) will not:
(a) violate:
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(i) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents (including any partnership, limited liability company or operating agreement or by-laws) of any Loan Party;
(ii) any applicable order of any court or any rule, regulation or order of any Governmental Authority; or
(iii) any provision of any indenture, certificate of designation for preferred stock, agreement or other instrument to which any Loan Party is a party or by which any of them or any of their property is or may be bound;
(b) be in conflict with, result in a breach of, constitute (alone or with notice or lapse of time or both) a default under, or give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) or to a loss of a material benefit under, any such indenture, certificate of designation for preferred stock, agreement or other instrument; or
(c) result in the creation or imposition of any Lien upon any property or assets of any Loan Party, other than the Liens created by the Loan Documents and Permitted Liens;
except with respect to clauses (a) and (b) of this Section 3.02(2) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.03. Enforceability . This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to:
(1) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors rights generally;
(2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);
(3) implied covenants of good faith and fair dealing; and
(4) any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries.
SECTION 3.04. Governmental Approvals . No action, consent or approval of, registration or filing with or any other action by any Governmental Authority or third party is or will be required in connection with the Transactions, the perfection or maintenance of the Liens created under the Security Documents or the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral, except for:
(1) the filing of Uniform Commercial Code financing statements and equivalent filings in foreign jurisdictions;
(2) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions;
(3) filings which may be required under Environmental Laws;
(4) filings as may be required under the Exchange Act and applicable stock exchange rules in connection therewith;
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(5) such as have been made or obtained and are in full force and effect;
(6) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect; or
(7) filings or other actions listed on Schedule 3.04 .
SECTION 3.05. Title to Properties; Possession Under Leases .
(1) Each of the Borrower and the Subsidiary Loan Parties has valid fee simple title to, or valid leasehold interests in, or easements or other limited property interests in, all of its Real Properties and valid title to its tangible assets (excluding Intellectual Property Rights or other intellectual property which is the subject of Section 3.20), in each case, except for Permitted Liens or defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes, in each case, except where the failure to have such title, interest, easement or right would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Permitted Liens.
(2) Neither the Borrower nor any of the Restricted Subsidiaries has defaulted under any lease to which it is a party, except for such defaults as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Each of the Borrowers and the Restricted Subsidiaries leases is in full force and effect, except leases in respect of which the failure to be in full force and effect would not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.05 , on the Closing Date the Borrower and each of the Restricted Subsidiaries enjoys peaceful and undisturbed possession under all such leases, other than leases in respect of which the failure to enjoy peaceful and undisturbed possession would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.06. Subsidiaries .
(1) Schedule 3.06 sets forth as of the Closing Date the name and jurisdiction of incorporation, formation or organization of Holdings, the Borrower and each Restricted Subsidiary and, as to each Restricted Subsidiary, the percentage of each class of Equity Interests owned by the Borrower or by any other Subsidiary of the Borrower.
(2) As of the Closing Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments of any nature relating to any Equity Interests owned or held by Holdings, the Borrower or any Restricted Subsidiary.
SECTION 3.07. Litigation; Compliance with Laws .
(1) There are no actions, suits or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of the Borrower, threatened in writing against or affecting the Borrower or any Restricted Subsidiary or any business, property or rights of any such Person (but excluding any actions, suits or proceedings arising under or relating to any Environmental Laws, which are subject to Section 3.13), in each case, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(2) To the knowledge of the Borrower, none of the Borrower, any Restricted Subsidiary or their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any zoning, building, ordinance, code or approval, or any building permit, but excluding any Environmental Laws, which are subject to Section 3.13) or any restriction of record or agreement affecting any property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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SECTION 3.08. Federal Reserve Regulations .
(1) None of Holdings, the Borrower or any Restricted Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.
(2) No part of the proceeds of any Term Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund Indebtedness originally incurred for such purpose or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulations T, U or X.
SECTION 3.09. Investment Company Act . None of Holdings, the Borrower or any Guarantor is an investment company as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
SECTION 3.10. Use of Proceeds . The Borrower shall use the proceeds of the Term Loans made on the Closing Date to finance a portion of the Transactions.
SECTION 3.11. Tax Returns . Except as set forth on Schedule 3.11 :
(1) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of Holdings, the Borrower and the Restricted Subsidiaries has filed or caused to be filed all federal, state, local and non-U.S. Tax returns required to have been filed by it; and
(2) Each of Holdings, the Borrower and the Restricted Subsidiaries has timely paid or caused to be timely paid (a) all Taxes shown to be due and payable by it (taking into account any applicable extension) on the returns referred to in clause (1) of this Section 3.11 and (b) all other Taxes or assessments (or made adequate provision (in accordance with GAAP) for the payment of all Taxes due) with respect to all periods or portions thereof ending on or before the Closing Date, which Taxes, if not paid or adequately provided for, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, in each case except Taxes or assessments that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or any Restricted Subsidiary (as the case may be) has set aside on its books adequate reserves in accordance with GAAP.
SECTION 3.12. No Material Misstatements .
(1) All written factual information and written factual data (other than the Projections, estimates and information of a general economic or industry specific nature) concerning Holdings, the Borrower or any Restricted Subsidiary that has been made available to the Administrative Agent or the Lenders, directly or indirectly, by or on behalf of Holdings, the Borrower or any Restricted Subsidiary in connection with the Transactions, when taken as a whole and after giving effect to all supplements and updates provided thereto, is correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made.
(2) The Projections that have been made available to the Administrative Agent or the Lenders by or on behalf of the Borrower in connection with the Transactions, when taken as a whole, have been prepared in good faith based upon assumptions that are believed by the Borrower to be reasonable at the time made and at the time delivered to the Administrative Agent or the Lenders, it being understood by the Administrative Agent and the Lenders that:
(a) the Projections are merely a prediction as to future events and are not to be viewed as facts;
(b) the Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of Holdings, the Borrower and/or the Sponsors;
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(c) no assurance can be given that any particular Projections will be realized; and
(d) actual results may differ and such differences may be material.
SECTION 3.13. Environmental Matters . Except as set forth on Schedule 3.13 or as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:
(1) the Borrower and each of the Restricted Subsidiaries are in compliance with all Environmental Laws (including having obtained and complied with all permits, licenses and other approvals required under any Environmental Law for the operation of its business);
(2) neither the Borrower nor any Restricted Subsidiary has received notice of or is subject to any pending, or to the Borrowers knowledge, threatened action, suit or proceeding alleging a violation of, or liability under, any Environmental Law that remains outstanding or unresolved;
(3) to the Borrowers knowledge, no Hazardous Material is located at, on or under any property currently or formerly owned, operated or leased by the Borrower or any Restricted Subsidiary in violation of Environmental Laws and no Hazardous Material has been generated, owned, treated, stored, handled or controlled by the Borrower or any Restricted Subsidiary and transported to or Released at any location which, in each case, described in this clause (3), would reasonably be expected to result in liability to the Borrower or any Restricted Subsidiaries; and
(4) there are no agreements in which the Borrower or any Restricted Subsidiary has expressly assumed or undertaken responsibility for any known or reasonably anticipated liability or obligation of any other Person arising under or relating to Environmental Laws or Hazardous Materials.
SECTION 3.14. Security Documents .
(1) The Security Agreement is effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) legal and valid Liens on the Collateral described therein; and when financing statements in appropriate form are filed in the offices specified on Schedule IV to the Security Agreement, a short form grant of security interest in intellectual property (in substantially the form of Exhibit III to the Security Agreement (for trademarks), Exhibit IV to the Security Agreement (for patents) or Exhibit V to the Security Agreement (for copyrights) (any such short form grants of security interest in intellectual property, collectively, the Intellectual Property Security Agreements )) is properly filed in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and the Pledged Collateral described in the Security Agreement is delivered to the Collateral Agent, the Liens on the Collateral granted pursuant to the Security Agreement will constitute fully perfected Liens on all right, title and interest of the grantors in such Collateral in which (and to the extent) a security interest can be perfected under Article 9 of the Uniform Commercial Code by such filings, in each case prior to and superior in right of the Lien of any other Person (except for Permitted Liens).
(2) When financing statements in appropriate form are filed in the offices specified on Schedule IV to the Security Agreement and the Security Agreement or a summary thereof or an Intellectual Property Security Agreement is properly filed in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, the Liens on the Collateral granted pursuant to the Security Agreement shall constitute fully perfected Liens on all right, title and interest of the Loan Parties thereunder in the domestic intellectual property, in each case prior and superior in right to the Lien of any other Person (except for Permitted Liens) (it being understood that subsequent recordings in the United States Patent and Trademark Office or the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the grantors after the Closing Date).
(3) Notwithstanding anything herein (including this Section 3.14) or in any other Loan Document to the contrary, neither the Borrower nor any other Loan Party makes any representation or warranty as to the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity
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Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law.
SECTION 3.15. Location of Real Property and Leased Premises .
(1) Schedule 3.15(1) correctly identifies, in all material respects, as of the Closing Date, all material Real Property owned in fee by the Loan Parties ( Owned Material Real Property ). As of the Closing Date, the Loan Parties own in fee all the Real Property set forth as being owned by them on Schedule 3.15(1) .
(2) Schedule 3.15(2) lists correctly in all material respects, as of the Closing Date, all material Real Property leased by any Loan Party ( Leased Material Real Property ) and the addresses thereof. As of the Closing Date, the Loan Parties have in all material respects valid leases in all material Real Property set forth as being leased by them on Schedule 3.15(2) .
SECTION 3.16. Solvency . On the Closing Date, after giving effect to the consummation of the Transactions, including the making of the Term Loans hereunder and assuming that the payment of the Distribution occurs on the Closing Date, and after giving effect to the application of the proceeds of the Term Loans:
(1) the fair value of the assets of the Borrower and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities (subordinated, contingent or otherwise);
(2) the present fair saleable value of the property of the Borrower and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities (subordinated, contingent or otherwise) as such debts and other liabilities become absolute and matured;
(3) the Borrower and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities (subordinated, contingent or otherwise) as such liabilities become absolute and matured; and
(4) the Borrower and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.
For purposes of this Section 3.16, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.
SECTION 3.17. No Material Adverse Effect . Since January 31, 2016 there has been no event that has had, or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
SECTION 3.18. Insurance . Schedule 3.18 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of the Borrower or any Restricted Subsidiary as of the Closing Date. As of such date, such insurance is in full force and effect.
SECTION 3.19. USA PATRIOT Act; FCPA; OFAC; Anti-Terrorism .
(1) To the extent applicable, each of Holdings, the Borrower and their respective Subsidiaries is in compliance, in all material respects, with the USA PATRIOT Act.
(2) No part of the proceeds of the Term Loans will be used by Holdings, the Borrower or any of their respective Subsidiaries, directly or, to the knowledge of Holdings, the Borrower or any of their respective Subsidiaries, indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977 ( FCPA ).
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(3) None of Holdings, the Borrower or any of their respective Subsidiaries is any of the following:
(a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing effective September 24, 2001 (the Executive Order );
(b) a Person owned or Controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;
(c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any laws with respect to terrorism or money laundering;
(d) a Person that commits, threatens or conspires to commit or supports terrorism as defined in the Executive Order; or
(e) a Person that is named as a specially designated national and blocked Person on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control ( OFAC ) at its official website or any replacement website or other replacement official publication of such list and none of the proceeds of the Term Loans will be, directly or, to the knowledge of Holdings, the Borrower or any of their respective Subsidiaries, indirectly, offered, lent, contributed or otherwise made available to any Restricted Subsidiary, joint venture partner or other Person for the purpose of financing the activities of any Person currently the subject of sanctions administered by OFAC.
SECTION 3.20. Intellectual Property; Licenses, Etc . Except as set forth on Schedule 3.20 :
(1) except as would not reasonably be expected to have a Material Adverse Effect, the Borrower and each Restricted Subsidiary owns, or possesses the right to use, all of the patents, patent rights, trademarks, service marks, trade names, copyrights or mask works, domain names, trade secrets and other intellectual property rights (collectively, Intellectual Property Rights ) that are reasonably necessary for the operation of their respective businesses;
(2) except as would not reasonably be expected to have a Material Adverse Effect, to the knowledge of the Borrower, neither the Borrower nor any of the Restricted Subsidiaries nor any Intellectual Property Rights, product, process, method, substance, part or other material now, sold or offered by the Borrower or the Restricted Subsidiaries is infringing upon, misappropriating or otherwise violating Intellectual Property Rights of any Person; and
(3) no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrower, threatened, that could reasonably be expected to have a Material Adverse Effect.
SECTION 3.21. Employee Benefit Plans . Except as would not reasonably be expected to have a Material Adverse Effect, the Borrower and each of its ERISA Affiliates are in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, would reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, the present value of all accumulated benefit obligations under all Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plans, in the aggregate.
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ARTICLE IV
Conditions of Lending
SECTION 4.01. Conditions Precedent . The agreement of each Lender to make Term Loans on the Closing Date is subject solely to the satisfaction or waiver by the Administrative Agent, prior to or concurrently with the making of the Term Loans on the Closing Date, of the following conditions precedent:
(1) Loan Documents . The Administrative Agent shall have received this Agreement, the Security Agreement, Guaranty Agreement and each other Loan Document, in each case, dated as of the Closing Date, duly executed and delivered by a Responsible Officer of each of the Loan Parties party thereto.
(2) Borrowing Request . On or prior to the Closing Date, the Administrative Agent shall have received a Borrowing Request.
(3) ABL Credit Facility . The ABL Loan Documents required by the terms of the ABL Credit Agreement to be executed on the Closing Date shall have been duly executed and delivered by each Loan Party party thereto, and shall be in full force and effect, and prior to or substantially simultaneously with the initial Borrowings on the Closing Date, the Borrower shall have received at least $350.0 million in gross cash proceeds from the incurrence of the Initial ABL Borrowing.
(4) Second Lien Credit Facility . The Second Lien Loan Documents required by the terms of the Second Lien Credit Agreement to be executed on the Closing Date shall have been duly executed and delivered by each Loan Party party thereto, and shall be in full force and effect, and prior to or substantially simultaneously with the initial Borrowings on the Closing Date, the Borrower shall have received at least $625.0 million in gross cash proceeds from the incurrence of the Initial Second Lien Borrowing.
(5) Fees . All fees and expenses required to be paid to the Administrative Agent and the Arrangers on or prior to the Closing Date shall have been paid.
(6) Solvency Certificate . The Administrative Agent shall have received a solvency certificate substantially in the form attached hereto as Exhibit B .
(7) Closing Date Certificates . The Administrative Agent shall have received a certificate of a Responsible Officer of the Loan Parties dated the Closing Date and certifying:
(a) that attached thereto is a true and complete copy of the charter or other similar organizational document of such Loan Party, and each amendment thereto, certified (as of a date reasonably near the Closing Date) as being a true and correct copy thereof by the Secretary of State or other applicable Governmental Authority of the jurisdiction in which such Loan Party is organized;
(b) that attached thereto is a true and complete copy of a certificate of the Secretary of State or other applicable Governmental Authority of the jurisdiction in which such Loan Party is organized, dated reasonably near the Closing Date, listing the charter or other similar organizational document of such Person and each amendment thereto on file in such office and, if available, certifying that (i) such amendments are the only amendments to such Persons charter on file in such office, (ii) such Person has paid all franchise taxes to the date of such certificate and (iii) such Person is duly organized and in good standing under the laws of such jurisdiction;
(c) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which it is a party or any other document delivered in connection herewith on the Closing Date and certifying that such resolutions have not been modified, rescinded or amended and are in full force and effect; and
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(d) as to the incumbency and specimen signature of each Responsible Officer executing the Loan Documents specified in Section 4.01(1) (together with a certificate of another officer as to the incumbency and specimen signature of the Responsible Officer executing the certificate pursuant to this Section 4.01(7)).
(8) Legal Opinions . The Administrative Agent shall have received a customary legal opinion of (i) Latham & Watkins LLP, special New York counsel to the Loan Parties, (ii) The Feinberg Hanson LLP, special Massachusetts counsel to the Loan Parties and (iii) Venable LLP, special Maryland counsel to the Loan Parties.
(9) Pledged Equity Interests; Pledged Notes . Except as otherwise agreed by the Administrative Agent, the Administrative Agent shall have received the certificates representing the Equity Interests (if such Equity Interests are certificated) of each Subsidiary Loan Party, in each case to the extent such Equity Interests are included in the Collateral and required to be pledged pursuant to the Security Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof.
(10) Lien Searches . The Administrative Agent shall have received a completed Perfection Certificate dated as of the Closing Date and signed by a Responsible Officer of the Borrower, together with, if requested by the Administrative Agent at least 21 days prior to the Closing Date, the results of a search of Uniform Commercial Code filings made with respect to the Loan Parties (for purposes of this clause (10), giving effect to the Transactions) in the applicable jurisdiction of organization of each Loan Party and copies of the financing statements (or similar documents) disclosed by such search.
(11) Know Your Customer and Other Required Information . All documentation and other information required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, as has been reasonably requested in writing by the Administrative Agent at least ten calendar days prior to the Closing Date, will be provided not later than the date that is three Business Days prior to the Closing Date.
(12) Payoff Documentation . The Administrative Agent shall have received customary payoff letters evidencing the repayment of all outstanding Indebtedness and the termination of all commitments under each of the Existing First Lien Term Loan Agreement and the Existing Second Lien Credit Agreement, and the release of all respective liens, if any, in connection therewith.
(13) Intercreditor Agreement . The Administrative Agent shall have received an executed copy of the Intercreditor Agreement, amended pursuant to the terms thereof to, among other things, reflect the new administrative agents and collateral agents under the Term Facility and Second Lien Credit Facility, and which shall be in full force and effect as of the Closing Date.
(14) Representations and Warranties; Absence of Default . All representations and warranties contained in Article III of this Agreement shall be true and correct in all material respects on the Closing Date, except to the extent such representation or warranty specifically refers to an earlier date, in which case it shall be true and correct in all material respects as of such earlier date (in each case, any representation or warranty that is qualified as to materiality, Material Adverse Effect or similar language shall be true and correct in all respects) and no Default shall have occurred immediately after giving effect to the Transactions to occur on the Closing Date (assuming that the payment of the Distribution occurs on the Closing Date).
There are no conditions, implied or otherwise, to the making of Term Loans on the Closing Date other than as set forth in the preceding clauses (1) through (14) and upon satisfaction or waiver by the Administrative Agent of such conditions the Tranche B Term Loans will be made by the Lenders.
ARTICLE V
Affirmative Covenants
The Borrower covenants and agrees with each Lender that so long as this Agreement is in effect and until the Commitments have been terminated and the Obligations (other than Obligations in respect of (i) Specified
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Hedge Agreements and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) have been paid in full, unless the Required Lenders otherwise consent in writing, the Borrower will, and will cause its Restricted Subsidiaries, to, and will cause Holdings (solely with respect to Sections 5.01(1), 5.03, 5.06, 5.07 and 5.10(4)), to:
SECTION 5.01. Existence; Businesses and Properties .
(1) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except:
(a) in the case of a Restricted Subsidiary, where the failure to do so would not reasonably be expected to have a Material Adverse Effect; or
(b) in connection with a transaction permitted under Section 6.05.
(2) Do or cause to be done all things necessary to lawfully obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, Intellectual Property Rights, licenses and rights with respect thereto necessary to the normal conduct of its business and (b) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition (ordinary wear and tear excepted) and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times, in each case, except:
(a) as expressly permitted by this Agreement;
(b) such as may expire, be abandoned , be cancelled, lapse or disposed of in the ordinary course of business; or
(c) where the failure to do so would not reasonably be expected to have a Material Adverse Effect.
SECTION 5.02. Insurance .
(1) Maintain, with insurance companies reasonably believed to be financially sound and reputable, insurance in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations, and within 90 days of the Closing Date cause the Collateral Agent to be listed as a co-loss payee on property and casualty policies and as an additional insured on liability policies. The Borrower will furnish to the Administrative Agent or Collateral Agent, upon request, information in reasonable detail as to the insurance so maintained. Notwithstanding the foregoing, it is understood and agreed that no Loan Party will be required to maintain flood insurance other than with respect to any Mortgaged Property required to be so insured pursuant to the Flood Disaster Protection Act of 1973 or the National Flood Insurance Act of 1968, and the regulations promulgated thereunder, because such Mortgaged Property is located in an area which has been identified by the Secretary of Housing and Urban Development as a special flood hazard area.
(2) Use commercially reasonable efforts to: (a) if insurance is procured from insurance companies, obtain certificates and endorsements reasonably acceptable to the Administrative Agent with respect to property and casualty insurance; (b) cause each insurance policy referred to in this Section 5.02 and procured from an insurance company to provide that it shall not be cancelled, modified or not renewed (x) by reason of nonpayment of premium except upon not less than 10 days prior written notice thereof by the insurer to the Administrative Agent (giving the Administrative Agent the right to cure defaults in the payment of premiums) or (y) for any other reason except upon not less than 30 days prior written notice thereof by the insurer to the Administrative Agent; and (c) deliver to the Administrative Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the
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Administrative Agent, including an insurance binder) together with evidence reasonably satisfactory to the Administrative Agent of payment of the premium therefor.
SECTION 5.03. Taxes . Pay and discharge promptly when due all material Taxes imposed upon it or its income or profits or in respect of its property, before the same becomes delinquent or in default; provided that such payment and discharge will not be required with respect to any Tax if (a)(1) the validity or amount thereof is being contested in good faith by appropriate proceedings and (2) Holdings, the Borrower or any affected Restricted Subsidiary, as applicable, has set aside on its books reserves in accordance with GAAP with respect thereto or (b) such failure to pay or discharge would not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.04. Financial Statements, Reports, etc . Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders):
(1) within 90 days following the end of each fiscal year ended after the Closing Date (i), a consolidated balance sheet and related statements of operations, cash flows and owners equity showing the financial position of the Borrower and the Restricted Subsidiaries as of the close of such fiscal year and the consolidated results of its operations during such fiscal year and, in each case, starting with the following fiscal year, setting forth in comparative form the corresponding figures for the prior fiscal year, which consolidated balance sheet and related statements of operations, cash flows and owners equity will be audited by independent public accountants of recognized national standing, or such other accountants as are reasonably acceptable to the Administrative Agent, and accompanied by an opinion of such accountants (which opinion shall not be subject to any going concern statement, explanatory note or like qualification or exception (other than a going concern statement, explanatory note or like qualification or exception resulting from an upcoming maturity date occurring within one year from the time such opinion is delivered or anticipated (but not actual) covenant non-compliance)) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of the Borrower and the Restricted Subsidiaries on a consolidated basis in accordance with GAAP (the applicable financial statements delivered pursuant to this clause (1) being the Annual Financial Statements ) and (ii) a managements discussion and analysis of financial conditions and results of operations, discussing and analyzing the results of operations of the Borrower for the period covered by such Annual Financial Statements;
(2) within 45 days following the end of each of the first three fiscal quarters of each fiscal year, (i) a consolidated balance sheet and related statements of operations and cash flows showing the financial position of the Borrower and the Restricted Subsidiaries as of the close of such fiscal quarter and the consolidated results of its operations during such fiscal quarter and, in each case, the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, which consolidated balance sheet and related statements of operations and cash flows will be certified by a Responsible Officer of the Borrower on behalf of the Borrower as fairly presenting, in all material respects, the financial position and results of operations of the Borrower and the Restricted Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes, and (ii) a managements discussion and analysis of financial condition and results of operations, discussing and analyzing the results of operations of the Borrower for such fiscal quarter (the applicable financial statements delivered pursuant to this clause (2) being the Quarterly Financial Statements and, together with the Annual Financial Statements, the Required Financial Statements );
(3) concurrently with any delivery of Required Financial Statements, a certificate of a Financial Officer of the Borrower:
(a) certifying that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto;
(b) setting forth the calculation and uses of the Available Amount for the fiscal period then ended if the Borrower has used the Available Amount for any purpose during such fiscal period;
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(c) certifying a list of all Immaterial Subsidiaries, that each Subsidiary set forth on such list individually qualifies as an Immaterial Subsidiary and that all such Subsidiaries in the aggregate do not exceed the limitation set forth in clause (ii) of the definition of the term Immaterial Subsidiary;
(d) setting forth, in reasonable detail, the calculation of the Senior Secured First Lien Net Leverage Ratio for the most recent period of four consecutive fiscal quarters as of the close of such fiscal year or such fiscal quarter, as applicable; and
(e) certifying a list of all Unrestricted Subsidiaries at such time and that each Subsidiary set forth on such list qualifies as an Unrestricted Subsidiary;
(4) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials publicly filed by Holdings, the Borrower or any Restricted Subsidiary with the SEC or, after an initial public offering, distributed to its stockholders generally, as applicable;
(5) within 90 days following the end of each full fiscal year ended after the Closing Date, a consolidated annual budget for such fiscal year in the form customarily prepared by the Borrower (the Budget ), which Budget will in each case be accompanied by the statement of a Financial Officer of the Borrower on behalf of the Borrower to the effect that the Budget is based on assumptions believed by the Borrower to be reasonable as of the date of delivery thereof;
(6) upon the reasonable request of the Collateral Agent, concurrently with the delivery of the Annual Financial Statements, an updated Perfection Certificate (or, to the extent such request relates to specified information contained in the Perfection Certificate, such information) reflecting all changes since the date of the information most recently received pursuant to this paragraph (6) or Section 5.10;
(7) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any Restricted Subsidiary, in each case, as the Administrative Agent may reasonably request (for itself or on behalf of any Lender); and
(8) on a quarterly basis, at a time mutually agreed with Administrative Agent that is promptly after the delivery of the information required pursuant to clauses (1) and (2) for each fiscal quarter, participate in a conference call for Lenders to discuss the financial condition and results of operations of the Borrower and its Subsidiaries for the most recently-ended period for which financial statements have been delivered.
Anything to the contrary notwithstanding, the obligations in clauses (1) and (2) of this Section 5.04 may be satisfied with respect to financial information of the Borrower and the Restricted Subsidiaries by furnishing (1) the applicable financial statements of Holdings (or any other Parent Entity) or (2) the Borrowers or Holdings (or any such other Parent Entitys), as applicable, Form 10 K or 10 Q, as applicable, filed with the SEC; provided that with respect to each of the foregoing clauses (1) and (2) (a) to the extent such information relates to Holdings (or a Parent Entity), such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdings (or such Parent Entity), on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand, and (b) to the extent such information is in lieu of information required to be provided under Section 5.04(1), such materials are accompanied by a report and opinion of independent public accountants of recognized national standing, or such other accountants as are reasonably acceptable to the Administrative Agent, and accompanied by an opinion of such accountants (which opinion shall not be subject to any going concern statement, explanatory note or like qualification or exception (other than a going concern statement, explanatory note or like qualification or exception resulting from an upcoming maturity date occurring within one year from the time such opinion is delivered or anticipated (but not actual) covenant non-compliance)) (it being understood and agreed that if, in compliance with this paragraph, (x) the Borrower provides audited financial statements of Holdings (or any other Parent Entity) and related report and opinion of accountants with respect thereto in lieu of information required to be provided under Section 5.04(1), no such audited financial information, opinion or report shall be required with respect to the Borrower, (y) the Borrower provides unaudited financial statements of Holdings (or any other Parent Entity) in lieu of information required to be provided under Section 5.04(2), no such unaudited financial information shall be required with
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respect to the Borrower and (z) the Borrower provides a Budget of Holdings and accompanying statement (or any other Parent Entity) in lieu of information required to be provided under Section 5.04(5), no such Budget shall be required with respect to the Borrower; provided that for the avoidance of doubt, with respect to the foregoing clauses (x), (y) and (z) (i) to the extent such information relates to Holdings (or a Parent Entity), such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdings (or such Parent Entity), on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand, and (ii) to the extent such information is in lieu of information required to be provided under Section 5.04(1), such materials are accompanied by a report and opinion of independent public accountants of recognized national standing, or such other accountants as are reasonably acceptable to the Administrative Agent, and accompanied by an opinion of such accountants (which opinion shall not be subject to any going concern statement, explanatory note or like qualification or exception (other than a going concern statement, explanatory note or like qualification or exception resulting solely from an upcoming maturity date occurring within one year from the time such opinion is delivered or anticipated (but not actual) covenant non-compliance)). The obligations in clauses (1) and (2) of this Section 5.04 may be satisfied by delivery of financial information of the Borrower and its Subsidiaries so long as such financial statements include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Borrower and the Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Borrower.
Documents required to be delivered pursuant to this Section 5.04 may be delivered electronically in accordance with Section 10.01(5).
SECTION 5.05. Litigation and Other Notices . Furnish to the Administrative Agent (which will promptly thereafter furnish to the Lenders) written notice of the following promptly after any Responsible Officer of the Borrower obtains actual knowledge thereof:
(1) any Default or Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;
(2) the filing or commencement of, or any written threat or notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings or any of the Restricted Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect; and
(3) the occurrence of any ERISA Event that, together with all other ERISA Events that have occurred, would reasonably be expected to have a Material Adverse Effect.
SECTION 5.06. Compliance with Laws . Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including ERISA, FCPA, OFAC and the PATRIOT Act), except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 will not apply to Environmental Laws, which are the subject of Section 5.09, or laws related to Taxes, which are the subject of Section 5.03.
SECTION 5.07. Maintaining Records; Access to Properties and Inspections . Permit any Persons designated by the Administrative Agent to visit and inspect the financial records and the properties of the Borrower or any Restricted Subsidiary at reasonable times, upon reasonable prior notice to the Borrower, and as often as reasonably requested, to make extracts from and copies of such financial records, and permit any Persons designated by the Administrative Agent, upon reasonable prior notice to the Borrower to discuss the affairs, finances and condition of Holdings, the Borrower or any Restricted Subsidiary with the officers thereof and independent accountants therefor (subject to such accountants policies and procedures); provided that the Administrative Agent may not exercise such rights more often than two times during any calendar year unless an Event of Default is continuing and only one such time will be at the Borrowers expense; and provided, further, that when an Event of Default is continuing, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice.
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Notwithstanding anything to the contrary in this Agreement (including Sections 5.04(7), 5.05, 5.07 and 5.12) or any other Loan Document, none of the Loan Parties or any of the Restricted Subsidiaries will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter with any competitor to the Borrower or any of its Subsidiaries or that (1) constitutes non-financial trade secrets or non-financial proprietary information, (2) in respect of which disclosure is prohibited by law or any binding agreement, (3) is subject to attorney-client or similar privilege or constitutes attorney work product or (4) creates an unreasonably excessive expense or burden on the Borrower or any of its Subsidiaries.
SECTION 5.08. Use of Proceeds . Use the proceeds of the Term Loans made on the Closing Date to finance, in part, the Transactions.
SECTION 5.09. Compliance with Environmental Laws . Comply, and make reasonable efforts to cause all lessees and other Persons occupying its fee-owned Real Properties to comply, with all Environmental Laws applicable to its operations and properties, and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case, to the extent the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.10. Further Assurances; Additional Security .
(1) If (a) a Restricted Subsidiary (other than an Excluded Subsidiary) of the Borrower is formed or acquired after the Closing Date or (b) an Excluded Subsidiary ceases to constitute an Excluded Subsidiary (but remains a Restricted Subsidiary), within five Business Days after the date such Restricted Subsidiary is formed or acquired or such Excluded Subsidiary ceases to constitute an Excluded Subsidiary, as applicable, notify the Collateral Agent thereof and, within 45 days after the date such Restricted Subsidiary is formed or acquired or such Subsidiary ceases to constitute an Excluded Subsidiary (or such longer period as the Administrative Agent may agree in its sole discretion), the Borrower will or will cause such Restricted Subsidiary to:
(i) deliver a joinder to each of the Security Agreement and Guaranty Agreement, in the form annexed as Exhibit I to each of the Security Agreement and the Guaranty Agreement, duly executed on behalf of such Restricted Subsidiary;
(ii) to the extent required by and subject to the exceptions set forth in the Security Agreement, pledge the outstanding Equity Interests (other than Excluded Equity Interests) owned by such Restricted Subsidiary, and cause each Loan Party owning any Equity Interests issued by such Restricted Subsidiary to pledge such outstanding Equity Interests (other than Excluded Equity Interests), and deliver all certificates (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank, to the Collateral Agent (or a designated bailee thereof);
(iii) to the extent required by and subject to the exceptions set forth in this Section 5.10 or the Security Documents, deliver to the Collateral Agent (or a designated bailee thereof) Uniform Commercial Code financing statements with respect to such Restricted Subsidiary and such other documents reasonably requested by the Collateral Agent to create the Liens intended to be created under the Security Documents and perfect such Liens to the extent required by the Security Documents; and
(iv) except as otherwise contemplated by this Section 5.10 or any Security Document, obtain all consents and approvals required to be obtained by it in connection with (A) the execution and delivery of all Security Documents (or supplements thereto) to which it is a party and the granting by it of the Liens thereunder and (B) the performance of its obligations thereunder.
(2) If the Borrower or any Loan Party (a) acquires fee simple title in Real Property after the Closing Date or (b) enters a joinder pursuant to Section 5.10(1)(i) hereof and owns fee simple title in Real Property, then, in each case, within 90 days (or such longer period as the Administrative Agent may agree in its sole discretion) after such acquisition or entry of a joinder (as applicable):
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(a) notify the Collateral Agent thereof of such acquired or owned Real Property (as applicable);
(b) cause any such acquired or owned Real Property (as applicable) that has a fair market value (as determined in good faith by a Responsible Officer of the Borrower) in excess of $5.0 million to be subjected to a Mortgage securing the Obligations unless such Real Property shall be subject to a Specified Sale and Lease-Back Transaction or other sale and lease-back transaction or is already mortgaged to a third party to the extent permitted by Section 6.02;
(c) (A) obtain fully paid American Land Title Association Lenders Extended Coverage title insurance policies in form and substance reasonably satisfactory to Collateral Agent, with endorsements (including zoning endorsements where available) and in an amount not less than 100% of the fair market value of each Mortgaged Property that is owned in fee insuring the fee simple title to each of the fee owned Mortgaged Properties vested in the applicable Loan Party and insuring the Collateral Agent that the relevant Mortgage creates a valid and enforceable first priority Lien on the Mortgaged Property encumbered thereby, each of which title policy ( Title Policy ) (1) shall include all endorsements reasonably requested by the Collateral Agent and available in the related jurisdiction and (2) shall provide for affirmative insurance and such reinsurance as the Collateral Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to the Collateral Agent; (B) evidence reasonably satisfactory to the Collateral Agent that the applicable Loan Party has (1) delivered to the title company (the Title Company ) all certificates and affidavits reasonably required by the Title Company in connection with the issuance of the applicable Title Policy and (2) paid to the Title Company or to the appropriate Governmental Authorities all expenses and premiums of the Title Company and all other sums required in connection with the issuance of the Title Policies and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Mortgages in the applicable real property records; and (C) a title report issued by the Title Company with respect thereto, together with copies of all recorded documents listed as exceptions to title or otherwise referred to therein, each in form and substance reasonably satisfactory to the Collateral Agent (the Mortgage Policies );
(d) obtain (i) American Land Title Association/American Congress on Surveying and Mapping surveys, dated no more than 30 days before the date of their delivery to the Collateral Agent, certified to the Collateral Agent and the issuer of the Mortgage Policies in a manner reasonably satisfactory to the Collateral Agent or (ii) previously obtained ALTA surveys and affidavits of no-change with respect to each such survey, such surveys and affidavits to be sufficient to issue Title Policies to the Administrative Agent providing all reasonably required survey coverage and survey endorsements;
(e) deliver to the Collateral Agent: (A) a completed Flood Certificate with respect to each Mortgaged Property, which Flood Certificate shall (1) be addressed to the Collateral Agent, (2) be completed by a company which has guaranteed the accuracy of the information contained therein, and (3) otherwise comply with the Flood Program; (B) evidence describing whether the community in which each Mortgaged Property is located participates in the Flood Program; (C) if any Flood Certificate states that a Mortgaged Property is located in a Flood Zone, the Borrowers written acknowledgement of receipt of written notification from the Collateral Agent (1) as to the existence of each such Mortgaged Property, and (2) as to whether the community in which each such Mortgaged Property is located is participating in the Flood Program; and (D) if any Mortgaged Property is located in a Flood Zone and is located in a community that participates in the Flood Program, evidence that the applicable Loan Party has obtained a policy of flood insurance that is in compliance with all applicable regulations of the Board of Governors;
(f) provide evidence of insurance (including all insurance required to comply with applicable flood insurance laws) naming the Collateral Agent as loss payee and additional insured with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as are reasonably satisfactory to the Collateral Agent, including the insurance required by the terms of any mortgage or deed of trust;
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(g) for each Mortgage delivered pursuant to clause (b), obtain customary mortgage or deed of trust enforceability opinions of local counsel for the Loan Parties in the states in which such acquired Real Properties owned in fee simple are located; and
(h) take, or cause the applicable Loan Party to take, such actions as shall be necessary or reasonably requested by the Collateral Agent to perfect such Liens, in each case, at the expense of the Loan Parties, subject to paragraph (5) of this Section 5.10.
(3) Furnish to the Collateral Agent five Business Days prior written notice of any change in any Loan Partys:
(a) corporate or organization name;
(b) organizational structure;
(c) location (determined as provided in UCC Section 9-307); or
(d) organizational identification number (or equivalent) or, solely if required for perfecting a security interest in the applicable jurisdiction, Federal Taxpayer Identification Number.
The Borrower will not effect or permit any such change unless all filings have been made, or will be made within any statutory period, under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest, for the benefit of the applicable Secured Parties, in all Collateral held by such Loan Party.
(4) Execute any and all other documents, financing statements, agreements and instruments, and take all such other actions (including the filing and recording of financing statements and other documents), not described in the preceding clauses (1) through (3) and that may be required under any applicable law, or that the Collateral Agent may reasonably request, to satisfy the requirements set forth in this Section 5.10 and in the Security Documents with respect to the creation and perfection of the Liens on the Collateral in favor of the Collateral Agent, for the benefit of the Secured Parties, contemplated herein and in the Security Documents and to cause such requirement to be and remain satisfied, all at the expense of the Borrower, and provide to the Collateral Agent, from time to time upon reasonable request, evidence as to the perfection and priority of the Liens created by the Security Documents.
(5) Notwithstanding anything to the contrary,
(a) the other provisions of this Section 5.10 need not be satisfied with respect to any Excluded Property or Excluded Equity Interests or any exclusions and carve-outs from the perfection requirements set forth in the Security Agreement;
(b) neither the Borrower nor the other Loan Parties will be required to grant a security interest in any asset or perfect a security interest in any Collateral to the extent the cost, burden, difficulty or consequence of obtaining or perfecting a security interest therein outweighs the benefit of the security afforded thereby as reasonably determined by a Responsible Officer of the Borrower and the Administrative Agent; and
(c) no actions will be required outside of the United States in order to create or perfect any security interest in any assets located outside of the United States and no foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches will be required.
(6) With respect to each Mortgaged Property set forth on Schedule 3.15(3), within 90 days after the Closing Date (or such longer period as the Administrative Agent may agree in its sole discretion), the Borrower will
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or will cause the applicable Restricted Subsidiary to, deliver a Mortgage securing the Obligations and all items described in clauses 2(c)-(g) of this Section 5.10 and comply with clause 2(h) of this Section 5.10.
SECTION 5.11. Credit Ratings . Use commercially reasonable efforts to maintain at all times (a) a credit rating by each of S&P and Moodys in respect of the Term Facility and (b) a public corporate rating by S&P and a public corporate family rating by Moodys for the Borrower, in each case with no requirement to maintain any specific minimum rating.
SECTION 5.12. Preparation of Environmental Reports . At any time during the continuance of an Event of Default, provide to the Lenders within 60 days after reasonable request from the Administrative Agent or the Required Lenders, at the expense of the Borrower, an environmental site assessment report for any of its Real Properties described in such request, prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials at such property and the estimated cost of any compliance, including, if applicable, the estimated costs of legally required removal or remedial actions in connection with any such Hazardous Materials on such Real Property; without limiting the generality of the foregoing, if the Administrative Agent reasonably determines at any time following 30 days after its initial request that a material risk exists that any such report will not be provided within the time referred to above, the Administrative Agent may retain an environmental consulting firm to prepare such report at the expense of the Borrower, and Holdings hereby grants and agrees to cause any Subsidiary that maintains an interest in any Real Property described in such request to grant at the time of such request to the Administrative Agent, the Lenders, such firm and any agents or representatives thereof an irrevocable non-exclusive license, after reasonable advance notice subject to the reasonable rights of tenants or any limitation contained in applicable leases, to enter onto their respective properties to undertake such an assessment. Any such assessment shall be conducted during normal business hours and in a manner reasonably designed to mitigate any material interference with the ongoing operations of the Loan Partys business. The Loan Parties may require that, prior to entry onto the Real Property, any such engineer or consultant shall present evidence of reasonable and customary insurance coverage, including general liability and professional liability policies. Unless there exists a reasonable belief that there has been a material Release of Hazardous Materials at the Real Property any such assessment shall be limited to a visual inspection of the property and shall not include the taking of any samples of soil, groundwater, surface water, building materials or other environmental media.
SECTION 5.13. Post-Closing Matters . Deliver to Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, the items described on Schedule 5.13 hereof on or before the dates specified with respect to such items on Schedule 5.13 (or, in each case, such later date as may be agreed to by Administrative Agent in its sole discretion or, with respect to matters relating primarily to the ABL Priority Collateral, in the sole discretion of the administrative agent under the ABL Credit Agreement). All representations and warranties contained in this Agreement and the other Loan Documents will be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described on Schedule 5.13 within the time periods specified thereon, rather than as elsewhere provided in the Loan Documents).
ARTICLE VI
Negative Covenants
The Borrower covenants and agrees with each Lender that, so long as this Agreement is in effect and until the Commitments have been terminated and the Obligations (other than Obligations in respect of (i) Specified Hedge Agreements and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) have been paid in full, unless the Required Lenders otherwise consent in writing, it will not and will not permit any of its Restricted Subsidiaries to:
SECTION 6.01. Indebtedness . Issue, incur or assume any Indebtedness; provided that the Borrower and the Restricted Subsidiaries may issue, incur or assume Indebtedness so long as immediately after giving effect to the issuance, incurrence or assumption of such Indebtedness, the Interest Coverage Ratio is 2.00 to 1.00 or greater ( Ratio Debt ); and provided, further, that the aggregate principal amount of Ratio Debt incurred by Restricted Subsidiaries that are not Guarantors, when aggregated with the amount of Permitted Refinancing Indebtedness incurred by
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Restricted Subsidiaries that are not Guarantors in respect of Ratio Debt, may not exceed $50.0 million at any time outstanding.
The foregoing limitation will not apply to (collectively, Permitted Debt ):
(1) (a) Indebtedness created under the Loan Documents (including Incremental Term Loans, Other Term Loans and Extended Term Loans); (b) Incremental Equivalent Term Debt and (c) Credit Agreement Refinancing Indebtedness;
(2) (a) Indebtedness incurred pursuant to the ABL Loan Documents and the issuance and creation of letters of credit and bankers acceptances thereunder (with letters of credit and bankers acceptances being deemed to have a principal amount equal to the face amount thereof) up to an aggregate principal amount as of any date not to exceed $1,350.0 million, (b) any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness or obligations permitted pursuant to clause (a) of this clause (2) (and any successive Permitted Refinancing Indebtedness in respect thereof) and (c) obligations in respect of any Secured Hedge Agreement (as defined in the ABL Credit Agreement) and Cash Management Obligations (as defined in the ABL Credit Agreement);
(3) (a) Indebtedness incurred pursuant to the Second Lien Credit Agreement not to exceed, in the case of all Indebtedness incurred pursuant to this clause (3) (other than any Indebtedness incurred under the Second Lien Credit Agreement in accordance with clause 3(x) of Section 2.18)), $625.0 million, (b) any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness or obligations originally permitted pursuant to this clause (3) (and any successive Permitted Refinancing Indebtedness in respect thereof) and (c) obligations in respect of any Specified Hedge Agreement (as defined in the Second Lien Credit Agreement) and Cash Management Obligations (as defined in the Second Lien Credit Agreement);
(4) Indebtedness existing on the Closing Date (other than Indebtedness described in clause (1), (2) or (3) above) after giving effect to the Refinancing and, with respect to such Indebtedness exceeding $5.0 million in the aggregate, set forth on Schedule 6.01 ;
(5) Capital Lease Obligations, Indebtedness with respect to mortgage financings and purchase money Indebtedness to finance all or any part of the purchase, lease, construction, installation, repair or improvement of property (real or personal), plant or equipment or other fixed or capital assets and Indebtedness arising from the conversion of the obligations of the Borrower or any Restricted Subsidiary under or pursuant to any synthetic lease transactions to on-balance sheet Indebtedness of the Borrower or such Restricted Subsidiary, in an aggregate outstanding principal amount, including all Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally permitted pursuant to this clause (5) (and any successive Permitted Refinancing Indebtedness), not to exceed the greater of (a) $200.0 million and (b) 6.00% of Consolidated Total Assets as of the date any such Indebtedness is incurred; provided that such Indebtedness is incurred within 270 days after the purchase, lease, construction, installation, repair or improvement of the property that is the subject of such Indebtedness; provided, further, that for the purposes of determining compliance with this Section 6.01(5), Attributable Indebtedness shall not be deemed to arise from a Specified Sale and Lease-Back Transaction or other sale and lease-back transaction with respect to real property comprising a Store or distribution center that is originally treated under GAAP as an operating lease at the time such Specified Sale and Lease-Back Transaction or such other sale and leaseback transaction is consummated but is subsequently treated under GAAP as a capitalized lease as the result of a change in GAAP (or interpretations thereof) after the Closing Date;
(6) Indebtedness owed to (including obligations in respect of letters of credit or bank Guarantees or similar instruments for the benefit of) any Person providing workers compensation, health, disability or other employee benefits (whether to current or former employees) or property, casualty or liability insurance or self-insurance in respect of such items, or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims, health, disability or other employee benefits (whether current or former) or property, casualty or liability insurance;
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(7) Indebtedness arising from agreements of the Borrower or any Restricted Subsidiary providing for indemnification, earn-outs, adjustment of purchase or acquisition price or similar obligations, in each case, incurred or assumed in connection with the Transactions, a Permitted Change of Control, any Permitted Acquisition or the disposition of any business, assets or Restricted Subsidiaries not prohibited by this Agreement, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiaries for the purpose of financing any such Permitted Acquisition;
(8) intercompany Indebtedness between or among the Borrower and the Restricted Subsidiaries; provided that the aggregate outstanding principal amount of such Indebtedness that is owing by any Restricted Subsidiary that is not a Guarantor to a Loan Party may not exceed the amount, as of the date such Indebtedness is incurred, permitted pursuant to Sections 6.04(5) and (6);
(9) Indebtedness pursuant to Hedge Agreements;
(10) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion Guarantees and similar obligations, in each case, provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(11) Guarantees of Indebtedness of the Borrower or the Restricted Subsidiaries permitted to be incurred under this Agreement to the extent such Guarantees are not prohibited by the provisions of Section 6.04 (without giving effect to Section 6.04(20));
(12) (a) Indebtedness incurred or assumed in connection with a Permitted Acquisition and Indebtedness of any Person that becomes a Restricted Subsidiary if such Indebtedness was not created in anticipation or contemplation of such Permitted Acquisition or such Person becoming a Restricted Subsidiary and (b) Indebtedness incurred or assumed in anticipation or contemplation of a Permitted Acquisition; provided that, in each case of the foregoing subclauses (a) and (b):
(i) no Event of Default is continuing immediately before such Permitted Acquisition or would result therefrom;
(ii) immediately after giving effect to such Permitted Acquisition, on a Pro Forma Basis, either (A) the Borrower would be permitted to incur at least $1 of Ratio Debt or (B) (x) in the case of Indebtedness secured on a pari passu basis with the Term Loans, the Senior Secured First Lien Net Leverage Ratio, calculated on a Pro Forma Basis, is less than or equal to the equal to the Senior Secured First Lien Net Leverage Ratio immediately prior thereto, (y) in the case of Indebtedness to be secured on a junior basis to the Term Loans, the Total Secured Net Leverage Ratio, calculated on a Pro Forma Basis, is less than or equal to the Total Secured Net Leverage Ratio immediately prior thereto, and (III) in the case of unsecured Indebtedness, the Total Net Leverage Ratio, calculated on a Pro Forma Basis, is less than or equal to the Total Net Leverage Ratio immediately prior thereto; and
(iii) the aggregate principal amount of any such Indebtedness incurred pursuant to clause (12)(b) by Restricted Subsidiaries that are not Guarantors, together with any Permitted Re-financing Indebtedness incurred by Restricted Subsidiaries that are not Guarantors to Refinance any Indebtedness originally permitted pursuant to clause (12)(b) (and any successive Permitted Refinancing Indebtedness), may not exceed $75.0 million at any one time outstanding as of the date such Indebtedness is incurred;
(13) Indebtedness incurred in connection with a sale and leaseback transaction (including any Specified Sale and Leaseback Transaction permitted by Section 6.05), together with any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness permitted pursuant to this clause (13);
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(14) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness (other than credit or purchase cards) is extinguished within 10 Business Days after notification received by the Borrower of its incurrence;
(15) Indebtedness supported by a letter of credit under the ABL Credit Agreement (or any Permitted Refinancing Indebtedness in respect thereof), in a principal amount not in excess of the stated amount of such letter of credit;
(16) Indebtedness in an aggregate outstanding principal amount not to exceed an amount equal to 100% of the net proceeds received by the Borrower from the issuance or sale of its Equity Interests or as a contribution to its capital after the Closing Date, other than (a) proceeds from the issuance or sale of the Borrowers Disqualified Stock, (b) Excluded Contributions, (c) [reserved] and (d) any such proceeds that are used prior to the date of incurrence to (i) make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(15) or a payment in respect of Junior Financing under Section 6.09(2)(a), in each case utilizing the Available Amount or (ii) make a Restricted Payment under Section 6.06(1) or Section 6.06(2)(b) (any such Indebtedness, Contribution Indebtedness ), to the extent such contribution is designated by the Borrower as specified equity contributions for the incurrence of Contribution Indebtedness;
(17) Indebtedness consisting of (a) the financing of insurance premiums or (b) take or pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(18) Indebtedness incurred by a Receivables Subsidiary in a Qualified Receivables Financing that is not recourse to the Borrower or any Restricted Subsidiary other than a Receivables Subsidiary (except for Standard Securitization Undertakings);
(19) Cash Management Obligations and other Indebtedness in respect of Cash Management Services entered into in the ordinary course of business;
(20) Indebtedness issued to future, current or former officers, directors, managers, and employees, consultants and independent contractors of the Borrower or any Restricted Subsidiary or any direct or indirect parent thereof, their respective estates, heirs, family members, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of any Parent Entity permitted by Section 6.06;
(21) Indebtedness incurred on behalf of, or representing Guarantees of Indebtedness of, joint ventures; provided that the aggregate outstanding principal amount of such Indebtedness, together with any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally permitted pursuant to this clause (21) (and any successive Permitted Refinancing Indebtedness) may not exceed the greater of (a) $25.0 million and (b) 0.75% of Consolidated Total Assets as of the date any such Indebtedness is incurred;
(22) Indebtedness of Foreign Subsidiaries in an aggregate outstanding principal amount, together with any Permitted Refinancing Indebtedness incurred by Foreign Subsidiaries to Refinance any Indebtedness originally permitted pursuant to this clause (22) (and any successive Permitted Refinancing Indebtedness), not to not exceed the greater of (a) $35.0 million and (b) 1.25% of Consolidated Total Assets as of the date any such Indebtedness is incurred;
(23) unsecured Indebtedness in respect of short-term obligations to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services so long as such obligations are incurred in the ordinary course of business and not in connection with the borrowing of money;
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(24) Indebtedness representing deferred compensation or other similar arrangements incurred by the Borrower or any Restricted Subsidiary (a) in the ordinary course of business or (b) in connection with a Permitted Change of Control or any Permitted Investment;
(25) any Permitted Refinancing Indebtedness incurred to Refinance Ratio Debt, Incremental Equivalent Term Debt, Credit Agreement Refinancing Indebtedness or Indebtedness incurred under clauses (2), (3), (4), (5), (12), (16), (21), (22), this clause (25) or clause (28) of this Section 6.01;
(26) customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;
(27) Indebtedness incurred by the Borrower or any Restricted Subsidiary in connection with bankers acceptances, discounted bills of exchange, warehouse receipts or similar facilities or the discounting or factoring of receivables for credit management purposes, in each case incurred or undertaken in the ordinary course of business;
(28) additional Indebtedness in an aggregate outstanding principal amount, including all Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally permitted pursuant to this clause (28) (and any successive Permitted Refinancing Indebtedness), not to exceed the greater of (a) $125.0 million and (b) 3.75% of Consolidated Total Assets as of the date any such Indebtedness is incurred; provided that the aggregate principle amount of Indebtedness incurred pursuant to this clause (28) by non-Loan Parties may not exceed the greater of (x) $35.0 million and (y) 1.25% of Consolidated Total Assets as of the date any such Indebtedness is incurred;
(29) Indebtedness in respect of letters of credit issued for the account of the Borrower or any Restricted Subsidiary to finance the purchase of inventory so long as (x) such Indebtedness is unsecured and (y) the aggregate principal amount of such Indebtedness does not exceed $100.0 million at any time;
(30) guaranties in the ordinary course of business consistent with past practice of the obligations of suppliers, customers, franchisees and licensees of the Borrower and its subsidiaries; and
(31) unsecured Indebtedness of the Borrower owing to the Sponsors, so long as such Indebtedness is (1) subordinated in right of payment to the Term Loans on terms reasonably satisfactory to the Administrative Agent and (2) neither due nor payable (nor is any interest thereon payable) in each case until at least ninety-one (91) days after the Maturity Date and provided that the documentation with respect thereto contains no mandatory prepayments and no operative or financial covenants.
For purposes of determining compliance with this Section 6.01, in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the categories of Permitted Debt or is entitled to be incurred as Ratio Debt, the Borrower may, in its sole discretion, at the time of incurrence, divide, classify or reclassify, or at any later time divide, classify or reclassify, such item of Indebtedness (or any portion thereof) in any manner that complies with this covenant; provided that all Indebtedness outstanding under the Loan Documents, the ABL Credit Agreement and the Second Lien Loan Documents will be deemed to have been incurred in reliance on the exception in clauses (1), (2), and (3), respectively, of the definition of Permitted Debt and shall not be permitted to be reclassified pursuant to this paragraph. All unsecured Permitted Debt originally permitted under clause (5), (21), (22) or (28) of the definition of Permitted Debt will be automatically reclassified as Ratio Debt on the first date on which such Indebtedness would have been permitted to be incurred as Ratio Debt. Accrual of interest, the accretion of accreted value, amortization of original issue discount, the payment of interest or dividends in the form of additional Indebtedness with the same terms, and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies, will not be deemed to be an incurrence of Indebtedness for purposes of this Section 6.01. Guarantees of, or obligations in respect of letters of credit relating to Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness will not be included in the determination of such amount of Indebtedness; provided that the incurrence of the Indebtedness represented by such Guarantee or letter of credit, as the case may be, was in compliance with this Section 6.01.
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For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Indebtedness, the Dollar equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed or first incurred (whichever yields the lower Dollar equivalent), in the case of revolving credit debt; provided that if such Indebtedness is incurred to Refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such Dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of such refinanc-ing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced (plus unpaid accrued interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs, fees, commissions and expenses in connection therewith).
SECTION 6.02. Liens . Create, incur, assume or permit to exist any Lien that secures obligations under any Indebtedness on any property or assets at the time owned by it, except the following (collectively, Permitted Liens ):
(1) Liens securing Indebtedness incurred and obligations permitted under Sections 6.01(1), 6.01(2) or 6.01(3); provided that, in the case of Indebtedness incurred and obligations permitted under Sections 6.01(2) and 6.01(3), the applicable Liens are subject to the Intercreditor Agreement or other intercreditor agreement(s) substantially consistent with and no less favorable to the Lenders in any material respect than the Intercreditor Agreement as determined in good faith by a Responsible Officer of the Borrower;
(2) Liens securing Indebtedness existing on the Closing Date and, to the extent securing such Indebtedness exceeding $5.0 million in the aggregate, set forth on Schedule 6.02 ; provided that such Liens only secure the obligations that they secure on the Closing Date (and any Permitted Refinancing Indebtedness in respect of such obligations permitted by Section 6.01) and do not apply to any other property or assets of the Borrower or any Restricted Subsidiary other than replacements, additions, accessions and improvements thereto;
(3) Liens securing Indebtedness incurred in accordance with Section 6.01(5); provided that such Liens only extend to the assets financed with such Indebtedness (and any replacements, additions, accessions and improvements thereto);
(4) Liens on accounts receivable and related assets of the type specified in the definition of Qualified Receivables Financing securing Indebtedness incurred in accordance with Section 6.01(18);
(5) Liens on assets or Equity Interests of Foreign Subsidiaries securing Indebtedness incurred in accordance with Section 6.01(4), (12), (22) and (28);
(6) Liens securing Permitted Refinancing Indebtedness incurred in accordance with Section 6.01(25); provided that the Liens securing such Permitted Refinancing Indebtedness are limited to all or part of the same property that secured (or, under the written arrangements under which the original Lien arose, could secure) the original Lien (plus any replacements, additions, accessions and improvements thereto);
(7) (a) Liens on property or Equity Interests of a Person at the time such Person becomes a Restricted Subsidiary if such Liens were not created in connection with, or in contemplation of, such other Person becoming a Restricted Subsidiary and (b) Liens on property at the time the Borrower or a Restricted Subsidiary acquired such property, including any acquisition by means of a merger or consolidation with or into the Borrower or any of the Restricted Subsidiaries, if such Liens were not created in connection with, or in contemplation of, such acquisition;
(8) Liens on property or assets of any Restricted Subsidiary that is not a Guarantor securing obligations of Restricted Subsidiaries that are not Guarantors;
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(9) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03;
(10) Liens disclosed by the title insurance policies delivered on, or prior to or subsequent to the Closing Date and any replacement, extension or renewal of any such Liens (so long as the Indebtedness and other obligations secured by such replacement, extension or renewal Liens are permitted by this Agreement); provided that such replacement, extension or renewal Liens do not cover any property other than the property that was subject to such Liens prior to such replacement, extension or renewal;
(11) Liens securing judgments that do not constitute an Event of Default under Section 8.01(10) and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and in respect of which Holdings, the Borrower or any affected Restricted Subsidiary has set aside on its books reserves in accordance with GAAP with respect thereto;
(12) Liens imposed by law, including landlords, carriers, warehousemens, mechanics, materialmens, repairmens, construction or other like Liens arising in the ordinary course of business securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Borrower or a Restricted Subsidiary has set aside on its books reserves in accordance with GAAP;
(13) (a) pledges and deposits and other Liens made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers compensation, unemployment insurance and other similar laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (b) pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any Restricted Subsidiary;
(14) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof) incurred by the Borrower or any Restricted Subsidiary in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(15) survey exceptions and such matters as an accurate survey would disclose, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights of way covenants, conditions, restrictions and declarations on or with respect to the use of Real Property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of the Borrower or any Restricted Subsidiary;
(16) any interest or title of a lessor or sublessor under any leases or subleases entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business;
(17) Liens that are contractual rights of set-off (a) relating to pooled deposit or sweep accounts of the Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any Restricted Subsidiary or (b) relating to purchase orders and other agreements entered into with customers of the Borrower or any Restricted Subsidiary in the ordinary course of business;
(18) Liens arising solely by virtue of any statutory or common law provision relating to bankers liens, rights of set-off or similar rights;
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(19) leases or subleases, licenses or sublicenses (including with respect to intellectual property and software) granted to others in the ordinary course of business that do not interfere in any material respect with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
(20) Liens solely on any cash earnest money deposits made by the Borrower or any Restricted Subsidiary in connection with any letter of intent or other agreement in respect of any Permitted Investment;
(21) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business;
(22) Liens arising from precautionary Uniform Commercial Code financing statements;
(23) Liens on Equity Interests of any joint venture (a) securing obligations of such joint venture or (b) pursuant to the relevant joint venture agreement or arrangement;
(24) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(25) Liens on securities that are the subject of repurchase agreements constituting Cash Equivalents under clause (4) of the definition thereof;
(26) Liens securing insurance premium financing arrangements;
(27) Liens on vehicles or equipment of the Borrower or any of the Restricted Subsidiaries granted in the ordinary course of business;
(28) Liens on cash and Cash Equivalents used to defease or to satisfy and discharge Indebtedness; provided that such defeasance or satisfaction and discharge is not prohibited by this Agreement;
(29) Liens:
(a) of a collection bank arising under Section 4-208 or 4-210 of the Uniform Commercial Code, or any comparable or successor provision, on items in the course of collection;
(b) attaching to pooling, commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business; or
(c) in favor of banking or other financial institutions or entities, or electronic payment service providers, arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking or finance industry;
(30) Liens on specific items of inventory or other goods and proceeds of any Person securing such Persons obligations in respect of bankers acceptances or letters of credit entered into in the ordinary course of business issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(31) Liens that rank pari passu with the Liens securing the Obligations if the Senior Secured First Lien Net Leverage Ratio as of the date on which such Liens are first created is less than or equal to 4.60 to 1.00; provided (x) that a Debt Representative acting on behalf of the holders of such Indebtedness will become party to or otherwise subject to the provisions of the Intercreditor Agreement and (y) such Liens shall not secure Indebtedness in the form of term loans;
(32) Liens that rank junior to the Liens securing Obligations, if the Total Secured Net Leverage Ratio as of the date on which such Liens are first created is less than or equal to 5.90 to 1.00; provided
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that a Debt Representative acting on behalf of the holders of such Indebtedness will become party to or otherwise subject to the provisions of the Intercreditor Agreement;
(33) Liens securing additional obligations in an aggregate outstanding principal amount not to exceed the greater of (a) $75.0 million and (b) 2.25% of Consolidated Total Assets as of the date such Liens are first created;
(34) Liens securing (a) Specified Hedge Obligations and Cash Management Obligations, which amounts are secured under the Loan Documents, (b) obligations in respect of any Specified Hedge Agreement (as defined in the Second Lien Credit Agreement) and Cash Management Obligations (as defined in the Second Lien Credit Agreement) and (c) obligations in respect of any Secured Hedge Agreement (as defined in the ABL Credit Agreement) and Cash Management Obligations (as defined in the ABL Credit Agreement); provided that, in each case, the applicable Liens are subject to the Intercreditor Agreement or other intercreditor agreement(s) substantially consistent with and no less favorable to the Lenders in any material respect than the Intercreditor Agreement as determined in good faith by a Responsible Officer of the Borrower;
(35) Liens securing Indebtedness incurred in accordance with Section 6.01(13) solely encumbering the assets that are subject of such Indebtedness;
(36) Liens in favor of a trustee in an indenture to the extent such Liens secure only customary compensation and reimbursement obligations of such trustee under such indenture; and
(37) assignments to landlords or mortgagees of insurance or condemnation proceeds.
For purposes of this Section 6.02, Indebtedness will not be considered incurred under a subsection or clause of Section 6.01 if it is later reclassified as outstanding under another subsection or clause of Section 6.01 (in which event, and at which time, same will be deemed incurred under the subsection or clause to which reclassified).
SECTION 6.03. [Reserved].
SECTION 6.04. Investments, Loans and Advances . Purchase, hold or acquire (including pursuant to any merger, consolidation or amalgamation with a Person that is not a Wholly Owned Subsidiary immediately prior to such merger, consolidation or amalgamation) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest in (each, a Investment ), any other Person, except the following (collectively, Permitted Investments ):
(1) the Transactions;
(2) loans and advances to officers, directors, employees or consultants of any Parent Entity, the Borrower or any Restricted Subsidiary not to exceed $20.0 million in an aggregate principal amount at any time outstanding (calculated without regard to write-downs or write-offs after the date made);
(3) Investments in an amount not to exceed the Available Amount as of the date such Investments are made; provided that no Event of Default has occurred and is continuing immediately prior to making such Investment or would result therefrom;
(4) Permitted Acquisitions and pre-existing Investments held by Persons acquired in Permitted Acquisitions or acquired in connection with Permitted Acquisitions and not created in contemplation thereof;
(5) intercompany Investments among the Borrower and the Restricted Subsidiaries (including intercompany Indebtedness); provided that the sum of (a) the aggregate fair market value of all such Investments (other than intercompany Indebtedness and Guarantees of Indebtedness) made since the Closing
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Date (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value) by the Borrower and the Guarantors in Restricted Subsidiaries that are not Guarantors; (b) the aggregate principal amount of Indebtedness owing to the Borrower and the Guarantors by Restricted Subsidiaries that are not Guarantors at any time outstanding; and (c) the aggregate principal amount of Indebtedness of Restricted Subsidiaries that are not Guarantors that is Guaranteed by the Borrower and the Guarantors at any time outstanding, together with any Investments made in Restricted Subsidiaries that are not Guarantors pursuant to Section 6.04(31), may not exceed the greater of (i) $75.0 million and (ii) 2.25% of Consolidated Total Assets as of the date any such Investment is made, plus an amount equal to any returns of capital or sale proceeds actually received in respect of any such Investments (which such amount shall not exceed the amount of such Investment (as determined above) at the time such Investment was made);
(6) Investments in Foreign Subsidiaries; provided that the sum of (a) the aggregate fair market value of all such Investments (other than intercompany Indebtedness and Guarantees of Indebtedness) made by the Borrower and the Restricted Subsidiaries since the Closing Date (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value); (b) the aggregate principal amount of Indebtedness of Foreign Subsidiaries owing to the Borrower and the other Restricted Subsidiaries at any time outstanding; and (c) the aggregate principal amount of Indebtedness of Foreign Subsidiaries that is Guaranteed by the Borrower and the other Restricted Subsidiaries at any time outstanding, when taken together with the aggregate amount of payments made with respect to entities that do not become Guarantors pursuant to clause (2) of the definition of Permitted Acquisitions, may not exceed the greater of (i) $25.0 million and (ii) 0.75% of Consolidated Total Assets as of the date any such Investment is made, plus an amount equal to any returns of capital or sale proceeds actually received in respect of any such Investments (which such amount shall not exceed the amount of such Investment (as determined above) at the time such Investment was made);
(7) Cash Equivalents and, to the extent not made for speculative purposes, Investment Grade Securities or Investments that were Cash Equivalents or Investment Grade Securities when made;
(8) Investments arising out of the receipt by the Borrower or any of the Restricted Subsidiaries of non-cash consideration in connection with any sale of assets permitted under Section 6.05;
(9) accounts receivable, security deposits and prepayments and other credits granted or made in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and others, including in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, such account debtors and others, in each case in the ordinary course of business;
(10) Investments acquired as a result of a foreclosure by the Borrower or any Restricted Subsidiary with respect to any secured Investments or other transfer of title with respect to any secured Investment in default;
(11) Hedge Agreements;
(12) Investments existing on, or contractually committed as of, the Closing Date and set forth on Schedule 6.04 and any replacements, refinancings, refunds, extensions, renewals or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (12) is not increased at any time above the amount of such Investments existing or committed on the Closing Date (other than pursuant to an increase as required by the terms of any such Investment as in existence on the Closing Date);
(13) Investments resulting from pledges and deposits that are Permitted Liens;
(14) intercompany loans among Foreign Subsidiaries and Guarantees by Foreign Subsidiaries permitted by Section 6.01(22);
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(15) acquisitions of obligations of one or more officers or other employees of any Parent Entity, Borrower or any Subsidiary of the Borrower in connection with such officers or employees acquisition of Equity Interests of any Parent Entity, so long as no cash is actually advanced by the Borrower or any Restricted Subsidiary to such officers or employees in connection with the acquisition of any such obligations;
(16) Guarantees of operating leases (for the avoidance of doubt, excluding Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case, entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business;
(17) Investments to the extent that payment for such Investments is made with Equity Interests of any Parent Entity;
(18) Investments consisting of the redemption, purchase, repurchase or retirement of any Equity Interests permitted under Section 6.06;
(19) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers;
(20) Guarantees of Indebtedness permitted under Section 6.01;
(21) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Borrower or any Restricted Subsidiary;
(22) Investments, including loans and advances, to any Parent Entity so long as Borrower or any Restricted Subsidiary would otherwise be permitted to make a Restricted Payment in such amount; provided that the amount of any such Investment will be deemed to be a Restricted Payment under the appropriate clause of Section 6.06 for all purposes of this Agreement;
(23) Investments consisting of the leasing or licensing of intellectual property in the ordinary course of business or the contribution of intellectual property pursuant to joint marketing arrangements with other Persons;
(24) purchases or acquisitions of inventory, supplies, materials and equipment or purchases or acquisitions of contract rights or intellectual property in each case in the ordinary course of business;
(25) Investments in assets useful in the business of the Borrower or any Restricted Subsidiary made with (or in an amount equal to) any Reinvestment Deferred Amount or Below Threshold Asset Sale Proceeds; provided that if the underlying Asset Sale was with respect to assets of the Borrower or a Subsidiary Loan Party, then such Investment shall be consummated by the Borrower or a Subsidiary Loan Party;
(26) any Investment in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person, in each case in connection with a Qualified Receivables Financing, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Financing or any related Indebtedness;
(27) intercompany current liabilities owed to Unrestricted Subsidiaries or joint ventures incurred in the ordinary course of business in connection with the cash management operations of the Borrower and its Subsidiaries;
(28) Investments that are made with Excluded Contributions;
(29) additional Investments; provided that the aggregate fair market value of such Investments made since the Closing Date that remain outstanding (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value), when
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taken together with the aggregate amount of payments made with respect to Junior Financings pursuant to Section 6.09(1)(c) and Restricted Payments pursuant to Section 6.06(17), does not exceed the greater of (a) $115.0 million and (b) 3.50% of Consolidated Total Assets as of the date any such Investment is made, in each case, plus any returns of capital actually received by the Borrower or any of the Restricted Subsidiary in respect of such Investments;
(30) Investments by the Borrower or any Restricted Subsidiary in Captive Insurance Companies;
(31) Investments in Indebtedness of the Borrower or any of its Restricted Subsidiaries; provided that an Investment in Junior Financing will be treated as a repayment thereof for purposes of compliance with the covenant described in Section 6.09(2) and such Investment will be permitted only to the extent a repayment of such Junior Financing would be permitted at the time of such Investment and provided , further , that any Investments in Indebtedness of any Restricted Subsidiary that is not a Guarantor, taken together with intercompany investments made pursuant to Section 6.04(5), may not exceed the greater of (i) $75.0 million and (ii) 2.25% of Consolidated Total Assets as of the date any such Investment is made, plus an amount equal to any returns of capital or sale proceeds actually received in respect of any such Investments (which such amount shall not exceed the amount of such Investment (as determined therein) at the time such Investment was made); and
(32) any Investment, if (a) no Event of Default is continuing immediately prior to making such Investment or would result therefrom and (b) the Total Net Leverage Ratio, on a Pro Forma Basis, is less than or equal to 4.50 to 1.00.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions . Merge into, or consolidate or amalgamate with, any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets, or issue, sell, transfer or otherwise dispose of any Equity Interests of any Restricted Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other Person or any division, unit or business of any other Person, except that this Section 6.05 will not prohibit:
(1) if at the time thereof and immediately after giving effect thereto no Event of Default has occurred and is continuing or would result therefrom:
(a) the merger, consolidation or amalgamation of any Restricted Subsidiary into (or with) the Borrower in a transaction in which the Borrower is the survivor;
(b) the merger, consolidation or amalgamation of any Restricted Subsidiary into or with any Subsidiary Loan Party in a transaction in which the surviving or resulting entity is a Subsidiary Loan Party;
and, in the case of each of the foregoing clauses (a) and (b), no Person other than the Borrower or a Subsidiary Loan Party receives any consideration;
(c) the merger, consolidation or amalgamation of any Restricted Subsidiary that is not a Loan Party into or with any other Restricted Subsidiary that is not a Loan Party;
(d) any transfer of inventory among the Borrower and its Restricted Subsidiaries or between Restricted Subsidiaries and any other transfer of property or assets among the Borrower and its Restricted Subsidiaries or between Restricted Subsidiaries, in each case, in the ordinary course of business;
(e) the liquidation or dissolution or change in form of entity of any Restricted Subsidiary of the Borrower if a Responsible Officer of the Borrower determines in good faith that
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such liquidation, dissolution or change in form is in the best interests of the Borrower and is not materially disadvantageous to the Lenders;
(f) the merger, consolidation or amalgamation of any Restricted Subsidiary with or into any other Person in order to effect a Permitted Investment so long as the continuing or surviving Person will be a Subsidiary Loan Party if the merging, consolidating or amalgamating Subsidiary was a Subsidiary Loan Party and which, together with each of its Subsidiaries, shall have complied with the requirements of Section 5.10; or
(g) a merger or consolidation of the Borrower into a newly formed entity organized under the laws of the United States of America, any state thereof or the District of Columbia in connection with a Permitted Change of Control; provided that either the Borrower shall be the surviving Person in such transaction or the Person surviving such transaction shall expressly assume, pursuant to an instrument reasonably satisfactory to the Administrative Agent, all liabilities and obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is party;
(2) any sale, transfer or other disposition if:
(a) the Net Cash Proceeds therefrom are to be applied in accordance with Section 2.08(1);
(b) at least 75% of the consideration therefor is in the form of cash and Cash Equivalents; and
(c) such sale, transfer or disposition is made for fair market value (as determined by a Responsible Officer of the Borrower in good faith);
provided that each of the following items will be deemed to be cash for purposes of this Section 6.05(2):
(i) any liabilities of the Borrower or the Restricted Subsidiaries (as shown on the most recent Required Financial Statements or in the notes thereto), other than liabilities that are by their terms subordinated in right of payment to the Obligations, that are assumed by the transferee with respect to the applicable disposition and for which the Borrower and the Restricted Subsidiaries have been validly released by all applicable creditors in writing;
(ii) any securities received by the Borrower or any Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of the applicable disposition; and
(iii) any Designated Non-Cash Consideration received in respect of such disposition; provided that the aggregate fair market value of all such Designated Non-Cash Consideration, as determined by a Responsible Officer of the Borrower in good faith, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (iii) that is then outstanding, does not exceed the greater of (A) $40.0 million and (B) 1.25% of Consolidated Total Assets as of the date any such Designated Non-Cash Consideration is received, with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value;
(3) (a) the purchase and sale of inventory or goods in the ordinary course of business, (b) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business, (c)
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the sale or other disposition of surplus, obsolete, damaged or worn out equipment or other property in the ordinary course of business or (d) the disposition of Cash Equivalents (or Investments that were Cash Equivalents when made);
(4) so long as no Event of Default exists or would result therefrom, Specified Sale and Lease-Back Transactions provided that, (x) such dispositions shall be for fair market value in a bona fide arms length transaction (as determined in the good faith judgment of the Borrower) and (y) the applicable Specified Sale and Lease-Back Net Proceeds thereof are applied in accordance with Section 2.08(6);
(5) Investments permitted by Section 6.04, (including any Permitted Acquisition or merger, consolidation or amalgamation in order to effect a Permitted Acquisition), provided, that, following any such merger, consolidation or amalgamation involving the Borrower, the Borrower is the surviving corporation;
(6) Permitted Liens;
(7) Restricted Payments permitted by Section 6.06;
(8) the sale or discount of overdue or defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;
(9) leases, licenses, or subleases or sublicenses of any real or personal property in the ordinary course of business;
(10) sales, leases or other dispositions of inventory of the Borrower or any Restricted Subsidiary determined by the management of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower or such Restricted Subsidiary;
(11) acquisitions and purchases made with Below Threshold Asset Sale Proceeds;
(12) to the extent allowable under Section 1031 of the Code (or comparable or successor provision), any exchange of like property (excluding any boot thereon permitted by such provision) for use in any business conducted by the Borrower or any Restricted Subsidiary that is not in contravention of Section 6.08; provided that to the extent the property being transferred constitutes Term Priority Collateral, such replacement property will constitute Term Priority Collateral; and
(13) sales or other dispositions by the Borrower or any Restricted Subsidiary of assets in connection with the closing or sale of a Store (including a factory Store) in the ordinary course of business of the Borrower and its Subsidiaries, which consist of leasehold interests in the premises of such Store, the equipment and fixtures located at such premises and the books and records relating exclusively and directly to the operations of such Store; provided that as to each and all such sales and closings, (A) no Event of Default shall result therefrom and (B) such sale shall be on commercially reasonable prices and terms in a bona fide arms length transaction;
(14) bulk sales of other Dispositions of the inventory of a Loan Party not in the ordinary course of business in connection with Store closings, at arms length; and
(15) any sale, transfer or other disposition, in a single transaction or a series of related transactions, of any asset or assets having a fair market value, as determined by a Responsible Officer of the Borrower in good faith, of not more than $5.0 million.
To the extent any Collateral is disposed of in a transaction expressly permitted by this Section 6.05 to any Person other than Holdings, the Borrower or any Guarantor, such Collateral will be free and clear of the Liens created by the Loan Documents, and the Administrative Agent will take, and each Lender hereby authorizes the Administrative
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Agent to take, any actions reasonably requested by the Borrower in order to evidence the foregoing, in each case, in accordance with Section 10.18.
SECTION 6.06. Restricted Payments . Declare or pay any dividend or make any other distribution (by reduction of capital or otherwise), directly or indirectly, whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional Equity Interests (other than Disqualified Stock not otherwise permitted under Section 6.01) of the Person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any of its Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests (other than Disqualified Stock) of the Person redeeming, purchasing, retiring or acquiring such shares) (the foregoing, Restricted Payments ) other than:
(1) the making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the sale (other than to a Restricted Subsidiary of the Borrower) of, Equity Interests of the Borrower (other than Disqualified Stock) or from the contribution of common equity capital to the Borrower, other than (a) Excluded Contributions, (b) [reserved] and (c) any such proceeds that are used prior to the date of determination to (i) make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(15) or a payment in respect of Junior Financing under Section 6.09(1)(a), in each case utilizing the Available Amount, (ii) make a Restricted Payment under Section 6.06(2)(b) or (iii) incur Contribution Indebtedness;
(2) Restricted Payments to any Parent Entity the proceeds of which are used to purchase, retire, redeem or otherwise acquire, or to any Parent Entity for the purpose of paying to any other Parent Entity to purchase, retire, redeem or otherwise acquire, the Equity Interests of such Parent Entity (including related stock appreciation rights or similar securities) held directly or indirectly by then present or former directors, consultants, officers, employees, managers or independent contractors of Holdings, the Borrower or any of the Restricted Subsidiaries or any Parent Entity or their estates, heirs, family members, spouses or former spouses (including for all purposes of this clause (2), Equity Interests held by any entity whose Equity Interests are held by any such future, present or former employee, officer, director, manager, consultant or independent contractor or their estates, heirs, family members, spouses or former spouses) pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or other agreement or arrangement or any stock subscription or shareholder or similar agreement; provided that the aggregate amount of such purchases or redemptions may not exceed:
(a) $25.0 million in any fiscal year (with any unused amounts in any fiscal year being carried over to the next three succeeding fiscal years); plus
(b) the amount of net cash proceeds contributed to the Borrower that were received by any Parent Entity since the Closing Date from sales of Equity Interests of any Parent Entity to directors, consultants, officers, employees, managers or independent contractors of any Parent Entity, the Borrower or any Restricted Subsidiary in connection with permitted employee compensation and incentive arrangements, other than (a) Excluded Contributions, (b) [reserved] and (c) any such proceeds that are used prior to the date of determination to (1) make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(15) or a payment in respect of Junior Financing under Section 6.09(2)(a), in each case utilizing the Available Amount, (2) make a Restricted Payment under Section 6.06(1) or (3) incur Contribution Indebtedness; plus
(c) the amount of net proceeds of any key man life insurance policies received during such fiscal year; plus
(d) the amount of any bona fide cash bonuses otherwise payable to directors, consultants, officers, employees, managers or independent contractors of any Parent Entity, the Borrower or any Restricted Subsidiary that are foregone in return for the receipt of Equity Interests, the fair market value of which is equal to or less than the amount of such cash bonuses, which, if not used in any year, may be carried forward to any subsequent fiscal year;
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and provided, further, that cancellation of Indebtedness owing to the Borrower or any Restricted Subsidiary from directors, consultants, officers, employees, managers or independent contractors of any Parent Entity, the Borrower or any Restricted Subsidiary in connection with a repurchase of Equity Interests of any Parent Entity will not be deemed to constitute a Restricted Payment;
(3) the Distribution and Restricted Payments to consummate the Transactions;
(4) at any time after the consummation of a Qualified IPO, Restricted Payments in an amount equal to 6.0% per annum of the net cash proceeds received from any public sale of the Equity Interests of the Borrower or any Parent Entity that are contributed to the Borrower in cash;
(5) Restricted Payments in the form of cash distributions to any Parent Entity that files, or to any Parent Entity for the purpose of paying to any other Parent Entity that files, a consolidated, combined or unitary U.S. federal, state or local income tax return that includes the Borrower and one or more Subsidiaries (or the taxable income thereof), or to any Parent Entity that is a partner or a sole owner of the Borrower in the event the Borrower is treated as a partnership or a disregarded entity for U.S. federal income tax purposes, to pay U.S. federal, state or local income taxes, in each case, in an amount not to exceed the amount that the Borrower and its relevant Subsidiaries would have been required to pay in respect of the applicable U.S. federal or state or local income taxes had Borrower been the parent of a consolidated, combined or unitary group (as applicable) only including the Borrower and its subsidiaries included in the applicable consolidated, combined or unitary return; provided, however, that any distributions pursuant to the foregoing in respect of any tax liability attributed to taxable income of any Unrestricted Subsidiary shall be permitted only to the extent that cash distributions were made by such Unrestricted Subsidiary to the Borrower or any Restricted Subsidiary for such purpose;
(6) Restricted Payments to permit any Parent Entity to:
(a) pay operating, overhead, legal, accounting and other professional fees and expenses (including directors fees and expenses and administrative, legal, accounting, filings and similar expenses), in each case to the extent related to its separate existence as a holding company or to its ownership of the Borrower and the Restricted Subsidiaries;
(b) pay fees and expenses related to any public offering or private placement of debt or equity securities of, or incurrence of any Indebtedness by, any Parent Entity or any Permitted Investment, whether or not consummated;
(c) pay franchise taxes and other similar taxes and expenses, in each case, in connection with the maintenance of its legal existence;
(d) make payments under transactions permitted under Section 6.07 (other than Section 6.07(8)) or Article VII, in each case to the extent such payments are due at the time of such Restricted Payment; or
(e) pay customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers, employees, directors, managers, consultants or independent contractors of any Parent Entity to the extent related to its ownership of the Borrower and the Restricted Subsidiaries;
(7) non-cash repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;
(8) Restricted Payments to allow any Parent Entity to make, or to any Parent Entity for the purpose of paying to any other Parent Entity to make, payments in cash, in lieu of the issuance of fractional shares, upon the exercise of warrants or upon the conversion or exchange of Equity Interests of any such
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Person, in connection with any merger, consolidation, amalgamation or other business combination, or in connection with any dividend, distribution or split of Equity Interests;
(9) (a) any Sponsor Termination Fees pursuant to the Sponsor Management Agreement and (b) so long as no Event of Default is continuing, Restricted Payments to any Parent Entity for the purpose of paying (i) monitoring, consulting, management, transaction, advisory, termination or similar fees payable to any Sponsor or any Affiliate of Sponsor in accordance with the Management Agreement in an amount not to exceed amounts payable pursuant to the Management Agreement (it being understood that any amounts that are not paid due to the existence of an Event of Default shall accrue and may be paid when the applicable Event of Default ceases to exist or is otherwise waived) and (ii) indemnities, reimbursements and reasonable and documented out-of-pocket fees and expenses of any Sponsor or any Affiliate of Sponsor;
(10) Restricted Payments to the Borrower or any Restricted Subsidiary (or, in the case of non-Wholly Owned Subsidiaries, to the Borrower and to each other owner of Equity Interests of such Restricted Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower or such Restricted Subsidiary) based on their relative ownership interests so long as any repurchase of its Equity Interests from a Person that is not the Borrower or a Restricted Subsidiary is permitted under (or not prohibited by) Section 6.04);
(11) Restricted Payments to any Parent Entity to finance, or to any Parent Entity for the purpose of paying to any other Parent Entity to finance, any Permitted Investment; provided that (a) such Restricted Payment is made substantially concurrently with the closing of such Investment and (b) promptly following the closing thereof, such Parent Entity causes (i) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or any Restricted Subsidiary of the Borrower or (ii) the merger, consolidation or amalgamation (to the extent permitted by Section 6.05) of the Person formed or acquired into the Borrower or any Restricted Subsidiary of the Borrower in order to consummate such Permitted Investment, in each case, in accordance with the requirements of Section 5.10;
(12) the payment of any dividend or distribution or consummation of any redemption within 60 days after the date of declaration thereof or the giving of a redemption notice related thereto, if at the date of declaration or notice such payment would have complied with the provisions of this Agreement;
(13) Restricted Payments as part of a Permitted Change of Control;
(14) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Borrower or any Restricted Subsidiary by, one or more Unrestricted Subsidiaries (other than Unrestricted Subsidiaries the primary assets of which are cash or Cash Equivalents);
(15) any Restricted Payment in an amount not to exceed the Available Amount on the date such Restricted Payment is made if (a) no Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom and (b) the Interest Coverage Ratio would be at least 2.00 to 1.00 after giving effect thereto;
(16) any Restricted Payment, if (a) no Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom and (b) the Total Net Leverage Ratio, on a Pro Forma Basis, is less than or equal to 4.25 to 1.00; or
(17) additional Restricted Payments in an aggregate amount, when taken together with the aggregate amount of payments made with respect to Junior Financings pursuant to Section 6.09(2)(c) and Investments made pursuant to Section 6.04(29) that remain outstanding, not to exceed $25.0 million.
SECTION 6.07. Transactions with Affiliates . Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates in a transaction involving aggregate consideration in excess of $5.0 million, unless such transaction is (i) otherwise per-
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mitted (or required) under this Agreement or (ii) upon terms no less favorable to the Borrower and the Restricted Subsidiaries, as applicable, than would be obtained in a comparable arms length transaction with a Person that is not an Affiliate, except that this Section 6.07 will not prohibit:
(1) transactions between or among (a) the Borrower and the Restricted Subsidiaries or (b) the Borrower and any Person that becomes a Restricted Subsidiary as a result of such transaction (including by way of a merger, consolidation or amalgamation in which a Loan Party is the surviving entity);
(2) so long as no Event of Default is continuing, payment of the Sponsor Termination Fees pursuant to the Sponsor Management Agreement and management, monitoring, consulting, transaction, oversight, advisory and similar fees and payment of all expenses and indemnification claims, in each case, in accordance with the Management Agreement and Section 6.06(9) (it being understood that any amounts that are not paid due to the existence of an Event of Default will accrue and may be paid when the applicable Event of Default ceases to exist or is otherwise waived);
(3) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the Board of Directors of the Borrower or any Parent Entity in good faith;
(4) loans or advances to employees or consultants of any Parent Entity, the Borrower or any Restricted Subsidiary in accordance with Section 6.04(2);
(5) the payment of fees, reasonable out-of-pocket costs and indemnities to directors, officers, consultants and employees of any Parent Entity, the Borrower or any of the Restricted Subsidiaries in the ordinary course of business (limited, in the case of any Parent Entity, to the portion of such fees and expenses that are allocable to the Borrower and the Restricted Subsidiaries (which shall be 100% for so long as such Parent Entity owns no assets other than the Equity Interests in the Borrower and assets incidental to the ownership of the Borrower and its Restricted Subsidiaries));
(6) transactions, agreements and arrangements in existence on the Closing Date and set forth on Schedule 6.07 or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect as determined in good faith by a Responsible Officer of the Borrower;
(7) (a) any employment and severance agreements entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business, (b) any subscription agreement or similar agreement pertaining to the repurchase of Equity Interests pursuant to put/call rights or similar rights with employees, officers or directors and (c) any employee compensation, benefit plan or arrangement, any health, disability or similar insurance plan which covers employees, and any reasonable employment contract and transactions pursuant thereto;
(8) Restricted Payments permitted under Section 6.06, including payments to any Parent Entity;
(9) any purchase by any Parent Entity of the Equity Interests of the Borrower and the purchase by the Borrower of Equity Interests in any Restricted Subsidiary;
(10) payments to the Sponsors for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by the majority of the Board of Directors of the Borrower, or a majority of the Disinterested Directors of the Borrower, in good faith;
(11) transactions with Restricted Subsidiaries for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business;
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(12) any transaction in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of Holdings or the Borrower from an accounting, appraisal or investment banking firm or consultant, in each case, of nationally recognized standing that is (a) in the good faith determination of the Borrower qualified to render such letter and (b) independent from the Borrower and its Affiliates, which letter states that such transaction is (i) fair to the Borrower and its Restricted Subsidiaries from a financial point of view or (ii) on terms that are no less favorable to the Borrower and the Restricted Subsidiaries than would be obtained in a comparable arms length transaction with a Person that is not an Affiliate;
(13) transactions with joint ventures entered into in the ordinary course of business;
(14) the issuance, sale or transfer of Equity Interests of the Borrower to any Parent Entity and capital contributions by any Parent Entity to the Borrower (and payment of reasonable out-of-pocket expenses incurred by the Sponsors in connection therewith);
(15) a Permitted Change of Control, the payment of any Permitted Change of Control Costs and the issuance of Equity Interests to the management of Holdings, the Borrower or any of the Restricted Subsidiaries in connection with a Permitted Change of Control;
(16) payments by Holdings, the Borrower or any of the Restricted Subsidiaries pursuant to tax sharing agreements among Holdings, the Borrower and any of the Restricted Subsidiaries;
(17) payments or loans (or cancellation of loans) to employees or consultants that are:
(a) approved by a majority of the Disinterested Directors of Holdings or the Borrower in good faith;
(b) made in compliance with applicable law; and
(c) otherwise permitted under this Agreement;
(18) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case, in the ordinary course of business and otherwise in compliance with the terms of this Agreement, that are fair to the Borrower and the Restricted Subsidiaries;
(19) transactions between or among the Borrower and the Restricted Subsidiaries and any Person, a director of which is also a director of the Borrower or any Parent Entity, so long as (a) such director abstains from voting as a director of the Borrower or such Parent Entity, as the case may be, on any matter involving such other Person and (b) such Person is not an Affiliate of the Borrower for any reason other than such directors acting in such capacity;
(20) transactions pursuant to, and complying with, the provisions of Section 6.01, Section 6.04 or Section 6.05(1);
(21) the existence of, or the performance by any Loan Party of its obligations under the terms of, any customary registration rights agreement to which a Loan Party or any Parent Entity is a party or becomes a party in the future; and
(22) intercompany transactions undertaken in good faith (as certified by a Responsible Officer of the Borrower) for the purpose of improving the consolidated tax efficiency of Holdings and the Restricted Subsidiaries and not for the purpose of circumventing any covenant set forth herein.
SECTION 6.08. Business of the Borrower and its Subsidiaries . Notwithstanding any other provisions hereof, engage at any time in any material line of business or business activity other than any business or business activity conducted by the Borrower and the Restricted Subsidiaries on the Closing Date (after giving effect to the
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Transactions) and any similar, corollary, related, ancillary, incidental or complementary business or business activities or a reasonable extension, development or expansion thereof or ancillary thereto.
SECTION 6.09. Limitation on Payments and Modifications of Indebtedness; Modifications of Certain Other Agreements; etc .
(1) make any cash payment or other distribution in cash in respect of, or amend or modify, or permit the amendment or modification of, any provision of, any Junior Financing, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposits, on account of the purchase, redemption, retirement, acquisition, cancellation or termination in respect of any Junior Financing; except in the case of this clause (1):
(a) payments in respect of Junior Financings in an amount not to exceed the Available Amount on the date the payments are made if (i) no Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom and (ii) the Interest Coverage Ratio would be at least 2.00 to 1.00 on Pro Forma Basis after giving effect thereto;
(b) payments in respect of Junior Financings so long as (i) immediately after giving effect to such payment, the Borrowers Total Net Leverage Ratio is 4.50 to 1.00 or less and (ii) no Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom;
(c) additional payments in respect of Junior Financings, when taken together with the aggregate amount of payments made with respect to Investments pursuant to Section 6.04(29) and Restricted Payments pursuant to Section 6.06(17), in an amount not to exceed the greater of (i) $25.0 million and (ii) 0.75% of Consolidated Total Assets as of the date such payment is made;
(d) (i) the conversion or exchange of any Junior Financing into or for Equity Interests of any Parent Entity or other Junior Financing and (ii) any payment that is intended to prevent any Junior Financing from being treated as an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code;
(e) the incurrence of Permitted Refinancing Indebtedness in respect thereof;
(f) (i) payments of regularly scheduled principal and interest; (ii) mandatory offers to repay, repurchase or redeem (including in connection with the Net Cash Proceeds of Asset Sales); (iii) mandatory prepayments of principal, premium and interest; and (iv) payments of fees, expenses and indemnification obligations, in each case, with respect to such Junior Financing; and
(g) payments or distributions in respect of all or any portion of such Junior Financing with the proceeds contributed directly or indirectly to the Borrower by any Parent Entity from the issuance, sale or exchange by any Parent Entity of Equity Interests made within 18 months prior thereto; or
(2) permit any Material Subsidiary to enter into any agreement or instrument that by its terms restricts (a) with respect to any such Material Subsidiary that is not a Guarantor, Restricted Payments from such Material Subsidiary to the Borrower or any other Loan Party that is a direct or indirect parent of such Material Subsidiary or (b) with respect to any such Material Subsidiary that is a Guarantor, the granting of Liens by such Material Subsidiary pursuant to the Security Documents; except in the case of this clause (2):
(a) restrictions imposed by applicable law or required by any Governmental Authority purporting to have jurisdiction over such Material Subsidiary (including with respect to the status of any such Material Subsidiary as a Captive Insurance Company, if applicable);
(b) contractual encumbrances or restrictions:
(i) under the ABL Loan Documents;
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(ii) under the Second Lien Loan Documents; or
(iii) under any agreement relating to Ratio Debt, Indebtedness incurred pursuant to Section 6.01(1), (2), (3), (4), (5), (7), (12), (16), (21), (22), (25), (28) or (29) Indebtedness that is secured on a pari passu basis with Indebtedness under the Loan Documents or Indebtedness under the Second Lien Credit Agreement, the ABL Credit Agreement, or any Permitted Refinancing Indebtedness in respect thereof, that does not materially expand the scope of any such encumbrance or restriction;
(c) any restriction on a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Equity Interests or assets of a Restricted Subsidiary pending the closing of such sale or disposition;
(d) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business;
(e) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness;
(f) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business;
(g) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;
(h) customary provisions restricting assignment of any agreement entered into in the ordinary course of business;
(i) customary restrictions and conditions contained in any agreement relating to the sale, transfer or other disposition of any asset permitted under Section 6.05 pending the consummation of such sale, transfer or other disposition;
(j) customary restrictions and conditions contained in the document relating to any Lien, so long as (i) such Lien is a Permitted Lien and such restrictions or conditions relate only to the specific asset subject to such Lien and (ii) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this Section 6.09;
(k) customary net worth provisions contained in Real Property leases entered into by Restricted Subsidiaries, so long as a Responsible Officer of the Borrower has determined in good faith that such net worth provisions would not reasonably be expected to impair the ability of the Borrower and the other Restricted Subsidiaries to meet their ongoing obligations;
(l) any agreement in effect at the time any Person becomes a Restricted Subsidiary, so long as such agreement was not entered into in contemplation of such Person becoming a Restricted Subsidiary;
(m) restrictions in agreements representing Indebtedness permitted under Section 6.01 of a Restricted Subsidiary that is not a Subsidiary Loan Party;
(n) customary restrictions on leases, subleases, licenses or Equity Interests or asset sale agreements otherwise permitted hereby as long as such restrictions relate to the Equity Interests and assets subject thereto;
(o) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business; or
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(p) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (o) above, so long as such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Borrower, not materially more restrictive with respect to such Lien, dividend and other payment restrictions, taken as a whole, than those contained in the Lien, dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.
ARTICLE VII
Holdings Covenant
SECTION 7.01. Holdings Covenant . Holdings will not, so long as this Agreement is in effect and until all Obligations (other than Obligations in respect of (i) Specified Hedge Agreements and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) have been paid in full, unless the Required Lenders otherwise consent in writing, conduct, transact or otherwise engage in any active trade or business or operations other than through the Borrower and its Subsidiaries.
The foregoing will not prohibit Holdings from taking actions related to the following (and activities incidental thereto):
(1) its ownership of the Equity Interests of the Borrower;
(2) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance);
(3) the performance of its obligations with respect to the ABL Credit Agreement, the Tranche B Term Loan Facility, the Second Lien Credit Facility and other Indebtedness permitted by this Agreement;
(4) any offering of its common stock or any other issuance of its Equity Interests;
(5) the making of Restricted Payments; provided that Holdings will not be permitted to make Restricted Payments using the cash from the Borrower or any Subsidiary unless such cash has been dividended or otherwise distributed to Holdings as a permitted Restricted Payment pursuant to the terms of Section 6.06;
(6) the incurrence of Permitted Holdings Debt;
(7) making contributions to the capital or acquiring Equity Interests of its Subsidiaries;
(8) guaranteeing the obligations of the Borrower and its Subsidiaries;
(9) participating in tax, accounting and other administrative matters as a member or parent of the consolidated group;
(10) holding any cash or property (including cash and property received in connection with Restricted Payments made by the Borrower, but excluding the Equity Interests of any Person other than the Borrower);
(11) providing indemnification to officers and directors;
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(12) the making of Investments consisting of Cash Equivalents or, to the extent not made for speculative purposes, Investment Grade Securities;
(13) the Distribution, the consummation of the other Transactions on the Closing Date and any Permitted Change of Control; and
(14) activities incidental to the businesses or activities described above.
ARTICLE VIII
Events of Default
SECTION 8.01. Events of Default . In case of the happening of any of the following events (each, an Event of Default ):
(1) any representation or warranty made by Holdings, the Borrower or any other Loan Party herein or in any other Loan Document or any certificate or document required to be delivered pursuant hereto or thereto proves to have been false or misleading in any material respect when so made;
(2) default is made in the payment of any principal of any Term Loan when and as the same becomes due and payable, whether at the due date thereof, at a date fixed for prepayment thereof, by acceleration thereof or otherwise;
(3) default is made in the payment of:
(a) any interest on any Term Loan or in the payment of any Fee (other than an amount referred to in clause (2) of this Section 8.01), when and as the same becomes due and payable, and such default continues unremedied for a period of five Business Days; or
(b) any other amount due under any Loan Document (other than an amount referred to in clause (2) or (3)(a) of this Section 8.01), when and as the same becomes due and payable, and such default continues unremedied for a period of five Business Days;
(4) default is made in the due observance or performance by Holdings, the Borrower or any Restricted Subsidiary of any covenant, condition or agreement contained in Section 5.01(1) (solely with respect to the Borrower), or 5.05(1) or in Article VI or Article VII (in each case solely to the extent applicable to such Person);
(5) default is made in the due observance or performance by Holdings, the Borrower or any Restricted Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in clauses (2), (3) and (4) of this Section 8.01), in each case solely to the extent applicable to such Person, and such default continues unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower;
(6) (a) any event or condition occurs (in each case, other than as a result of a Permitted Change of Control) that (i) results in any Material Indebtedness becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired) the holder or holders of any Material Indebtedness (other than under a Hedge Agreement) or any trustee or agent on its or their behalf to cause any such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (b) the Borrower or any Restricted Subsidiary fails to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (6) will not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; provided, further, that such event or condition is un-remedied and is not waived or cured by the holders of such Indebtedness prior to any acceleration of the
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Term Loans pursuant to this Section 8.01; provided, further, that the failure to observe or perform a covenant under the ABL Credit Agreement (or any Permitted Refinancing Indebtedness in respect thereof) shall not in and of itself constitute an Event of Default hereunder until the date on which the lenders under the ABL Credit Agreement (or any Permitted Refinancing Indebtedness in respect thereof) shall have accelerated payment of the ABL Obligations (or any Permitted Refinancing Indebtedness in respect thereof) as the case may be and terminated the commitments with respect thereto or foreclosed upon the collateral securing the ABL Obligations pursuant to applicable judicial proceedings (or any Permitted Refinancing Indebtedness in respect thereof);
(7) a Change of Control occurs;
(8) an involuntary proceeding is commenced or an involuntary petition is filed in a court of competent jurisdiction seeking:
(a) relief in respect of Holdings, the Borrower or any of the Material Subsidiaries, or of a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law;
(b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any of the Material Subsidiaries or for a substantial part of the property or assets of Holdings, the Borrower or any Restricted Subsidiary; or
(c) the winding up or liquidation of Holdings, the Borrower or any Material Subsidiary (except, in the case of any Material Subsidiary, in a transaction permitted by Section 6.05) and such proceeding or petition continues undismissed for 60 days or an order or decree approving or ordering any of the foregoing is entered;
(9) Holdings, the Borrower or any Material Subsidiary:
(a) voluntarily commences any proceeding or files any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law;
(b) consents to the institution of, or fails to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (8) of this Section 8.01;
(c) applies for or consents to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any of the Material Subsidiaries or for a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary;
(d) files an answer admitting the material allegations of a petition filed against it in any such proceeding;
(e) makes a general assignment for the benefit of creditors; or
(f) becomes unable or admits in writing its inability or fails generally to pay its debts as they become due;
(10) the Borrower or any Restricted Subsidiary fails to pay one or more final judgments aggregating in excess of $35.0 million (to the extent not covered by insurance), which judgments are not discharged or effectively waived or stayed for a period of 60 consecutive days;
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(11) (a) a trustee is appointed by a United States district court to administer any Plan or (b) an ERISA Event or ERISA Events occurs with respect to any Plan or Multiemployer Plan, and, in each case, with respect to clauses (a) and (b) above, such event or condition, together with all other such events or conditions, if any, is reasonably expected to have a Material Adverse Effect; or
(12) (a) any material provision of any Loan Document ceases to be, or is asserted in writing by Holdings, the Borrower or any Restricted Subsidiary not to be, for any reason, a legal, valid and binding obligation of any party thereto, (b) any security interest purported to be created by any Security Document and to extend to assets that are not immaterial to Holdings, the Borrower and the Restricted Subsidiaries on a consolidated basis ceases to be, or is asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of validity, perfection or priority results from the limitations of foreign laws, rules and regulations as they apply to pledges of Equity Interests in Foreign Subsidiaries or the application thereof, or from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under a Security Document or to file Uniform Commercial Code continuation statements and except to the extent that such loss is covered by a lenders title insurance policy and the Collateral Agent is reasonably satisfied with the credit of such insurer or (c) the Guarantees pursuant to the Security Documents by any Loan Party of any of the Obligations cease to be in full force and effect (other than in accordance with the terms thereof) or are asserted in writing by Holdings, the Borrower or any other Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations, except in the cases of clauses (a) and (b), in connection with an Asset Sale permitted by this Agreement;
then, (i) upon the occurrence of any such Event of Default (other than an Event of Default with respect to the Borrower described in clause (8) or (9) of this Section 8.01), and at any time thereafter during the continuance of such Event of Default, the Administrative Agent, at the request of the Required Lenders, will, by notice to the Borrower, take any or all of the following actions, at the same or different times: (A) declare the Term Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Term Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, will become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and (B) exercise all rights and remedies granted to it under any Loan Document and all of its rights under any other applicable law or in equity, and (ii) in any event with respect to the Borrower described in clause (8) or (9) of this Section 8.01, the principal of the Term Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, will automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.
ARTICLE IX
The Agents
SECTION 9.01. Appointment .
(1) Each Lender (in its capacities as a Lender and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements) hereby irrevocably designates and appoints the Administrative Agent as agent of such Lender under this Agreement and the other Loan Documents, as applicable, including as the Collateral Agent for such Lender and the other applicable Secured Parties under the applicable Security Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacities, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States, each of the Lenders hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lenders behalf. Notwithstanding any provision to the contrary elsewhere in this Agree-
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ment, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.
(2) To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due the Administrative Agent under this Section 9.01(2). The agreements in this Section 9.01(2) shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations. For the avoidance of doubt, no Borrower shall have liability for the actions of the Administrative Agent pursuant to the immediately preceding sentence.
(3) In furtherance of the foregoing, each Lender (in its capacities as a Lender and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements) hereby appoints and authorizes the Administrative Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on the Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In connection therewith, the Administrative Agent (and any Subagents appointed by the Administrative Agent pursuant to Section 9.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights or remedies thereunder at the direction of the Administrative Agent) shall be entitled to the benefits of this Article IX (including Section 9.07) as though the Administrative Agent (and any such Subagents) were an Agent under the Loan Documents, as if set forth in full herein with respect thereto.
(4) Each Lender (in its capacities as a Lender and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements) irrevocably authorizes the Administrative Agent, at its option and in its discretion:
(a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document:
(i) upon termination of the Commitments, the payment in full of all Obligations (other than Obligations in respect of (i) Specified Hedge Agreements and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted);
(ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document; or
(iii) if approved, authorized or ratified in writing in accordance with Section 10.08 hereof;
(b) to release any Loan Party from its obligations under the Loan Documents if such Person ceases to be a Restricted Subsidiary as a result of a transaction permitted hereunder; and
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(c) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 6.02(3) (and to the extent required by the terms thereof as of the Closing Date).
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agents authority to release its interest in particular types or items of property, or to release any Loan Party from its obligations under the Loan Documents.
(5) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, (a) the Administrative Agent (irrespective of whether the principal of any Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of any or all of the Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agents and any Subagents allowed in such judicial proceeding and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under the Loan Documents. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition (each, a Plan of Reorganization ) affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
(6) The Lenders and each other holder of an Obligation under a Loan Document shall act collectively through the Administrative Agent and, without limiting the delegation of authority to the Administrative Agent set forth herein, the Required Lenders shall direct the Administrative Agent with respect to the exercise of rights and remedies hereunder and under other Loan Documents (including with respect to alleging the existence or occurrence of, and exercising rights and remedies as a result of, any Default or Event of Default in each case that could be waived with the consent of the Required Lenders), and such rights and remedies shall not be exercised other than through the Administrative Agent; provided that the foregoing shall not preclude any Lender from exercising any right of set-off in accordance with the provisions of Section 10.06 or from exercising rights and remedies (other than the enforcement of Collateral) with respect to any payment default after the occurrence of the Maturity Date with respect to any Term Loans made by it.
SECTION 9.02. Delegation of Duties . The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof)) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of the agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent may also from time to time, when the Administrative Agent deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact (each, a Subagent ) with respect to all or any part of the Collateral; provided that no such Subagent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Subagent so appointed by the Administrative Agent to more fully or certainly vest in and confirm to such Subagent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. If any Subagent, or successor thereto, shall die, become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Subagent, to the extent permitted by law, shall automatically vest in and be exercised by the Administrative Agent until the appointment of a new Subagent. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent, attorney-in-fact or Subagent that it selects in ac-
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cordance with the foregoing provisions of this Section 9.02 in the absence of the Administrative Agents gross negligence or willful misconduct.
SECTION 9.03. Exculpatory Provisions . None of the Administrative Agent, its Affiliates or any of their respective officers, directors, employees, agents or attorneys-in-fact shall be (1) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and non-appealable decision of a court of competent jurisdiction to have resulted from its or such Persons own gross negligence or willful misconduct) or (2) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (1) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, and (2) the Administrative Agent shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into:
(1) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document;
(2) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith;
(3) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default;
(4) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents;
(5) the value or the sufficiency of any Collateral; or
(6) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
SECTION 9.04. Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) or conversation believed in good faith by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed in good faith by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to any Borrowing that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to such Borrowing. The Administrative Agent may consult with legal counsel (including counsel to Holdings or the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of
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assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all or other Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all or other Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Term Loans.
SECTION 9.05. Notice of Default . The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received written notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a notice of default. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all or other Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
SECTION 9.06. Non-Reliance on Agents and Other Lenders . Each Lender expressly acknowledges that none of the Agents, the Arrangers or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of a Loan Party or any Affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Agents and Arrangers that it has, independently and without reliance upon the Administrative Agent or Arrangers, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates and made its own decision to make its Term Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or Arrangers, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any Affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 9.07. Indemnification . The Lenders agree to indemnify each Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), in the amount of its pro rata share (based on its aggregate outstanding Term Loans determined at the time such indemnity is sought or, if indemnification is sought after the date upon which the Term Loans shall have been paid in full, ratably in accordance with its pro rata share or the outstanding Term Loans immediately prior to the repayment or retirement in full of the Term Loans), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Term Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and non-appealable decision of a court of competent jurisdiction to have resulted from the Administrative Agents gross negligence or willful mis-
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conduct. The failure of any Lender to reimburse the Administrative Agent promptly upon demand for its ratable share of any amount required to be paid by the Lenders to the Administrative Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Administrative Agent for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Administrative Agent for such other Lenders ratable share of such amount. The agreements in this Section 9.07 shall survive the payment of the Term Loans and all other amounts payable hereunder.
SECTION 9.08. Agent in Its Individual Capacity . Each Agent and its affiliates may make loans to, accept deposits from, and generally engage in any kind of business with any Loan Party as though the Administrative Agent were not the Administrative Agent. With respect to its Term Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms Lender and Lenders shall include each Agent in its individual capacity.
SECTION 9.09. Successor Agent . The Administrative Agent may resign as Administrative Agent upon ten days notice to the Lenders and the Borrower. If the Administrative Agent resigns as the Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the reference to the resigning Administrative Agent means such successor agent effective upon such appointment and approval, and the former Administrative Agents rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Term Loans. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 10 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. If no successor agent has accepted appointment as Administrative Agent by the date that is ten days following a retiring Administrative Agents notice of resignation, the retiring Administrative Agents resignation will nevertheless thereupon become effective, and the Required Lenders will thereafter perform all the duties of such Administrative Agent hereunder and/or under any other Loan Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent, which shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed). After any retiring Administrative Agents resignation as Administrative Agent, the provisions of this Section 9.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.
SECTION 9.10. Arrangers . The Arrangers will not have any duties, responsibilities or liabilities hereunder in their respective capacity as such.
SECTION 9.11. Secured Cash Management Agreements and Secured Hedge Agreements . Except as otherwise expressly set forth herein or in any Guaranty or any Security Document, no Cash Management Bank or a Qualified Counterparty to a Specified Hedge Agreement that obtains the benefits of Section 8.01, any Guaranty or any Collateral by virtue of the provisions hereof or of any Guaranty or any Security Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article IX to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Cash Management Obligations or Obligations arising under Specified Hedge Agreements unless the Administrative Agent has received written notice of such Cash Management Obligations or such Obligations arising under Specified Hedge Agreements, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank or a Qualified Counterparty to a Specified Hedge Agreement, as the case may be.
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ARTICLE X
Miscellaneous
SECTION 10.01. Notices; Communications .
(1) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 10.01(2)), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or e mail, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, in each case, as follows:
(a) if to any Loan Party or the Administrative Agent, to the address, facsimile number, e mail address or telephone number specified for such Person on Schedule 10.01 ; and
(b) if to any other Lender, to the address, facsimile number, e mail address or telephone number specified in its Administrative Questionnaire.
(2) Notices and other communications to the Lenders may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
(3) Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received. Notices sent by facsimile shall be deemed to have been given when sent and confirmation of transmission received (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 10.01(2) shall be effective as provided in such Section 10.01(2).
(4) Any party hereto may change its address, facsimile number or e mail address for notices and other communications hereunder by notice to the other parties hereto.
(5) Documents required to be delivered pursuant to Section 5.04 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically (including as set forth in Section 10.17) and if so delivered, shall be deemed to have been delivered on the date (a) on which the Borrower posts such documents or provides a link thereto on the Borrowers website on the Internet at the website address listed on Schedule 10.01 or (b) on which such documents are posted on the Borrowers behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third party website or whether sponsored by the Administrative Agent); provided that the Borrower shall notify the Administrative Agent (by facsimile or e mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents; provided, further, that, upon reasonable request by the Administrative Agent, the Borrower shall also provide a hard copy to the Administrative Agent of any such document; provided, further, that any documents posted for which a link is provided after normal business hours for the recipient shall be deemed to have been given at the opening of business on the next Business Day for such recipient. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
SECTION 10.02. Survival of Agreement . All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared
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or delivered in connection with or pursuant to this Agreement or any other Loan Document will be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Term Loans and the execution and delivery of the Loan Documents, regardless of any investigation made by such Persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Term Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.12, 2.14 and 10.05) shall survive the payment in full of the principal and interest hereunder and the termination of the Commitments or this Agreement.
SECTION 10.03. Binding Effect . This Agreement shall become effective when it has been executed by Holdings, the Borrower and the Administrative Agent and when the Administrative Agent has received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of Holdings, the Borrower, the other Loan Parties, each Agent, each Lender and their respective permitted successors and assigns.
SECTION 10.04. Successors and Assigns .
(1) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (a) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void), and (b) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 10.04 (and any attempted assignment, transfer or delegation in contravention with this Section 10.04 shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (4) of this Section 10.04) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement or the other Loan Documents.
(2) (a) Subject to the conditions set forth in paragraph (2)(b) of this Section 10.04 (and, with respect to an assignment to Holdings, the Borrower, any Subsidiary or any of their respective Affiliates, subject to the limitations set forth in Section 10.04(10) or 10.04(14), as applicable), any Lender may assign to one or more assignees (other than a natural person, a Defaulting Lender or a Disqualified Institution) (each such non-excluded Person, an Assignee ) all or a portion of its rights and obligations under this Agreement (including all or a portion of the Term Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld, delayed or conditioned) of:
(i) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Specified Event of Default has occurred and is continuing, any other Person; provided, further, that such consent shall be deemed to have been given if the Borrower has not responded within ten Business Days after delivery of a written request therefor by the Administrative Agent; provided, further, that no consent of the Borrower shall be required for any assignment by either Arranger (or any Affiliate thereof) pursuant to the initial syndication of the Term Loans; and
(ii) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund.
(b) Assignments shall be subject to the following additional conditions:
(i) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lenders Term Loans, the amount of the Term Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall
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not be less than $1.0 million, unless each of the Borrower and the Administrative Agent otherwise consent; provided that (1) no such consent of the Borrower shall be required if a Specified Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds (with simultaneous assignments to or by two or more Approved Funds being treated as one assignment for purposes of meeting the minimum assignment amount requirement), if any;
(ii) the assignee or assigning Lender to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent);
(iii) the Assignee, if it shall not be a Lender, shall deliver to (x) the Administrative Agent an Administrative Questionnaire and (y) the Administrative Agent and the Borrower any tax forms required to be delivered pursuant to Section 2.14 and all documentation and other information required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including, without limitation, the USA PATRIOT Act; and
(iv) the assignor shall deliver to the Administrative Agent any Note issued to it with respect to the assigned Term Loan.
For the purposes of this Section 10.04, Approved Fund means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(c) Subject to acceptance and recording thereof pursuant to paragraph (2)(e) of this Section 10.04, from and after the effective date specified in each Assignment and Acceptance, the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such Assignment and Acceptance). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (4) of this Section 10.04 to the extent such participation would be permitted by such Section 10.04(4).
(d) The Administrative Agent, acting for this purpose as the Administrative Agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the principal amount (and stated interest with respect thereto) of the Term Loans owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender (solely with respect to such Lenders Term Loans) at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignees completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder), all applicable tax forms, any Note outstanding with respect to the assigned Term Loan, the processing and recordation fee referred to in paragraph (2)(b)(ii) of this Section 10.04 and any written consent to such assignment required by paragraph (2) of this Section 10.04, the Administrative Agent promptly shall accept such Assignment and Acceptance and record the information contained therein in the Register (the Recordation Date ).
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No assignment, whether or not evidenced by a promissory note, shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph (2)(e).
(3) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows:
(a) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim;
(b) except as set forth in clause (a) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of Holdings, the Borrower or any Restricted Subsidiary or the performance or observance by Holdings, the Borrower or any Restricted Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto;
(c) the Assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance;
(d) the Assignee confirms that it has received a copy of this Agreement, together with copies of the most recent Required Financial Statements delivered pursuant to Section 5.04, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance;
(e) the Assignee will independently and without reliance upon the Administrative Agent or the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement;
(f) the Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto; and
(g) the Assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.
(4) (a) Any Lender may, without the consent of the Administrative Agent or, subject to Section 10.04(8), the Borrower, sell participations to one or more banks or other entities (a Participant ) in all or a portion of such Lenders rights and obligations under this Agreement (including all or a portion of the Term Loans owing to it); provided that
(i) such Lenders obligations under this Agreement shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and
(iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement.
(iv) Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to ap-
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prove any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (A) such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to Section 10.04(1)(a) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso to Section 10.08(2) and (2) directly affects such Participant and (B) no other agreement with respect to amendment, modification or waiver may exist between such Lender and such Participant. Subject to clause (4)(b) of this Section 10.04, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (2) of this Section 10.04, provided that such Participant agrees to be subject to the provisions of Sections 2.16(2) as if it were an assignee pursuant to paragraph (2) of this Section 10.04. Each Lender that sells a participation agrees, at the Borrowers request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.16(2) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.06 as though it were a Lender; provided that such Participant shall be subject to Section 2.15(3) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Term Loans or other obligations under the Loan Documents (the Participant Register ); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participants interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103 1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(b) A Participant shall not be entitled to receive any greater payment under Section 2.12, 2.13 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, except to the extent the entitlement to a greater payment results from a Change in Law occurring after the sale of the participation to such Participant.
(5) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank and in the case of any Lender that is an Approved Fund, any pledge or assignment to any holders of obligations owed, or securities issued, by such Lender, including to any trustee for, or any other representative of, such holders, and this Section 10.04 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.
(6) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender reasonably requiring Notes to facilitate transactions of the type described in paragraph (5) of this Section 10.04.
(7) If the Borrower wishes to replace the Term Loans with ones having different terms, it shall have the option, with the consent of the Administrative Agent and subject to at least three Business Days advance notice to the Lenders, instead of prepaying the Term Loans to be replaced, to (a) require the Lenders to assign such Term Loans to the Administrative Agent or its designees and (b) amend the terms thereof in accordance with Section 10.08 (with such replacement, if applicable, being deemed to have been made pursuant to Section 10.08(4)). Pursuant to any such assignment, all Term Loans to be replaced shall be purchased at par (allocated among the Lenders in the same manner as would be required if such Term Loans were being optionally prepaid, and for the avoidance of doubt, subject to Section 2.21), accompanied by payment of any accrued interest and fees thereon and any amounts owing pursuant to Section 10.05(2). By receiving such purchase price, the Lenders shall automatically be deemed to have assigned the Term Loans pursuant to the terms of the form of Assignment and Acceptance attached hereto as
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Exhibit A , and accordingly no other action by such Lenders shall be required in connection therewith. The provisions of this paragraph (7) are intended to facilitate the maintenance of the perfection and priority of existing security interests in the Collateral during any such replacement.
(8) (a) No assignment or participation shall be made to any Person that was a Disqualified Institution as of the date on which the assigning Lender entered into a binding agreement to sell and assign all or a portion of its rights and obligations under this Agreement to such Person (unless the Borrower has consented to such assignment in writing in its sole and absolute discretion, in which case such Person will not be considered a Disqualified Institution for the purpose of such assignment or participation). For the avoidance of doubt, with respect to any Assignee that becomes a Disqualified Institution after the applicable Recordation Date, (x) such Assignee shall not retroactively be disqualified from becoming a Lender and (y) the execution by the Borrower of an Assignment and Acceptance with respect to such Assignee will not by itself result in such Assignee no longer being considered a Disqualified Institution. Any assignment in violation of this clause (8)(a) shall not be void, but the other provisions of this clause (8) shall apply.
(b) If any assignment or participation is made to any Disqualified Institution without the Borrowers prior written consent in violation of clause (a) above, the Borrower may, at its sole expense and effort, upon notice to the applicable Disqualified Institution and the Administrative Agent, (A) [reserved.], (B) in the case of outstanding Term Loans held by Disqualified Institutions, purchase or prepay such Term Loan by paying the lowest of (x) the principal amount thereof, (y) the amount that such Disqualified Institution paid to acquire such Term Loans and (z) the market price of such Term Loans (as reasonably determined by the Borrower), in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder and/or (C) require such Disqualified Institution to assign, without recourse (in accordance with and subject to the restrictions contained in this Section 10.04), all of its interest, rights and obligations under this Agreement to one or more Assignees at the lowest of (x) the principal amount thereof, (y) the amount that such Disqualified Institution paid to acquire such interests, rights and obligations and (z) the market price of such Term Loans (as reasonably determined by the Borrower), in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder.
(c) Notwithstanding anything to the contrary contained in this Agreement, Disqualified Institutions (A) will not (x) have the right to receive information, reports or other materials provided to Lenders by the Borrower, the Administrative Agent or any other Lender, (y) attend or participate in meetings attended by the Lenders and the Administrative Agent, or (z) access any electronic site established for the Lenders or confidential communications from counsel to or financial advisors of the Administrative Agent or the Lenders and (B) (x) for purposes of any consent to any amendment, waiver or modification of, or any action under, and for the purpose of any direction to the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) under this Agreement or any other Loan Document, each Disqualified Institution will be deemed to have consented in the same proportion as the Lenders that are not Disqualified Institutions consented to such matter, and (y) for purposes of voting on any Plan of Reorganization, each Disqualified Institution party hereto hereby agrees (1) not to vote on such Plan of Reorganization, (2) if such Disqualified Institution does vote on such Plan of Reorganization notwithstanding the restriction in the foregoing clause (1), such vote will be deemed not to be in good faith and shall be designated pursuant to Section 1126(e) of the Bankruptcy Code (or any similar provision in any other debtor relief laws), and such vote shall not be counted in determining whether the applicable class has accepted or rejected such Plan of Reorganization in accordance with Section 1126(c) of the Bankruptcy Code (or any similar provision in any other debtor relief laws) and (3) not to contest any request by any party for a determination by the Bankruptcy Court (or other applicable court of competent jurisdiction) effectuating the foregoing clause (2).
(d) The Administrative Agent shall have the right, and the Borrower hereby expressly authorizes the Administrative Agent, to provide the list of Disqualified Institutions to each Lender or bona fide prospective Lender (as reasonably determined by the Administrative Agent) requesting the same; provided that the Lenders shall not be restricted from participating their obligations in all or a portion of such Lenders rights and obligations under this Agreement (including all or a portion of the Term Loans owing to it) to Disqualified Institutions if the Borrower has not posted the list of Disqualified Institutions to the Platform.
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(9) Notwithstanding anything to the contrary contained herein, no Non-Debt Fund Affiliate shall have any right to:
(a) attend (including by telephone) any meeting or discussions (or portion thereof) among the Administrative Agent or any Lender to which representatives of Holdings or the Borrower are not then present;
(b) receive any information or material prepared by the Administrative Agent or any Lender or any communication by or among Administrative Agent and one or more Lenders, except to the extent such information or materials have been made available to the Borrower or its representatives (and in any case, other than the right to receive notices of prepayments and other administrative notices in respect of its Term Loans required to be delivered to Lenders pursuant to this Agreement); or
(c) make or bring (or participate in, other than as a passive participant in or recipient of its pro rata benefits of) any claim, in its capacity as a Lender, against Administrative Agent or any other Lender with respect to any duties or obligations or alleged duties or obligations of such Agent or any other such Lender under the Loan Documents in the absence, with respect to any such Person, of the gross negligence, bad faith (including a material breach of obligations under the Loan Documents) or willful misconduct by such Person and its Related Parties (as determined by a court of competent jurisdiction by final and non-appealable judgment).
(10) Notwithstanding anything to the contrary contained herein, any Lender may assign all or any portion of its Term Loans hereunder to any Person who, after giving effect to such assignment, would be an Affiliated Lender; provided that:
(a) such assignment shall be made pursuant to (i) an open market purchase (including, for the avoidance of doubt, any purchase made during the initial syndication of the Term Loans) on a non-pro rata basis or (ii) a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis;
(b) in the case of an assignment to a Non-Debt Fund Affiliate, the assigning Lender and such Non-Debt Fund Affiliate purchasing such Lenders Term Loans shall execute and deliver to the Administrative Agent an assignment agreement substantially in the form of Exhibit E (a Non-Debt Fund Affiliate Assignment and Acceptance ) in lieu of an Assignment and Acceptance;
(c) in the case of an assignment to a Non-Debt Fund Affiliate, at the time of such assignment and after giving effect to such assignment, Non-Debt Fund Affiliates shall not, in the aggregate, hold Term Loans (and participating interests in Term Loans) with an aggregate principal amount in excess of 30.0% of the principal amount of all Term Loans (including, for the avoidance of doubt, any Incremental Term Loans, Other Term Loans or Extended Term Loans, if any) then outstanding;
(d) in the case of an assignment to a Non-Debt Fund Affiliate, each Non-Debt Fund Affiliate shall at the time of such assignment of such Term Loans held by it, either (i) make a No MNPI Representation or (ii) if it is not able to make the No MNPI Representation, inform the assignor and the assignor will deliver to such Non-Debt Fund Affiliate customary written assurance that it is a sophisticated investors and is willing to proceed with the assignment; and
(e) in the case of an assignment to a Non-Debt Fund Affiliate, if such Non-Debt Fund Affiliate subsequently assigns the Term Loans acquired by it in accordance with this Section 10.04(10), such Non-Debt Fund Affiliate shall at the time of such assignment of such Term Loans held by it, either (i) affirm the No MNPI Representation or (ii) if it is not able to affirm the No MNPI Representation, inform the assignee and the assignee will deliver to such Non-Debt Fund Affiliate customary written assurance that it is a sophisticated investors and is willing to proceed with the assignment.
(11) To the extent not previously disclosed to the Administrative Agent, the Borrower shall, upon reasonable request of the Administrative Agent (but not more frequently than once per calendar quarter), report to the
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Administrative Agent the amount and Class of Term Loans held by Non-Debt Fund Affiliates and the identity of such holders. Notwithstanding the foregoing, any Affiliated Lender shall be permitted to contribute any Term Loan so assigned to such Affiliated Lender pursuant to this Section 10.04(11) to Holdings or any of the Restricted Subsidiaries for purposes of cancellation, which contribution may be made, subject to Section 6.07, in exchange for Equity Interests (other than Disqualified Stock) of any Parent Entity or Indebtedness of the Borrower to the extent such Indebtedness is permitted to be incurred pursuant to Section 6.01 at such time; provided that any Term Loans so contributed shall be automatically and permanently canceled upon the effectiveness of such contribution and will thereafter no longer be outstanding for any purpose hereunder.
(12) Notwithstanding anything in Section 10.04 or the definition of Required Lenders to the contrary, for purposes of determining whether the Required Lenders, all affected Lenders or all Lenders have:
(a) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom;
(b) otherwise acted on any matter related to any Loan Document; or
(c) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document (collectively, Required Lender Consent Items ):
(i) a Non-Debt Fund Affiliate shall be deemed to have voted its interest as a Lender in the same proportion as the allocation of voting with respect to such matter by Lenders who are not Non-Debt Fund Affiliates, unless such Required Lender Consent Item requires the consent of each Lender or each affected Lender or the result of such Required Lender Consent Item would reasonably be expected to deprive such Non-Debt Fund Affiliate of its pro rata share (compared to Lenders which are not Non-Debt Fund Affiliates) of any payments to which such Non-Debt Fund Affiliate is entitled under the Loan Documents without such Non-Debt Fund Affiliate providing its consent or such Non-Debt Fund Affiliate is otherwise adversely affected thereby compared to Lenders which are not Non-Debt Fund Affiliates (in which case for purposes of such vote such Non-Debt Fund Affiliate shall have the same voting rights as other Lenders which are not Non-Debt Fund Affiliates); and
(ii) Term Loans held by Debt Fund Affiliates may not account for more than 49.9% of the Term Loans of consenting Lenders included in determining whether the Required Lenders have consented to any action pursuant to Section 10.04.
(13) Additionally, the Loan Parties and each Non-Debt Fund Affiliate hereby agree that, and each Non-Debt Fund Affiliate Assignment and Acceptance by a Non-Debt Fund Affiliate shall provide a confirmation that, if a case under Title 11 of the United States Code is commenced against any Loan Party, such Loan Party shall seek (and each Non-Debt Fund Affiliate shall consent) to provide that the vote of any Non-Debt Fund Affiliate (in its capacity as a Lender) with respect to any plan of reorganization of such Loan Party shall not be counted except that such Non-Debt Fund Affiliates vote (in its capacity as a Lender) may be counted to the extent any such plan of reorganization proposes to treat the Obligations or claims held by such Non-Debt Fund Affiliate in a manner that is less favorable to such Non-Debt Fund Affiliate than the proposed treatment of the Term Loans or claims held by Lenders that are not Affiliates of the Borrower.
(14) Notwithstanding anything to the contrary contained in this Agreement, any Lender may assign all or a portion of its Term Loans to any Purchasing Borrower Party; provided that:
(a) the assigning Lender and the Purchasing Borrower Party purchasing such Lenders Term Loans, as applicable, shall execute and deliver to the Administrative Agent a Non-Debt Fund Affiliate Assignment and Acceptance in lieu of an Assignment and Acceptance;
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(b) such assignment shall be made pursuant to (i) an open market purchase on a non-pro rata basis or (ii) a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis;
(c) any Term Loans assigned to any Purchasing Borrower Party shall be automatically and permanently cancelled upon the effectiveness of such assignment and will thereafter no longer be outstanding for any purpose hereunder;
(d) at the time of and immediately after giving effect to any such purchase, no Event of Default shall exist;
(e) the applicable Purchasing Borrower Party shall at each of the time of its execution of a written trade confirmation in respect of, and at the time of consummation of, such assignment, either (i) make a No MNPI Representation or (ii) if it is not able to make the No MNPI Representation, inform the assignor and the assignor will deliver to such Non-Debt Fund Affiliate customary written assurance that it is a sophisticated investors and is willing to proceed with the assignment;
(f) the aggregate outstanding principal amount of the Term Loans of the applicable Class shall be deemed reduced by the full par value of the aggregate principal amount of the Term Loans purchased pursuant to this Section 10.04(14) and each principal repayment installment with respect to the Term Loans of such Class shall be reduced pro rata by the aggregate principal amount of Term Loans purchased; and
(g) no proceeds from revolving loans under the ABL Credit Agreement shall be used to fund any such purchases.
SECTION 10.05. Expenses; Indemnity .
(1) If the Transactions are consummated and the Closing Date occurs, the Borrower agrees to pay all reasonable, documented and invoiced out-of-pocket expenses incurred by the Administrative Agent and the Arrangers in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent (and, in the case of enforcement of this Agreement, each Lender) in connection with the syndication of the Term Facility, preparation, execution and delivery, amendment, modification, waiver or enforcement of this Agreement (including expenses incurred in connection with due diligence (including third party expenses) and initial and ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Borrower or provided for in this Agreement) or in connection with the administration of this Agreement and any amendments, modifications or waivers of the provisions hereof or thereof, including the reasonable, documented and invoiced fees, charges and disbursements of a single counsel for the Administrative Agent and the Arrangers, one firm of local counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions) and, in the case of any actual or perceived conflict of interest, one additional firm of counsel for the Administrative Agent and the Arrangers and, in the case of enforcement of this Agreement, the Lenders.
(2) The Borrower agrees to indemnify the Administrative Agent, each Arranger, each Lender, each of their respective Affiliates and each of their respective directors, officers, employees, agents, advisors, controlling Persons, equityholders, partners, members and other representatives and each of their respective successors and permitted assigns (each such Person being called an Indemnitee ) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and reasonable, documented and invoiced out-of-pocket fees and expenses (limited to reasonable and documented legal fees of a single firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all Indemnitees taken as a whole (and, in the case of an actual or perceived conflict of interest, where the Indemnitee affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of an additional counsel for each group of affected Indemnitees similarly situated, taken as a whole)), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of:
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(a) the execution or delivery of this Agreement or any other Loan Document, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby;
(b) the use of the proceeds of the Term Loans; or
(c) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto and regardless of whether such matter is initiated by a third party or by Holdings, the Borrower or any of their Restricted Subsidiaries or Affiliates or creditors;
provided that no Indemnitee will be indemnified for any loss, claim, damage, liability, cost or expense to the extent it (i) has been determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (A) the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Parties or (B) a material breach of the obligations of such Indemnitee under the Loan Documents or (ii) relates to any proceeding between or among Indemnitees other than (A) claims against the Administrative Agent or any Arranger or their respective Affiliates, in each case, in their capacity or in fulfilling their role as the agent or arranger, syndication agent or documentation agent or any other similar role under the Term Facility (excluding their role as a Lender) to the extent such Persons are otherwise entitled to receive indemnification under this paragraph (2) or (B) claims arising out of any act or omission on the part of Holdings, the Borrower or their Affiliates.
(3) Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses claims, damages, liabilities and related expenses, including reasonable, documented and invoiced fees, charges and disbursements of one firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each appropriate jurisdiction (which may include a single special counsel in multiple jurisdictions) for all Indemnitees taken as a whole (and, in the case of an actual or perceived conflict of interest, an additional counsel for all Indemnitees taken as a whole) and reasonable, documented and invoiced consultant fees, in each case, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of any claim related in any way to Environmental Laws and the Borrower or any of the Restricted Subsidiaries, or any actual or alleged presence, Release or threatened Release of Hazardous Materials at, under, on or from any property for which the Borrower or any Restricted Subsidiaries would reasonably be expected to be held liable under Environmental Laws; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Parties.
(4) Any indemnification or payments required by the Loan Parties under this Section 10.05 shall not apply with respect to (a) Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim or (b) Taxes that are duplicative of any indemnification or payments required by the Loan Parties under Section 2.14.
(5) To the fullest extent permitted by applicable law, Holdings and the Borrower shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Term Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(6) The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations and the termination of this Agreement. All amounts due under this Section 10.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
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SECTION 10.06. Right of Set-off . If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender to or for the credit or the account of Holdings or any Subsidiary Loan Party against any of and all the Obligations of Holdings or any Subsidiary Loan Party now or hereafter existing under this Agreement or any other Loan Document held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although the Obligations may be unmatured. The rights of each Lender under this Section 10.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender may be exercised only at the direction of the Administrative Agent or the Required Lenders.
SECTION 10.07. Applicable Law . THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN THE OTHER LOAN DOCUMENTS) AND ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
SECTION 10.08. Waivers; Amendment .
(1) No failure or delay of the Administrative Agent or any Lender in exercising any right or power hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Holdings, the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (2) of this Section 10.08, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, the Borrower or any other Loan Party in any case shall entitle such Person to any other or further notice or demand in similar or other circumstances.
(2) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except
(a) as provided in Sections 2.18, 2.19 and 2.20;
(b) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrower and the Required Lenders and acknowledged by the Administrative Agent; and
(c) in the case of any other Loan Document, as set forth in such Loan Document or, if not set forth therein, pursuant to an agreement or agreements in writing entered into by each party thereto and the Administrative Agent;
provided, however, that except as provided in Section 2.18, 2.19 and 2.20, no such agreement shall:
(i) decrease, forgive, waive or excuse the principal amount of, or any interest on, or extend the final maturity of, or decrease the rate of interest on, any Term Loan beyond the Maturity Date, without the prior written consent of each Lender directly affected thereby (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default shall not constitute an increase of the Commitments of any Lender);
(ii) increase or extend the Commitment of any Lender or decrease, forgive, waive or excuse the fees of any Agent without the prior written consent of such Lender or Agent (it being
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understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default shall not constitute an increase of the Commitments of any Lender);
(iii) extend or waive any Term Loan Installment Date or reduce the amount due on any Term Loan Installment Date or extend any date on which payment of principal or interest on any Term Loan or any Fee is due, without the prior written consent of each Lender adversely affected thereby (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default shall not constitute an increase of the Commitments of any Lender);
(iv) amend the provisions of Section 2.15(2) or (3) of this Agreement, Section 5.02 of the Security Agreement, Section 4.3 of the Intercreditor Agreement or any analogous provision of any other Loan Document, in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby;
(v) amend or modify the provisions of this Section 10.08 or the definition of the term Required Lenders or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Term Loans are included on the Closing Date); or
(vi) release all or substantially all of the Collateral (or subordinate the Liens in favor of the Administrative Agent on all or substantially all of the Collateral including by altering the definition of Term Priority Collateral in the Intercreditor Agreement), unless pursuant to a transaction permitted by this Agreement, or release any of Holdings, the Borrower or any of the other Subsidiary Loan Parties from their respective Guarantees under the Guaranty Agreement, unless, in the case of a Subsidiary Loan Party (other than the Borrower), all or substantially all the Equity Interests of such Subsidiary Loan Party is sold or otherwise disposed of in a transaction permitted by this Agreement, without the prior written consent of each Lender;
provided that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 10.08 and any consent by any Lender pursuant to this Section 10.08 shall bind any assignee of such Lender.
(3) Without the consent of the Administrative Agent or any Lender, the Loan Parties and the Administrative Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law.
(4) This Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrower (i) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and the accrued interest and fees in respect thereof and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.
(5) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, the Borrower may enter into Incremental Facility Amendments in accordance with Section 2.18, Refinancing Amendments
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in accordance with Section 2.19, Extension Amendments in accordance with Section 2.20 and Refinancing Amendments, and such Incremental Facility Amendments, Extension Amendments and Refinancing Amendments shall be effective to amend the terms of this Agreement and the other applicable Loan Documents, in each case, without any further action or consent of any other party to any Loan Document.
(6) Notwithstanding the foregoing, any amendment or waiver that by its terms affects the rights or duties of Lenders holding Term Loans or Commitments of a particular Class (but not the rights or duties of Lenders holdings Term Loans or Commitments of any other Class) will require only the requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto if such Class of Lenders were the only Class of Lenders.
(7) Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of the Borrower and the Administrative Agent to the extent necessary to integrate any Incremental Facilities on substantially the same basis as the Term Loans, as applicable.
Notwithstanding the foregoing, the Administrative Agent, with the consent of the Borrower, may amend, modify or supplement any Loan Document without the consent of any Lender or the Required Lenders in order to correct, amend or cure any ambiguity, inconsistency or defect or correct any typographical error or other manifest error in any Loan Document, and such amendment, modification or supplement shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders within five Business Days following receipt of notice thereof.
SECTION 10.09. Interest Rate Limitation . Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the Charges ), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the Maximum Rate ) that may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender, shall be limited to the Maximum Rate; provided that such excess amount shall be paid to such Lender on subsequent payment dates to the extent not exceeding the legal limitation. In no event will the total interest received by any Lender exceed the amount which it could lawfully have received and any such excess amount received by any Lender will be applied to reduce the principal balance of the Term Loans or to other amounts (other than interest) payable hereunder to such Lender, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining will be paid to the Borrower.
SECTION 10.10. Entire Agreement . This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
SECTION 10.11. WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.
SECTION 10.12. Severability . In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity,
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legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10.13. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 10.03. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission (e. g. , pdf or tiff) shall be as effective as delivery of a manually signed original.
SECTION 10.14. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
SECTION 10.15. Jurisdiction; Consent to Service of Process .
(1) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, Borough of Manhattan and any appellate court from any thereof (collectively, New York Courts ), in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction, except that each of the Loan Parties agrees that (a) it will not bring any such action or proceeding in any court other than New York Courts (it being acknowledged and agreed by the parties hereto that any other forum would be inconvenient and inappropriate in view of the fact that more of the Lenders who would be affected by any such action or proceeding have contacts with the State of New York than any other jurisdiction), and (b) in any such action or proceeding brought against any Loan Party in any other court, it will not assert any cross-claim, counterclaim or setoff, or seek any other affirmative relief, except to the extent that the failure to assert the same will preclude such Loan Party from asserting or seeking the same in the New York Courts.
(2) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
SECTION 10.16. Confidentiality . Each of the Lenders and each of the Agents agrees (and agrees to cause each of its Affiliates) to use all information provided to it by or on behalf of Holdings, the Borrower or its Restricted Subsidiaries under the Loan Documents or otherwise in connection with the Transactions solely for the purposes of the transactions contemplated by this Agreement and the other Loan Documents and shall not publish, disclose or otherwise divulge such information, other than information that:
(1) has become generally available to the public other than as a result of a disclosure by such party;
(2) has been independently developed by such Lender or the Administrative Agent without violating this Section 10.16; or
(3) was available to such Lender or the Administrative Agent from a third party having, to such Persons knowledge, no obligations of confidentiality to Holdings, the Borrower or any other Loan Party);
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(4) and shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know or to any Person that approves or administers the Term Loans on behalf of such Lender or any numbering, administration or settlement service providers (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 10.16), except:
(a) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, in which case such Person agrees, to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof prior to disclosure;
(b) as part of normal reporting or review procedures to, or examinations by, Governmental Authorities or any bank accountants or bank regulatory authority exercising examination or regulatory authority, in which case (except with respect to any audit or examination conducted by any such bank accountant or bank regulatory authority) such Person agrees, to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof prior to disclosure;
(c) to its parent companies, Affiliates or auditors (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 10.16);
(d) in order to enforce its rights under any Loan Document in a legal proceeding;
(e) to any pledgee or assignee under Section 10.04(5) or any other prospective or actual Assignee of, or prospective or actual Participant in, any of its rights under this Agreement (so long as such Person shall have been instructed to keep the same confidential in accordance with this Section 10.16); and
(f) to any direct or indirect contractual counterparty in Hedge Agreements or such contractual counterpartys professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 10.16).
(g) Notwithstanding the foregoing, no such information (other than the fact that such Disqualified Institution is a Disqualified Institution) shall be disclosed to a Disqualified Institution that constitutes a Disqualified Institution at the time of such disclosure without the Borrowers prior written consent (such consent not to be unreasonably withheld, delayed or conditioned).
SECTION 10.17. Platform; Borrower Materials . The Borrower hereby acknowledges that (1) the Administrative Agent or the Arrangers will make available to the Lenders materials or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on Intra-Links or another similar electronic system (the Platform ), and (2) certain of the Lenders may be public-side Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a Public Lender ). The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that
(a) all the Borrower Materials shall be clearly and conspicuously marked PUBLIC which, at a minimum, means that the word PUBLIC shall appear prominently on the first page thereof;
(b) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat the Borrower Materials as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws;
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(c) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Investor; and
(d) the Administrative Agent and the Arrangers shall be entitled to treat the Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not designated Public Investor.
Notwithstanding the foregoing, the following Borrower Materials shall be deemed to be marked PUBLIC unless the Borrower notifies the Administrative Agent that any such document contains MNPI: (1) the Loan Documents, (2) any notification of changes in the terms of the Term Loans, (3) any notification of the identity of Disqualified Institutions and (4) all information delivered pursuant to clauses (1), (2) and (3) of Section 5.04.
SECTION 10.18. Release of Liens and Guarantees . In the event that any Loan Party conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Equity Interests or assets of any Loan Party (other than Equity Interests of the Borrower) to a Person that is not (and is not required to become) a Loan Party in a transaction not prohibited by the Loan Documents, at the request of the Borrower, any Liens created by any Loan Document in respect of such Equity Interests or assets shall be automatically released and the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by Holdings or the Borrower and at the Borrowers expense in connection with such release of any Liens created by any Loan Document in respect of such Equity Interests or assets, and, in the case of a disposition of the Equity Interests of any Subsidiary Loan Party (other than the Borrower) in a transaction permitted by the Loan Documents (including through merger, consolidation, amalgamation or otherwise) and as a result of which such Subsidiary Loan Party would cease to be a Restricted Subsidiary, such Subsidiary Loan Partys obligations under each of the Security Agreement and Guaranty Agreement shall be automatically terminated and the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) and at the Borrowers expense take such action and execute any such documents as may be reasonably requested by Holdings or the Borrower to terminate such Subsidiary Loan Partys obligations under each of the Security Agreement and Guaranty Agreement. In addition, the Administrative Agent agrees to take such actions as are reasonably requested by Holdings or the Borrower and at the Borrowers expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations (other than Obligations in respect of (i) Specified Hedge Agreements and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) are paid in full and the Commitments are terminated.
SECTION 10.19. USA PATRIOT Act Notice . Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the USA PATRIOT Act.
SECTION 10.20. Security Documents and Intercreditor Agreement .
(a) The parties hereto acknowledge and agree that any provision of any Loan Document to the contrary notwithstanding, prior to the discharge in full of all ABL Claims, the Loan Parties shall not be required to act or refrain from acting under any Security Document with respect to the ABL Priority Collateral in any manner that would result in a Default or Event of Default (as defined in any ABL Loan Document) under the terms and provisions of the ABL Loan Documents. Each Lender hereunder:
(1) consents to the subordination of Liens provided for in the Intercreditor Agreement;
(2) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement; and
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(3) authorizes and instructs the Administrative Agent to enter into the Intercreditor Agreement as on behalf of such Lender.
The foregoing provisions are intended as an inducement to the lenders under the ABL Credit Agreement to extend credit and such lenders are intended third party beneficiaries of such provisions and the provisions of the Intercreditor Agreement.
(b) The parties hereto authorize the Administrative Agent to enter into any First Lien Intercreditor Agreement, Junior Lien Intercreditor Agreement or Intercreditor Agreement each in the form attached hereto or in such other form as may be satisfactory to the Administrative Agent. The Administrative Agent may from time to time enter into a modification of the Intercreditor Agreement, any First Lien Intercreditor Agreement or any Junior Lien Intercreditor Agreement, as the case may be, so long as the Administrative Agent reasonably determines that such modification is consistent with the terms of this Agreement.
SECTION 10.21. No Advisory or Fiduciary Responsibility . In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of Holdings and the Borrower acknowledge and agree that: (1) (a) the arranging and other services regarding this Agreement provided by the Agents and the Arrangers are arms-length commercial transactions between Holdings and the Borrower, on the one hand, and the Agents and the Arrangers, on the other hand; (b) the Borrower and Holdings have consulted their own legal, accounting, regulatory and tax advisors to the extent they deemed appropriate; and (c) the Borrower and Holdings are capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (2) (a) each Agent and each Arranger each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower, Holdings or any other Person and (b) none of the Agents or Arrangers has any obligation to the Borrower, Holdings or any of their Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (3) the Agents, each Arranger and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, Holdings and their respective Affiliates, and none of the Agents or any Arranger has any obligation to disclose any of such interests to the Borrower, Holdings or any of their respective Affiliates. To the fullest extent permitted by law, each of the Borrower and Holdings hereby waives and releases any claims that it may have against the Agents and the Arrangers with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
SECTION 10.22. Cashless Settlement . Notwithstanding anything to the contrary contained in this Agreement, any Lender may exchange, continue or rollover all or a portion of its Term Loans in connection with any refinancing, extension, loan modification or similar transaction permitted by the terms of this Agreement, pursuant to a cashless settlement mechanism approved by the Borrower, the Administrative Agent and such Lender.
SECTION 10.23. Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(1) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(2) the effects of any Bail-In Action on any such liability, including, if applicable:
(a) a reduction in full or in part or cancellation of any such liability;
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(b) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(c) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-134-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
BJS WHOLESALE CLUB, INC., as the Borrower | ||
By: |
/s/ Christopher J. Baldwin |
|
Name: Christopher J. Baldwin | ||
Title: President, Chief Executive Officer | ||
BEACON HOLDING INC., as Holdings | ||
By: |
/s/ Christopher J. Baldwin |
|
Name: Christopher J. Baldwin | ||
Title: President |
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent, Collateral Agent and Lender | ||
By: |
/s/ Lee Olive
|
|
Name: Lee Olive | ||
Title: Managing Director |
EXHIBIT A
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
This Assignment and Acceptance (this Assignment and Acceptance ) is dated as of the Effective Date set forth below and is entered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] Assignor ) and [the][each] 2 Assignee identified in item 2 below ([the][each, an] Assignee ). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the Credit Agreement ), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.
For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignors][the respective Assignors] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] Assigned Interest ). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.
1. |
Assignor[s] : |
|
||
|
1 |
For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language. |
2 |
For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language. |
3 |
Select as appropriate. |
4 |
Include bracketed language if there are either multiple Assignors or multiple Assignees. |
Exh. A-1
2. |
Assignee[s] : |
|
||
3. |
Borrower : |
BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), | ||
4. |
Administrative Agent : NOMURA CORPORATE FUNDING AMERICAS, LLC, as the Administrative Agent under the Credit Agreement. | |||
5. |
Credit Agreement : First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among the Borrower, BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. | |||
6. |
Assigned Interest[s] : |
Assignor[s] 5 |
Assignee[s] 6 |
Facility Assigned 7 |
Aggregate Amount
|
Amount of
|
Percentage
Assigned of Commitment /Term Loans 10 |
CUSIP Number |
||||||||
$ | $ | % | ||||||||||||
$ | $ | % | ||||||||||||
$ | $ | % |
[7. |
Trade Date: |
] | 11 |
5 |
List each Assignor, as appropriate. |
6 |
List each Assignee, as appropriate. |
7 |
Fill in appropriate terminology for each applicable type of facility under the Credit Agreement that is being assigned under this Assignment, i.e., Tranche B Term Loans, Extended Term Loans, Incremental Term Loans or Other Term Loans. |
8 |
Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. |
9 |
Subject to minimum amount requirements pursuant to Section 10.04(2) of the Credit Agreement. |
10 |
Set forth, to at least 9 decimals, as a percentage of the Commitment/Term Loans of all Lenders thereunder. |
11 |
To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date. |
Exh. A-2
EXHIBIT A
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR | ||
[NAME OF ASSIGNOR] |
By: |
|
|
Name: | ||
Title: |
ASSIGNEE | ||
[NAME OF ASSIGNEE] |
By: |
|
|
Name: | ||
Title: |
[Consented to and] 12 Accepted: | ||
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent |
By: |
|
|
Name: | ||
Title: |
[Consented to:] 13 | ||
BJS WHOLESALE CLUB, INC., as Borrower |
By: |
|
|
Name: | ||
Title: |
12 |
To the extent required under Section 10.04(2) of the Credit Agreement. |
13 |
To the extent required under Section 10.04(2) of the Credit Agreement. |
ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation, as the Borrower, BEACON HOLDING INC., a Delaware corporation, as Holdings, the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent.
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE
1. |
Representations and Warranties . |
1.1. Assignor . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.
1.2. Assignee . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is not a Defaulting Lender or Disqualified Institution, (iii) it meets all the requirements to be a Lender under the Credit Agreement (subject to such consents, if any, as may be required under Section 10.04(2) of the Credit Agreement), (iv) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (v) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (vi) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.04 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (vii) it has, independently and without reliance upon the Administrative Agent, Collateral Agent, or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (viii) if it is a Foreign Lender, attached hereto is any
1
documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; and (c) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms of the Credit Agreement, together with such powers as are reasonably incidental thereto.
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions . This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy or electronically shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be construed in accordance with and governed by the laws of the State of New York.
2
EXHIBIT B
[FORM OF]
SOLVENCY CERTIFICATE
of
THE BORROWER
AND ITS SUBSIDIARIES
Pursuant to (i) Section 4.01(6) of the First Lien Term Loan Credit Agreement, dated as of February 3,
2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the
First Lien Term Loan Credit Agreement
), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the
Borrower
), BEACON HOLDING INC., a Delaware corporation (
Holdings
), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral
Agent and
(ii) Section 4.01(6) of the Second Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the
Second Lien
Term Loan Credit Agreement
and together with the First Lien Term Loan Credit Agreement, the
Credit Agreements
), among the Borrower, Holdings, the Lenders party thereto from time to time and JEFFERIES FINANCE
LLC, as Administrative Agent and as Collateral Agent, the undersigned hereby certifies, solely in such undersigneds capacity as [chief financial officer] of BJS WHOLESALE CLUB, INC., and not individually, as follows:
As of the date hereof, after giving effect to the consummation of the Transactions, including the making of the Term Loans under each Credit Agreement on the date hereof, and after giving effect to the application of the proceeds of such indebtedness:
a. |
The fair value of the assets of the Borrower and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities (subordinated, contingent or otherwise); |
b. |
The present fair saleable value of the property of the Borrower and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities (subordinated, contingent or otherwise) as such debts and other liabilities become absolute and matured; |
c. |
The Borrower and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities (subordinated, contingent or otherwise) as such liabilities become absolute and matured; and |
d. |
The Borrower and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. |
For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the applicable Credit Agreement.
Exh. B-1
[ Signature Page Follows ]
Exh. B-2
IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate in such undersigneds capacity as [chief financial officer] of the Borrower, on behalf of the Borrower, and not individually, as of the date first stated above.
BJS WHOLESALE CLUB, INC. |
By: |
|
|
Name: | ||
Title: |
EXHIBIT C
[FORM OF]
BORROWING REQUEST
To: |
NOMURA CORPORATE FUNDING AMERICAS, LLC, |
as Administrative Agent for
the Lenders referred to below
[ ], 2017
Ladies and Gentlemen:
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among initially BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.
The undersigned hereby gives you notice pursuant to Section 2.02 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:
(A) | Date of Borrowing | |||||||
(which shall be a Business Day) | ||||||||
(B) | Principal Amount of Borrowing | |||||||
(C) | Type of Borrowing 14 | |||||||
(D) | Interest Period and the last day thereof 15 | |||||||
(in the case of a Eurocurrency Borrowing) | ||||||||
(E) | Account Number and Location |
14 |
Specify an ABR Borrowing or a Eurocurrency Borrowing. |
15 |
The initial Interest Period applicable to a Eurocurrency Borrowing shall be subject to the definition of Interest Period. |
Exh. C-1
BJS WHOLESALE CLUB, INC | ||
By: |
|
|
Name: | ||
Title: |
EXHIBIT D
[FORM OF]
INTEREST ELECTION REQUEST
To: |
NOMURA CORPORATE FUNDING AMERICAS, LLC, |
as Administrative Agent for the Lenders referred to below
[●], 20[●] 1
Ladies and Gentlemen:
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.
This notice constitutes a notice of conversion or notice of continuation, as applicable, under Section 2.04 of the Credit Agreement, and the Borrower hereby irrevocably notifies the Administrative Agent of the following information with respect to the conversion or continuation requested hereby:
a. The Borrowing to which this Interest Election Request applies 2 is [●];
b. The effective date of the election (which shall be a Business Day) made pursuant to this Interest Election Request is [●], 20[●];
c. The resulting Borrowing is to be [an ABR Borrowing][a Eurocurrency Borrowing][; and]
[d. The Interest Period applicable to the resulting Borrowing after giving effect to such election is [●] 3 ].
[Remainder of Page Intentionally Left Blank]
1 |
Administrative Agent must be notified as indicated in Section 2.04 of the Credit Agreement in the case of an election to convert to or continue a Eurocurrency Borrowing election, not later than 2:00 p.m. New York City time, three Business Days before the effective date of such election or, in the case of an election to convert to an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day prior to such election ( provided that , to make an election to convert any Eurocurrency Borrowing to an ABR Borrowing prior to the end of the effective Interest Period of such Eurocurrency Borrowing, the Borrower must notify the Administrative Agent not later than 2:00 p.m., two Business Days before the effective date of such election). |
2 |
If different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information specified pursuant to (d) below shall be specified for each resulting Borrowing). |
3 |
Include this clause (d) if the resulting Borrowing is a Eurocurrency Borrowing. In the case of a Eurocurrency Borrowing that does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one months duration. |
Exh. D-1
BJS WHOLESALE CLUB, INC. | ||
By: |
|
|
Name: | ||
Title: |
EXHIBIT E
[FORM OF]
NON-DEBT FUND AFFILIATE ASSIGNMENT AND ACCEPTANCE
This Non-Debt Fund Affiliate Assignment and Acceptance (this Assignment and Acceptance ) is dated as of the Effective Date set forth below and is entered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] Assignor ) and [the][each] 2 Assignee identified in item 2 below ([the][each, an] Assignee ). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the Credit Agreement ), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.
For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignors][the respective Assignors] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] Assigned Interest ). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.
1. |
Assignor[s] : |
1 |
For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language. |
2 |
For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language. |
3 |
Select as appropriate. |
4 |
Include bracketed language if there are either multiple Assignors or multiple Assignees. |
Exh. E-1
2. | Assignee[s] : | |||||
[and is a Non-Debt Fund Affiliate/Purchasing Borrower Party 5 ] | ||||||
3. | Borrower : BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ) | |||||
4. | Administrative Agent : NOMURA CORPORATE FUNDING AMERICAS, LLC, as the administrative agent under the Credit Agreement | |||||
5. | Credit Agreement : First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among the Borrower, BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. | |||||
6. | Assigned Interest[s] : |
Assignor[s] 6 |
Assignee[s] 7 |
Facility Assigned 8 |
Aggregate Amount
|
Amount of
|
Percentage
Assigned of Commitment / Term Loans 11 |
CUSIP Number |
||||||||
$ | $ | % | ||||||||||||
$ | $ | % | ||||||||||||
$ | $ | % |
[7. |
Trade Date: |
] |
12 |
5 |
Select as applicable. |
6 |
List each Assignor, as appropriate. |
7 |
List each Assignee, as appropriate. |
8 |
Fill in appropriate terminology for each applicable type of facility under the Credit Agreement that is being assigned under this Assignment, i.e., Extended Term Loans, Incremental Term Loans or Other Term Loans. |
9 |
Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. |
10 |
Subject to minimum amount requirements pursuant to Section 10.04(2) of the Credit Agreement. |
11 |
Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
12 |
To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date. |
Exh. E-2
EXHIBIT E
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR | ||
[NAME OF ASSIGNOR] |
By: |
|
|
Name: | ||
Title: |
ASSIGNEE | ||
[NAME OF ASSIGNEE] |
By: |
|
|
Name: | ||
Title: |
[Consented to and] 1 Accepted: | ||
NOMURA CORPORATE FUNDING AMERICAS, LLC, | ||
as Administrative Agent |
By: |
|
|
Name: | ||
Title: |
[Consented to:] 2 | ||
BJS WHOLESALE CLUB, INC., as Borrower |
By: |
|
|
Name: | ||
Title: |
1 |
To the extent required under Section 10.04(2) of the Credit Agreement. |
2 |
To the extent required under Section 10.04(2) of the Credit Agreement. |
EXHIBIT E
ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent.
STANDARD TERMS AND CONDITIONS FOR
NON-DEBT FUND AFFILIATE ASSIGNMENT AND ACCEPTANCE
1. Representations and Warranties .
1.1. Assignor . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.
1.2. Assignee . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is a [Non-Debt Fund Affiliate][Purchasing Borrower Party] pursuant to Section [10.04(10)][10.04(14)] of the Credit Agreement, (iii) it meets all the requirements to be a Lender under the Credit Agreement (subject to such consents, if any, as may be required under Section 10.04(2) of the Credit Agreement), (iv) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (v) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (vi) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.04 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (vii) it has, independently and without reliance upon the Administrative Agent, Collateral Agent, or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned
1
Interest, and (viii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; and (c) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms of the Credit Agreement, together with such powers as are reasonably incidental thereto.
1.3. [Non-Debt Fund Affiliate .
(a) [As of the Effective Date, the Assignee affirms [the No MNPI Representation][that it is a sophisticated investor and is willing to proceed with the assignment set forth in this Assignment and Acceptance] 1 .] 2
The Assignee consents to the provisions of Section 10.04 of the Credit Agreement that apply to a Non-Debt Fund Affiliate in its capacity as a Lender with respect to the Assigned Interest.
[(b) As of the Effective Date, the Assignor affirms [the No MNPI Representation][that it is a sophisticated investor and is willing to proceed with the assignment set forth in this Assignment and Acceptance.] 3 ] 4
[Purchasing Borrower Party . The Assignee [affirms the No MNPI Representation as of the Effective Date and further] 5 represents and warrants that immediately after giving effect to this Assignment and Acceptance, no Event of Default will exist. The Assignee consents to the provisions of the Credit Agreement that apply to the purchase by or assignment to a Purchasing Borrower Party of Term Loans included in the Assigned Interest.]
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions . This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which
1 |
Select applicable bracketed text. |
2 |
To be included only if required pursuant to Section 10.04(10)(d) of the Credit Agreement. |
3 |
Select applicable bracketed text. |
4 |
Applicable to Non-Debt Fund Affiliates only if required pursuant to Section 10.04(10)(d) of the Credit Agreement. Clause (a) applies to Non-Debt Fund Affiliates that are Assignees. Clause (b) applies to Non-Debt Fund Affiliates that are Assignors. |
5 |
To be included only if required pursuant to Section 10.04(14)(e) of the Credit Agreement. |
2
together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy or electronically shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be construed in accordance with and governed by the laws of the State of New York.
3
EXHIBIT F
EXHIBIT F-1
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.
Pursuant to the provisions of Section 2.14(5)(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Term Loan(s) (as well as any Note(s) evidencing such Term Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER] | ||
By: |
|
|
Name: | ||
Title: | ||
Date: , 20[ ] |
Exh. F-1
EXHIBIT F-2
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent.
Pursuant to the provisions of Section 2.14(5)(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT] |
By: |
|
|
Name: | ||
Title: | ||
Date: , 20[ ] |
Exh. F-2
EXHIBIT F-3
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.
Pursuant to the provisions of Section 2.14(5)(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT] |
By: |
|
|
Name: | ||
Title: | ||
Date: , 20[ ] |
Exh. F-3
EXHIBIT F-4
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and as Collateral Agent. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.
Pursuant to the provisions of Section 2.14(5)(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Term Loan(s) (as well as any Note(s) evidencing such Term Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Term Loan(s) (as well as any Note(s) evidencing such Term Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
Exh. F-4
[NAME OF LENDER] |
By: |
|
|
Name: | ||
Title: | ||
Date: , 20[ ] |
EXHIBIT G
[FORM OF]
TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$ |
New York, New York | |
, 20 |
FOR VALUE RECEIVED, the undersigned, BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), hereby unconditionally promises to pay to (the Lender ) or its registered assigns at the Payment Office specified in the Credit Agreement (as hereinafter defined) in lawful money of the United States and in immediately available funds, the principal amount of (a) DOLLARS ($ ), or, if less, (b) the unpaid principal amount of the Term Loans made by the Lender. The principal amount shall be paid in the amounts and on the dates specified in Section 2.06 of the Credit Agreement. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.10 of the Credit Agreement.
The holder of this Note is authorized to indorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of the Term Loan and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of Eurocurrency Loans, the length of each Interest Period with respect thereto. Each such indorsement shall constitute prima facie evidence of the accuracy of the information indorsed. The failure to make any such indorsement or any error in any such indorsement shall not affect the obligations of the Borrower in respect of the Term Loan.
This Note (a) is one of the Notes referred to in the First Lien Term Loan Credit Agreement dated as of February 3, 2017 (as amended, supplemented and/or otherwise modified from time to time, the Credit Agreement ), among the Borrower, Beacon Holding Inc., a Delaware corporation, the Lender, the other Lenders party thereto, Nomura Corporate Funding Americas, LLC, as Administrative Agent and as Collateral Agent, and the other parties thereto, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof.
Exh. I-1
Upon the occurrence of any one or more of the Events of Default, all principal and all accrued interest then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, in each case, as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, indorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 10.04 OF THE CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
I-2
BJS WHOLESALE CLUB, INC. | ||
By: |
|
|
Name: | ||
Title: |
EXHIBIT G
Schedule B to
Tranche B Term Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EUROCURRENCY LOANS
Date |
Amount of
|
Amount
|
Interest Period
and Adjusted LIBO Rate with Respect Thereto |
Amount of
Principal of Eurocurrency Loans Repaid |
Amount of
Eurocurrency Loans Converted to Base Rate Loans |
Unpaid
Principal Balance of Eurocurrency Loans |
Notation
Made By |
|||||||
Sch. B-1
EXHIBIT H
[FORM OF]
NOTICE OF PREPAYMENT
Date: [ , ]
To: |
Nomura Corporate Funding Americas, LLC, as Administrative Agent |
Ladies and Gentlemen:
Reference is made to that certain First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, extended, supplemented and/or otherwise modified in writing from time to time, the Credit Agreement ; the terms defined therein being used herein as therein defined), among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), the Lenders from time to time party thereto, and Nomura Corporate Funding Americas, LLC, as Administrative Agent and as Collateral Agent. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
The Borrower hereby notifies the Administrative Agent that on 1 pursuant to the terms of Section 2.07 of the Agreement, the Borrower intends to prepay the following Loans as more specifically set forth below:
☐ Optional prepayment of [Tranche B Term Loans][other Term Loans of any Class] in the following amount(s) :
☐ |
ABR Loans: $ 2 |
☐ |
Eurocurrency Loans: $ 3 |
Applicable Interest Period:
Delivery of an executed counterpart of a signature page of this notice by fax transmission or other electronic mail transmission (e.g., pdf or tif) shall be effective as delivery of a manually executed counterpart of this notice.
[This notice is conditioned upon the [refinancing of all or a portion of the [Tranche B Term Loans][other Term Loans of any Class]] [the consummation of any other transaction permitted by the Credit Agreement] and shall be revocable by the Borrower if such refinancing or transaction is not consummated.] 4
1 |
Specify date of such prepayment. |
2 |
Any prepayment of ABR Loans shall be in an aggregate principal amount that is an integral multiple of $1.0 million and not less than $5.0 million, or, if less, the amount outstanding. |
3 |
Any prepayment of Eurocurrency Loans shall be in in an aggregate principal amount that is an integral 4 multiple of $1.0 million and not less than $5.0 million, or, if less, the amount outstanding. |
4 |
Include if applicable. |
J-1
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
J-2
EXHIBIT H
BJS WHOLESALE CLUB, INC. | ||
By: |
|
|
Name: | ||
Title: |
EXHIBIT I
[ FORM OF]
FIRST LIEN LIMITED RECOURSE GUARANTY
[FORM OF] FIRST LIEN TERM LIMITED RECOURSE GUARANTY
dated as of
, 2017
among
[RESTRICTED SUBSIDIARY],
as Limited Guarantor,
and
NOMURA CORPORATE FUNDING AMERICAS, LLC,
as Administrative Agent
Table of Contents
Page | ||||||||
ARTICLE I |
Definitions | 1 | ||||||
Section 1.01 |
First Lien Credit Agreement Definitions | 1 | ||||||
Section 1.02 |
Other Defined Terms | 1 | ||||||
ARTICLE II |
Limited Guarantee | 2 | ||||||
Section 2.01 |
Limited Guarantee | 2 | ||||||
Section 2.02 |
Guarantee of Payment; Limited Recourse | 2 | ||||||
Section 2.03 |
No Limitations | 3 | ||||||
Section 2.04 |
Reinstatement | 4 | ||||||
Section 2.05 |
Agreement To Pay; Subrogation | 4 | ||||||
Section 2.06 |
Information | 5 | ||||||
ARTICLE III |
Indemnity, Subrogation and Subordination | 5 | ||||||
ARTICLE IV |
Miscellaneous | 5 | ||||||
Section 4.01 |
Notices | 5 | ||||||
Section 4.02 |
Waivers; Amendment | 5 | ||||||
Section 4.03 |
Administrative Agents Fees and Expenses; Indemnification | 7 | ||||||
Section 4.04 |
Successors and Assigns | 7 | ||||||
Section 4.05 |
Survival of Agreement | 8 | ||||||
Section 4.06 |
Counterparts; Effectiveness; Several Agreement | 8 | ||||||
Section 4.07 |
Severability | 8 | ||||||
Section 4.08 |
GOVERNING LAW, ETC. | 9 | ||||||
Section 4.09 |
WAIVER OF RIGHT TO TRIAL BY JURY | 9 | ||||||
Section 4.10 |
Headings | 10 | ||||||
Section 4.11 |
Obligations Absolute | 10 | ||||||
Section 4.12 |
Termination or Release | 10 | ||||||
Section 4.13 |
Recourse; Limited Obligations | 11 | ||||||
Section 4.14 |
Intercreditor Agreement | 11 |
(i)
This FIRST LIEN TERM LIMITED RECOURSE GUARANTY, dated as of , 20[ ], is made by [RESTRICTED SUBSIDIARY], a [ ] ( Limited Guarantor ), for the benefit of NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent for the Secured Parties (as defined below).
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, extended, supplemented, amended and restated and/or otherwise modified from time to time, the First Lien Credit Agreement ), by and among BEACON HOLDINGS INC., a Delaware corporation ( Holdings ), BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), the Lenders from time to time party thereto, and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and Collateral Agent for the Lenders.
The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the First Lien Credit Agreement. Limited Guarantor is an Affiliate of the Borrower and will derive substantial direct and indirect benefits from the extensions of credit to the Borrower pursuant to the First Lien Credit Agreement and is willing to execute and deliver this Agreement in order to have induced the Lenders to extend such credit. The Intercreditor Agreement governs the relative rights and priorities of the First Lien Term Secured Parties (as defined in the Intercreditor Agreement), the Second Lien Term Secured Parties (as defined in the Intercreditor Agreement) and the ABL Secured Parties (as defined in the Intercreditor Agreement) in respect of the Term Priority Collateral (as defined in the Intercreditor Agreement) and the ABL Priority Collateral (as defined in the Intercreditor Agreement) and with respect to certain other matters as described therein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 First Lien Credit Agreement Definitions . (a) Capitalized terms used in this Agreement, including the preamble and introductory paragraphs hereto, and not otherwise defined herein have the meanings specified in Section 1.01 of the First Lien Credit Agreement.
(b) The rules of construction specified in Sections 1.02 through 1.08 (inclusive) of the First Lien Credit Agreement also apply to this Agreement.
Section 1.02 Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
Agreement means this First Lien Term Limited Recourse Guaranty, as amended, restated, supplement and/or otherwise modified from time to time.
First Lien Credit Agreement has the meaning assigned to such term in the preliminary statement of this Agreement.
1
Guaranteed Obligations means, subject to Section 2.02 and Section 4.13 of this Agreement, the Obligations as defined in the First Lien Credit Agreement.
Guarantor means any guarantor of the Guaranteed Obligations other than Limited Guarantor.
Mortgage means the [First Lien Mortgage, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing dated as of the date hereof and made by Limited Guarantor to Collateral Agent for the benefit of the Secured Parties].
Qualified ECP Guarantor means, in respect of any Swap Obligation, each Loan Party or Limited Guarantor that has total assets exceeding $10,000,000 at the time the relevant Guarantee or Limited Recourse Guaranty or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an eligible contract participant under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an eligible contract participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Recourse Property means the [Mortgaged Property] as defined in the Mortgage.
Secured Parties has the meaning provided in the First Lien Credit Agreement.
ARTICLE II
Limited Guarantee
Section 2.01 Limited Guarantee . Subject to Section 2.02 and Section 4.13 of this Agreement, Limited Guarantor irrevocably, absolutely and unconditionally guarantees, jointly with any Guarantor and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Guaranteed Obligations, in each case, whether such Guaranteed Obligations are now existing or hereafter incurred under, arising out of or in connection with any Loan Document, Specified Hedge Agreements or Cash Management Services, and whether at maturity, by acceleration or otherwise. Limited Guarantor further agrees that the Guaranteed Obligations may be extended, increased or renewed, amended or modified, in whole or in part, without notice to, or further assent from, Limited Guarantor, and that Limited Guarantor will remain bound upon its guarantee hereunder notwithstanding any such extension, increase, renewal, amendment or modification of any Guaranteed Obligation. Limited Guarantor waives promptness, presentment to, demand of payment from, and protest to, any Guarantor or any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.
Section 2.02 Guarantee of Payment; Limited Recourse . Limited Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due (whether or not any proceeding under Title 11 of the United States Code, as now constituted or hereinafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar
2
law shall have stayed the accrual of collection of any of the Guaranteed Obligations or operated as a discharge thereof) and not of collection. Notwithstanding the foregoing or anything to the contrary contained herein, any recovery under this Agreement by the Administrative Agent or any other Secured Party shall be strictly limited to the Recourse Property for the payment of any of the Guaranteed Obligations. The obligations of Limited Guarantor hereunder are independent of the obligations of any Guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against Limited Guarantor whether or not action is brought against any Guarantor or the Borrower and whether or not any Guarantor or the Borrower be joined in any such action or actions.
Section 2.03 No Limitations . (a) Except for termination or release of Limited Guarantors obligations hereunder as expressly provided in Section 4.12 , to the fullest extent permitted by applicable law, the obligations of Limited Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Guaranteed Obligations, any impossibility in the performance of any of the Guaranteed Obligations, or otherwise. Without limiting the generality of the foregoing, to the fullest extent permitted by applicable law and except for termination or release of Limited Guarantors obligations hereunder in accordance with the terms of Section 4.12 (but without prejudice to Section 2.04 ), the obligations of Limited Guarantor hereunder shall not be discharged, impaired or otherwise affected by (i) the failure of the Administrative Agent, any other Secured Party or any other Person to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement; (iii) the release of, or any impairment of any security held by the Administrative Agent or any other Secured Party for the Guaranteed Obligations other than a release of the Mortgage; (iv) any default, failure or delay, wilful or otherwise, in the performance of the Guaranteed Obligations; (v) the failure to perfect any security interest in, or the release of, any of the Collateral other than the Mortgage held by or on behalf of the Administrative Agent or any other Secured Party other than the Mortgage; (vi) any change in the corporate existence, structure or ownership of any Loan Party, the lack of legal existence of the Borrower or any Guarantor or legal obligation to discharge any of the Guaranteed Obligations by the Borrower or any Guarantor for any reason whatsoever, including, without limitation, in any insolvency, bankruptcy or reorganization of any Loan Party; (vii) the existence of any claim, set-off or other rights that Limited Guarantor may have at any time against the Borrower, the Administrative Agent, any other Secured Party or any other Person, whether in connection with the First Lien Credit Agreement, the other Loan Documents or any unrelated transaction; (viii) this Agreement having been determined (on whatsoever grounds) to be invalid, non-binding or unenforceable against Limited Guarantor ab initio or at any time after the Closing Date; or (ix) any other circumstance (including statute of limitations), any act or omission that may or might in any manner or to any extent vary the risk of Limited Guarantor or otherwise operate as a defense to, or discharge of, the Borrower, any Guarantor or surety as a matter of law or equity (in each case, other than the payment in full in cash of all the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made)). Limited Guarantor expressly authorizes the applicable Secured Parties, to the extent permitted by the Mortgage, to take and hold security for the payment and performance of the Guaranteed
3
Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more guarantors or obligors upon or in respect of the Guaranteed Obligations all without affecting the obligations of Limited Guarantor hereunder. Anything contained in this Agreement to the contrary notwithstanding, the obligations of Limited Guarantor under this Agreement shall be limited by Section 2.02 and Section 4.13 hereof as well as to an aggregate amount equal to the largest amount that would not render its obligations under this Agreement subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code of the United States or any comparable provisions of any similar federal or state law.
(b) To the fullest extent permitted by applicable law and except for termination or release of Limited Guarantors obligations hereunder in accordance with the terms of Section 4.12 (but without prejudice to Section 2.04 ), Limited Guarantor waives any defense based on or arising out of any defense of the Borrower or any Guarantor or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any Guarantor, other than the payment in full in cash of all the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made). The Administrative Agent and the other Secured Parties may in accordance with the terms of the Security Documents, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with the Borrower or any Guarantor or exercise any other right or remedy available to them against Limited Guarantor, without affecting or impairing in any way the liability of Limited Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full in cash (excluding contingent obligations as to which no claim has been made). To the fullest extent permitted by applicable law, Limited Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of Limited Guarantor against the Borrower or any Guarantor, as the case may be, or any security. To the fullest extent permitted by applicable law, Limited Guarantor waives any and all suretyship defenses.
Section 2.04 Reinstatement . Notwithstanding anything to the contrary contained in this Agreement, Limited Guarantor agrees that (a) its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization (or any analogous proceeding in any jurisdiction) of the Borrower or any Guarantor or otherwise and (b) the provisions of this Section 2.04 shall survive the termination of this Agreement.
Section 2.05 Agreement To Pay; Subrogation . In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against Limited Guarantor by virtue hereof, upon the failure of the Borrower, any Guarantor, or any Limited Guarantor to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, Limited Guarantor hereby promises to the Administrative Agent and Secured Parties
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that Collateral Agent shall be able to exercise its rights with respect to the Recourse Property, with the proceeds thereof to be made available for distribution to the applicable Secured Parties in the amount of such unpaid Guaranteed Obligation. Upon payment by Limited Guarantor of any sums to the Administrative Agent as provided above, all rights of Limited Guarantor against the Borrower or any Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article III .
Section 2.06 Information . Limited Guarantor assumes all responsibility for being and keeping itself informed of the Borrowers and each Guarantors financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that Limited Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the other Secured Parties will have any duty to advise Limited Guarantor of information known to it or any of them regarding such circumstances or risks.
ARTICLE III
Indemnity, Subrogation and Subordination
Upon exercise of the Administrative Agents rights in the Recourse Property in payment of any Guaranteed Obligations, all rights of Limited Guarantor against the Borrower or any Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior payment in full in cash of all the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made) and the termination of all Commitments to the Borrower under the First Lien Credit Agreement. If any amount shall be paid to the Borrower or Limited Guarantor in violation of the foregoing restrictions on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower or any Guarantor, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the First Lien Credit Agreement and the other Loan Documents.
ARTICLE IV
Miscellaneous
Section 4.01 Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.01 of the First Lien Credit Agreement. All communications and notice hereunder to Limited Guarantor shall be given in care of the Borrower.
Section 4.02 Waivers; Amendment . (a) No failure by any Secured Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The
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rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 4.02 , and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.
(b) Subject to the Intercreditor Agreement, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 10.08 of the First Lien Credit Agreement.
Section 4.03 Administrative Agents Fees and Expenses; Indemnification . (a) Subject to Section 2.02 and Section 4.13 of this Agreement, Limited Guarantor, jointly with the other Guarantors and severally, agrees to reimburse the Administrative Agent for its fees and expenses incurred hereunder to the extent provided in Section 10.05(1) of the First Lien Credit Agreement; provided that each reference therein to the Borrower shall be deemed to be a reference to Limited Guarantor.
(b) Subject to Section 2.02 and Section 4.13 of this Agreement, without limitation of the indemnification obligations under the other Loan Documents, but without duplication of amounts paid by the Borrower pursuant to Section 10.05 of the First Lien Credit Agreement, Limited Guarantor, jointly with the other Guarantors and severally, agrees to indemnify the Administrative Agent, the Collateral Agent, the Arrangers, each Lender and the other Indemnitees against, and hold each Indemnitee harmless from, any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (but limited, in the case of legal fees and expenses, to the Attorney Costs of one counsel to all Indemnitees taken as a whole and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interest of such Indemnitees (which may be a single local counsel acting in multiple material jurisdictions), and solely in the case of an actual conflict of interest where the Indemnitee affected by such conflict of interest informs the Borrower in writing of such conflict of interest, one additional counsel in each relevant jurisdiction to each group of affected Indemnitees similarly situated taken as a whole) (a) the execution, delivery, enforcement, performance or administration of this Agreement or any other agreement, letter or instrument delivered in connection with the transactions contemplated hereby or the consummation of the transactions contemplated hereby (including the reliance in good faith by any Indemnitee on any notice purportedly given by or on behalf of the Borrower or Limited Guarantor), (b) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by Limited Guarantor, or any Environmental Liability arising out of the activities or operations of Limited Guarantor, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and
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regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Guarantor Indemnified Liabilities ); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements resulted from (w) the gross negligence, bad faith, or willful misconduct of such Indemnitee or of any Related Party, (x) a material breach of any obligations under any Loan Document by such Indemnitee or of any Related Party as determined by a final, non-appealable judgment of a court of competent jurisdiction, (y) any dispute solely among Indemnitees or of any Related Party other than any claims against an Indemnitee in its capacity or in fulfilling its role as the Administrative Agent or an Arranger under the Facility and other than any claims arising out of any act or omission of the Borrower or any of its Affiliates or (z) any settlement entered into by any Indemnitee or of any Related Party of such Indemnitee in respect of any Guarantor Indemnified Liability, in each case, without each Guarantors (or the Borrowers, on behalf of each Guarantor) prior written consent (such consent not to be unreasonably withheld or delayed), but, if such settlement occurs with Guarantors (or the Borrowers on behalf of each Guarantor) written consent or if there is a final judgment for the plaintiff in any action or claim with respect to any of the foregoing, the Guarantor shall be liable for such settlement or for such final judgment. To the extent that the undertakings to indemnify and hold harmless set forth in this Section 4.03(b) may be unenforceable in whole or in part because they are violative of any applicable law or public policy, Limited Guarantor shall jointly with the other Guarantors and severally contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Guarantor Indemnified Liabilities incurred by the Indemnitees or any of them. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, except to the extent resulting from the willful misconduct, bad faith or gross negligence of such Indemnitee or any Related Party (as determined by a final and non-appealable judgment of a court of competent jurisdiction), nor shall any Indemnitee, Limited Guarantor or any other Guarantor have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date) (other than, in the case of Limited Guarantor or any other Guarantor, in respect of any such damages incurred or paid by an Indemnitee to a third party). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 4.03(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by Limited Guarantor or any other Guarantor, their respective directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. This Section 4.03(b) shall not apply to Taxes, Other Taxes, taxes covered by Section 2.12 of the First Lien Credit Agreement or Excluded Taxes, except it shall apply to any taxes (other than taxes imposed on or measured by net income (however denominated, and including branch profits and similar taxes) and franchise or similar taxes) that represent losses, claims, damages, etc. arising from a non-tax claim (including a value added tax or similar tax charged with respect to the supply of legal or other services).
(c) Any such amounts payable as provided hereunder shall be additional Guaranteed Obligations guaranteed hereby and secured by the Security Documents. The provisions of this Section 4.03 shall remain operative and in full force and effect regardless of
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the termination of this Agreement, any other Loan Document, any Specified Hedge Agreement or any Cash Management Services agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Guaranteed Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, any resignation of the Administrative Agent or the Collateral Agent or any document governing any of the Obligations arising under any Specified Hedge Agreements or any Cash Management Services, or any investigation made by or on behalf of the Administrative Agent or any other Secured Party. All amounts due under this Section 4.03 shall be payable within twenty (20) Business Days after written demand therefor.
Section 4.04 Successors and Assigns . Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of Limited Guarantor or any Secured Party that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. Limited Guarantor may not assign any of its rights or obligations hereunder without the written consent of the Administrative Agent.
Section 4.05 Survival of Agreement . All covenants, agreements, indemnities, representations and warranties made by Limited Guarantor in any Loan Document to which it is a party or in any certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document to which it is a party shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of any Loan Document to which it is a party and the making of any Loans, regardless of any investigation made by any Secured Party or on its behalf and notwithstanding that any Secured Party may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended under the First Lien Credit Agreement or any Loan Document to which it is a party, and shall continue in full force and effect until this Agreement is terminated as provided in Section 4.12 hereof.
Section 4.06 Counterparts; Effectiveness; Several Agreement . This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall become effective when it shall have been executed by Limited Guarantor and the Administrative Agent and thereafter shall be binding upon and inure to the benefit of Limited Guarantor, the Administrative Agent, the other Secured Parties and their respective permitted successors and assigns, subject to Section 4.04 hereof. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means (including in .pdf format via electronic mail) shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 4.07 Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the
8
illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 4.08 GOVERNING LAW, ETC . (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) LIMITED GUARANTOR AND ADMINISTRATIVE AGENT EACH IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT ADMINISTRATIVE AGENT AND THE OTHER SECURED PARTIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE OF ANY RIGHTS UNDER THIS AGREEMENT OR THE ENFORCEMENT OF ANY JUDGMENT.
(c) LIMITED GUARANTOR AND ADMINISTRATIVE AGENT EACH IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
Section 4.09 WAIVER OF RIGHT TO TRIAL BY JURY . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
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SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 4.10 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 4.11 Obligations Absolute . All rights of the Administrative Agent and the other Secured Parties hereunder and all obligations of Limited Guarantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the First Lien Credit Agreement, any other Loan Document, any agreement with respect to any of the Guaranteed Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to any departure from the First Lien Credit Agreement, any other Loan Document, or any other agreement or instrument, (c) any release or amendment or waiver of or consent under or departure from any guarantee guaranteeing all or any of the Guaranteed Obligations or (d) subject only to termination or release of Limited Guarantors obligations hereunder in accordance with the terms of Section 4.12, but without prejudice to reinstatement rights under Section 2.04, any other circumstance that might otherwise constitute a defense available to, or a discharge of, Limited Guarantor in respect of the Guaranteed Obligations or this Agreement.
Section 4.12 Termination or Release . (a) This Agreement and the guarantee made herein shall terminate with respect to all Guaranteed Obligations when either of the following has occurred:
(1)(A) all Commitments have expired or been terminated and the Lenders have no further commitment to lend under the First Lien Credit Agreement, and (B) all principal and interest in respect of each Term Loan and all other Guaranteed Obligations (other than (i) contingent indemnification obligations with respect to then unasserted claims and (ii) Guaranteed Obligations in respect of Obligations that may thereafter arise with respect to any Specified Hedge Agreement or any Cash Management Services agreement, in each case, not yet due and payable, unless the Administrative Agent has received written notice, at least two (2) Business Days prior to the proposed date of any such termination, stating that arrangements reasonably satisfactory to each applicable Qualified Counterparty or Cash Management Bank, as the case may be, in respect thereof have not been made) shall have been paid in full in cash, provided , however , that in connection with the termination of this Agreement under this subclause (1), the Administrative Agent may require such indemnities as it shall reasonably deem necessary or appropriate to protect the Secured Parties against (x) loss on account of credits previously applied to the Guaranteed Obligations that may subsequently be reversed or revoked, and (y) any Obligations that may thereafter arise with respect to the Specified Hedge Agreements or Cash Management Obligations to the extent not provided for thereunder; or
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(2) the Mortgage is released by Collateral Agent in accordance with the terms of the First Lien Credit Agreement or the Mortgage.
(b) Limited Guarantor shall automatically be released hereunder in the circumstances set forth in Section 10.18 of the First Lien Credit Agreement, as though Limited Guarantor were a Subsidiary Loan Party and this Agreement were a Guaranty Agreement each as defined thereunder.
(c) In connection with any termination or release pursuant to clauses (a) or (b) above, the Administrative Agent shall promptly execute and deliver to Limited Guarantor, at Limited Guarantors expense, all documents that Limited Guarantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 4.12 shall be without recourse to or warranty by the Administrative Agent.
(d) At any time that Limited Guarantor desires that the Administrative Agent take any of the actions described in immediately preceding clause (c), it shall, upon request of the Administrative Agent, deliver to the Administrative Agent an officers certificate certifying that the release of the respective Limited Guarantor is permitted pursuant to clause (a) or (b) above. The Administrative Agent shall have no liability whatsoever to any Secured Party as a result of any release of Limited Guarantor by it as permitted (or which the Administrative Agent in good faith believes to be permitted) by this Section 4.12 .
Section 4.13 Recourse; Limited Obligations . This Agreement is made with recourse limited only to the Recourse Property, and the proceeds thereof, and pursuant to and upon all the warranties, representations, covenants and agreements on the part of Limited Guarantor contained herein and otherwise in writing in connection herewith or therewith. It is the desire and intent of Limited Guarantor and each applicable Secured Party that this Agreement shall be enforced against Limited Guarantor subject to Section 2.02 and this Section 4.13 to the fullest extent permissible under applicable law applied in each jurisdiction in which enforcement is sought.
Section 4.14 Intercreditor Agreement . Limited Guarantor and the Administrative Agent acknowledge that the exercise of certain of the Administrative Agents rights and remedies hereunder may be subject to, and restricted by, the provisions of the Intercreditor Agreement. Except as specified herein, nothing contained in the Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement, which, as among Limited Guarantor and the Administrative Agent shall remain in full force and effect.
Section 4.15 [Keepwell . To the extent that the Limited Guarantor is a Qualified ECP Guarantor, and subject to Section 2.02 and Section 4.13 of this Agreement, it hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Loan Party and each other Limited Guarantor, as the case may be, to honor all of its obligations under this Agreement, the Guaranty or the Limited Recourse Guaranty of such other Limited Guarantor in respect of Swap Obligations (provided, however, that the Limited Guarantor, to the extent that it is a Qualified ECP Guarantor, shall only be liable under this Section 4.15 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 4.15, or otherwise under this
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Agreement, as it relates to such Loan Party or such other Limited Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Limited Guarantor, to the extent that it is a Qualified ECP Guarantor, under this Section 4.15 shall remain in full force and effect until the termination of this Agreement pursuant to its terms. The Limited Guarantor, to the extent that it is a Qualified ECP Guarantor, intends that this Section 4.15 constitutes, and this Section 4.15 shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each Loan Party and each other Limited Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.]
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
LIMITED GUARANTOR: | ||
[RESTRICTED SUBSIDIARY] |
By: |
|
|
Name: | ||
Title: |
ADMINISTRATIVE AGENT: | ||
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent |
By: |
|
|
Name: | ||
Title: |
EXHIBIT J
[FORM OF]
FIRST LIEN TERM LOAN SECURITY AGREEMENT
EXECUTION VERSION
TERM LOAN SECURITY AGREEMENT
dated as of February 3, 2017
among
BJS WHOLESALE CLUB, INC.,
as the Borrower,
BEACON HOLDING INC.
as Holdings,
THE SUBSIDIARY GUARANTORS PARTY HERETO FROM TIME TO TIME,
and
NOMURA CORPORATE FUNDING AMERICAS, LLC,
as Collateral Agent
Security Agreement (First Lien) |
Table of Contents
Page | ||||||||
ARTICLE I Definitions |
1 | |||||||
Section 1.01 |
First Lien Credit Agreement | 1 | ||||||
Section 1.02 |
Other Defined Terms | 2 | ||||||
ARTICLE II Pledge of Securities |
7 | |||||||
Section 2.01 |
Pledge | 7 | ||||||
Section 2.02 |
Delivery of the Pledged Collateral | 8 | ||||||
Section 2.03 |
Representations, Warranties and Covenants | 9 | ||||||
Section 2.04 |
Certification of Limited Liability Company and Limited Partnership Interests | 11 | ||||||
Section 2.05 |
Registration in Nominee Name; Denominations | 11 | ||||||
Section 2.06 |
Voting Rights; Dividends and Interest | 12 | ||||||
Section 2.07 |
Collateral Agent Not a Partner or Limited Liability Company Member | 14 | ||||||
ARTICLE III Security Interests in Personal Property |
14 | |||||||
Section 3.01 |
Security Interest | 14 | ||||||
Section 3.02 |
Representations and Warranties | 17 | ||||||
Section 3.03 |
Covenants | 20 | ||||||
Section 3.04 |
Other Actions | 22 | ||||||
ARTICLE IV Special Provisions Concerning IP Collateral |
24 | |||||||
Section 4.01 |
Grant of License to Use Intellectual Property | 24 | ||||||
Section 4.02 |
Protection of Collateral Agents Security | 25 | ||||||
ARTICLE V Remedies |
26 | |||||||
Section 5.01 |
Remedies Upon Default | 26 | ||||||
Section 5.02 |
Application of Proceeds | 29 | ||||||
ARTICLE VI Indemnity, Subrogation and Subordination |
30 | |||||||
ARTICLE VII Miscellaneous |
31 | |||||||
Section 7.01 |
Notices | 31 | ||||||
Section 7.02 |
Waivers; Amendment | 31 | ||||||
Section 7.03 |
Collateral Agents Fees and Expenses; Indemnification | 32 | ||||||
Section 7.04 |
Successors and Assigns | 33 | ||||||
Section 7.05 |
Survival of Agreement | 33 | ||||||
Section 7.06 |
Counterparts; Effectiveness; Several Agreement | 34 | ||||||
Section 7.07 |
Severability | 34 |
(i) | Security Agreement (First Lien) |
Table of Contents
(continued)
Page | ||||||||
Section 7.08 | GOVERNING LAW, ETC. | 34 | ||||||
Section 7.09 | WAIVER OF RIGHT TO TRIAL BY JURY | 35 | ||||||
Section 7.10 | Headings | 35 | ||||||
Section 7.11 | Security Interest Absolute | 35 | ||||||
Section 7.12 | Termination or Release | 36 | ||||||
Section 7.13 | Additional Restricted Subsidiaries | 37 | ||||||
Section 7.14 | Collateral Agent Appointed Attorney-in-Fact | 37 | ||||||
Section 7.15 | General Authority of the Collateral Agent | 38 | ||||||
Section 7.16 | Collateral Agents Duties | 38 | ||||||
Section 7.17 | Recourse; Limited Obligations | 38 | ||||||
Section 7.18 | Mortgages | 39 | ||||||
Section 7.19 | Intercreditor Agreement | 39 | ||||||
Section 7.20 | Right of Setoff | 40 |
SCHEDULES |
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|||||
Schedule I |
| Subsidiary Loan Parties | ||||
Schedule II |
| Pledged Equity; Pledged Debt | ||||
Schedule III |
| Commercial Tort Claims | ||||
Schedule IV |
| UCC Filing Offices | ||||
EXHIBITS |
|
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Exhibit I |
| Form of Security Agreement Supplement | ||||
Exhibit II |
| Form of Perfection Certificate | ||||
Exhibit III |
| Form of Trademark Security Agreement | ||||
Exhibit IV |
| Form of Patent Security Agreement | ||||
Exhibit V |
| Form of Copyright Security Agreement |
(ii) | Security Agreement (First Lien) |
This SECURITY AGREEMENT, dated as of February 3, 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, this Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Subsidiary Loan Parties set forth on Schedule I hereto and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent for the Secured Parties (as defined below).
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the First Lien Credit Agreement ), among the Borrower, Holdings, the Lenders party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent for the Lenders and Collateral Agent for the Secured Parties.
The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the First Lien Credit Agreement, the Qualified Counterparties have agreed to enter into and/or maintain one or more Specified Hedge Agreements and the Cash Management Banks have agreed to enter into and/or maintain Cash Management Services, on the terms and conditions set forth in the First Lien Credit Agreement, in such Specified Hedge Agreements and in such Cash Management Services agreements, as applicable. The obligations of the Lenders to extend such credit, the obligation of the Qualified Counterparties to enter into and/or maintain such Specified Hedge Agreements and the obligation of the Cash Management Banks to enter into and/or maintain such Cash Management Services are, in each case, conditioned upon, among other things, the execution and delivery of this Agreement by each Grantor (as defined below). The Grantors are Affiliates of one another, will derive substantial direct and indirect benefits from (i) the extensions of credit to the Borrower pursuant to the First Lien Credit Agreement, (ii) the entering into and/or maintaining by the Qualified Counterparties of Specified Hedge Agreements with the Borrower and/or one or more of its Restricted Subsidiaries, and (iii) the entering into and/or maintaining by the Cash Management Banks of Cash Management Services with the Borrower and/or one or more of its Restricted Subsidiaries, and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit, the Qualified Counterparties to enter into and/or maintain such Specified Hedge Agreements and the Cash Management Banks to enter into and/or maintain such Cash Management Services. The Intercreditor Agreement governs the relative rights and priorities of the Secured Parties, the Second Lien Term Secured Parties (as defined below) and the ABL Secured Parties (as defined below) in respect of the Term Priority Collateral (as defined below) and the ABL Priority Collateral (as defined below) and with respect to certain other matters as described therein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 First Lien Credit Agreement . (a) Capitalized terms used in this Agreement, including the preamble and introductory paragraphs hereto, and not otherwise defined herein have the meanings specified in the First Lien Credit Agreement.
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(b) Unless otherwise defined in this Agreement or in the First Lien Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9.
(c) The rules of construction specified in Sections 1.02 through 1.08 (inclusive) of the First Lien Credit Agreement also apply to this Agreement.
Section 1.02 Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
ABL Agent has the meaning assigned such term in the Intercreditor Agreement.
ABL Documents has the meaning assigned such term in the Intercreditor Agreement.
ABL Priority Collateral has the meaning assigned to such term in the Intercreditor Agreement.
ABL Secured Parties has the meaning assigned such term in the Intercreditor Agreement.
Accommodation Payment has the meaning assigned to such term in Article VI .
Account(s) means accounts as defined in Section 9-102 of the UCC, and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, or (c) arising out of the use of a credit or charge card or information contained on or for use with the card.
Account Debtor means any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.
After-Acquired Intellectual Property has the meaning assigned to such term in Section 4.02(f) .
Agreement has the meaning assigned to such term in the introductory paragraph hereto.
Allocable Amount has the meaning assigned to such term in Article VI .
Article 9 Collateral has the meaning assigned to such term in Section 3.01(a) .
Attorney Costs means all reasonable and documented in reasonable detail fees, expenses and disbursements of any law firm or other external legal counsel.
Bankruptcy Event of Default means any Event of Default under Section 8.01(9) of the First Lien Credit Agreement.
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Blue Sky Laws has the meaning assigned to such term in Section 5.01 .
Borrower has the meaning assigned to such term in the introductory paragraph to this Agreement.
Closing Date Grantor has the meaning assigned to such term in Section 2.02 .
Collateral means the Article 9 Collateral and the Pledged Collateral.
Collateral Account means any cash collateral account, which cash collateral account shall be established by the Collateral Agent for the benefit of the relevant Secured Parties in accordance with the First Lien Credit Agreement.
Copyright License means any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.
Copyrights means all of the following now owned or hereafter acquired by or assigned to any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, whether registered or unregistered and whether published or unpublished, (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule II(B)(1) to the Perfection Certificate and all: (i) rights and privileges arising under applicable law with respect to such Grantors use of such copyrights, (ii) reissues, renewals, and extensions thereof and amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof.
Debtor Relief Laws shall mean the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Discharge of ABL Obligations has the meaning assigned to such term in the Intercreditor Agreement.
Domain Names means all Internet domain names and associated URL addresses in or to which any Grantor now or hereafter has any right, title or interest.
Equipment shall mean (x) any equipment as such term is defined in Article 9 of the UCC and in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, appliances, furniture, fixtures, tools, and vehicles now or hereafter owned by any
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Grantor in each case, regardless of whether characterized as equipment under the UCC and (y) and any and all additions, substitutions and replacements of any of the foregoing and all accessions thereto, wherever located, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefore, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.
Excluded Equity Interests has the meaning assigned to such term in Section 2.01 of this Agreement.
Excluded Property has the meaning assigned to such term in Section 3.01 of this Agreement.
First Lien Credit Agreement has the meaning assigned to such term in the preliminary statement of this Agreement.
General Intangibles has the meaning provided in Article 9 of the UCC and shall in any event include all choses in action and causes of action and all other intangible personal property of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, as the case may be, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedge Agreements and other agreements), rights to the payment of Money, rights to the payment of insurance claims, rights to the payment of proceeds, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor, including, without limitation, all Payment Intangibles constituting amounts due or to become due arising out of the use of a credit card, debit card, or charge card.
Grant of Security Interest means a Grant of Security Interest in certain IP Collateral substantially in the form of Exhibit III , IV or V attached hereto.
Grantor means the Borrower and each Guarantor.
Holdings has the meaning assigned to such term in the introductory paragraph hereto.
Intellectual Property means all intellectual and similar property of every kind and nature now owned, licensed or hereafter acquired by any Grantor, including: inventions, designs, Patents, Copyrights, Licenses, Trademarks, Domain Names, trade secrets, confidential or proprietary technical and business information, know how, show how or other data or information, software, databases, all other proprietary information and all embodiments or fixations thereof and related documentation, registrations and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.
IP Collateral means the Collateral consisting of Intellectual Property.
License means any Patent License, Trademark License, Copyright License or other license or sublicense agreement granting rights under Intellectual Property to which any Grantor is a party.
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Patent License means any written agreement, now or hereafter in effect, granting to any third party any right to develop, commercialize, import, make, have made, offer for sale, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any such right with respect to any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.
Patents means all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule II(B)(2) to the Perfection Certificate, and (b) all (i) rights and privileges arising under applicable law with respect to such Grantors use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof and amendments thereto, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect to any of the foregoing including damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.
Perfection Certificate means a certificate substantially in the form of Exhibit II , completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.
Pledged Collateral has the meaning assigned to such term in Section 2.01 .
Pledged Debt has the meaning assigned to such term in Section 2.01 .
Pledged Equity has the meaning assigned to such term in Section 2.01 .
Pledged Securities means any promissory notes, stock certificates, unit certificates, limited or unlimited liability membership certificates or other Securities or Instruments now or hereafter included in the Pledged Collateral, including all Pledged Equity, Pledged Debt and all other certificates, instruments or other documents representing or evidencing any Pledged Collateral.
Second Lien Term Agent has the meaning assigned to such term in the Intercreditor Agreement.
Second Lien Term Documents has the meaning assigned to such term in the Intercreditor Agreement.
Second Lien Term Secured Parties has the meaning assigned to such term in the Intercreditor Agreement.
Secured Obligations means the Obligations as defined in the First Lien Credit Agreement; it being acknowledged and agreed that the term Secured Obligations as used
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herein shall include each extension of credit under the First Lien Credit Agreement and all obligations of the Loan Parties and their respective Subsidiaries which arise under the Loan Documents (including the Guaranty Agreement) and obligations of the Loan Parties and their respective Subsidiaries in respect of Specified Hedge Agreements and Cash Management Obligations, in each case, whether outstanding on the date of this Agreement or extended or arising from time to time after the date of this Agreement; provided that the term Secured Obligations as used herein shall not, in any event, include any Excluded Swap Obligations.
Secured Parties has the meaning assigned to such term in the First Lien Credit Agreement.
Securities Act has the meaning assigned to such term in Section 5.01 .
Security means a security as such term is defined in Article 8 of the UCC and, in any event, shall include any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as securities or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
Security Agreement Supplement means an instrument substantially in the form of Exhibit I hereto.
Security Interest has the meaning assigned to such term in Section 3.01(a) .
Term Priority Collateral has the meaning assigned to such term in the Intercreditor Agreement.
Trademark License means any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement (not including vendor or distribution agreements that allow incidental use of intellectual property rights in connection with the sale or distribution of such products or services).
Trademarks means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, the goodwill of the business symbolized thereby or associated therewith, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule II(B)(3) to the Perfection
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Certificate, (b) all rights and privileges arising under applicable law with respect to such Grantors use of any trademarks, (c) all extensions and renewals thereof and amendments thereto, (d) all income, fees, royalties, damages and payments now and hereafter due and/or payable with respect to any of the foregoing, including damages, claims and payments for past, present or future infringements thereof, (e) all rights corresponding thereto throughout the world and (f) all rights to sue for past, present and future infringements or dilutions thereof or other injuries thereto.
UCC means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection or the priority of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, UCC means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority or availability of such remedy, as the case may be.
UFCA has the meaning assigned to such term in Article VI .
UFTA has the meaning assigned to such term in Article VI .
ARTICLE II
Pledge of Securities
Section 2.01 Pledge . As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a continuing security interest in, all of such Grantors right, title and interest in, to and under (a) (i) all Equity Interests held by it on the date hereof (including those Equity Interests listed on Schedule II) and (ii) any other Equity Interests obtained in the future by such Grantor and the certificates representing all such Equity Interests (the foregoing clauses (i) and (ii) collectively, the Pledged Equity ), in each case including all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Equity and all warrants, rights or options issued thereon or with respect thereto; provided that the Pledged Equity shall not include (in each case, solely to the extent a Lien thereon has not been granted to the ABL Administrative Agent or the Second Lien Term Agent) (A) more than 65% of the issued and outstanding Equity Interests of (x) each Subsidiary that is a Foreign Subsidiary that is directly owned by the Borrower or by any Subsidiary Loan Party and (y) each Subsidiary that is a Domestic Subsidiary that is directly owned by the Borrower or by any Subsidiary Loan Party substantially all of the assets of which consist of Equity Interests in one or more Foreign Subsidiaries, (B) any Equity Interest of any Person (other than a Wholly Owned Subsidiary), to the extent restricted or not permitted by the terms of such Persons organizational or joint venture documents or other agreements with holders of such Equity Interests (other than to the extent that any such prohibition would be rendered ineffective pursuant to the UCC or any other applicable law);
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provided that such Equity Interest shall cease to be an Excluded Equity Interest at such time as such prohibition ceases to be in effect, (C) any Equity Interest if, to the extent and for so long as the pledge of such Equity Interest hereunder is prohibited by any applicable law other than to the extent such prohibition would be rendered ineffective under the UCC or other applicable law; provided that such Equity Interest shall cease to be an Excluded Equity Interest at such time as such prohibition ceases to be in effect, (D) any Equity Interest of any Person owned directly or indirectly by a Grantor that is a controlled foreign corporation for U.S. federal income tax purposes and (E) any specifically identified Equity Interest with respect to which the Administrative Agent has determined (in its reasonable judgment) that the costs of pledging, perfecting or maintaining the pledge in respect of such Equity Interest hereunder exceeds the fair market value thereof or the practical benefit to the Secured Parties afforded thereby (any Equity Interests excluded pursuant to clauses (A) through (E) above, the Excluded Equity Interests ); (b)(i) the promissory notes and any Instruments evidencing indebtedness owned by it (including those listed opposite the name of such Grantor on Schedule II ) and (ii) any promissory notes and Instruments evidencing indebtedness obtained in the future by such Grantor (the foregoing clauses (i) and (ii) collectively, the Pledged Debt ), in each case including all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all Pledged Debt; (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 2.01 ; (d) subject to Section 2.06 , all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a), (b) and (c) above; (e) subject to Section 2.06 , all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of, and Security Entitlements in respect of, any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the Pledged Collateral ).
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.
Section 2.02 Delivery of the Pledged Collateral . (a) On the Closing Date (in the case of any Grantor that grants a Lien on any of its assets hereunder on the Closing Date (each, a Closing Date Grantor )) or on the date on which it signs and delivers its first Security Agreement Supplement (in the case of any other Grantor), each Grantor shall deliver or cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties, any and all Pledged Securities (other than any Uncertificated Securities, but only for so long as such Securities remain uncertificated); provided that promissory notes and Instruments evidencing Indebtedness shall only be so required to be delivered to the extent required pursuant to paragraph (b) of this Section 2.02 . Thereafter, whenever such Grantor acquires any other Pledged Security (other than any Uncertificated Securities, but only for so long as such Securities remain uncertificated), such Grantor shall promptly deliver or cause to be delivered to the Collateral Agent such Pledged Security as Collateral; provided that promissory notes and Instruments evidencing Indebtedness shall only be so required to be delivered to the extent required pursuant to paragraph (b) of this Section 2.02 .
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(b) As promptly as practicable (and in any event within thirty (30) days after receipt by Grantor (or such longer period as the Administrative Agent may agree in its reasonable discretion)), each Grantor will cause any Indebtedness for borrowed money having an aggregate principal amount equal to or in excess of $5,000,000 owed to such Grantor by any Person (other than a Loan Party) to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms hereof.
(c) Upon delivery to the Collateral Agent, (i) any certificate or promissory note representing Pledged Collateral shall be accompanied by undated stock or note powers, as applicable, duly executed in blank or other undated instruments of transfer duly-executed in blank reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by such instruments and documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing such Pledged Securities, which schedule shall be deemed to supplement Schedule II and be made a part hereof; provided that failure to provide any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.
(d) The assignment, pledge and security interest granted in Section 2.01 are granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Pledged Collateral.
Section 2.03 Representations, Warranties and Covenants . Each Grantor, jointly and severally, represents, warrants and covenants, as to itself and the other Grantors, to and with the Collateral Agent, for the benefit of the Secured Parties, that:
(a) Schedule II sets forth, as of the Closing Date and as of each date on which a supplement to Schedule II is delivered pursuant to Section 2.02(c) , a true and correct list of (i) all the issued and outstanding units of each class of the Equity Interests required to be pledged hereunder and directly owned beneficially, or of record, by such Grantor specifying the issuer and certificate number (if any) of, and the number and percentage of ownership represented by, such Pledged Equity and (ii) all the Pledged Debt owned by such Grantor (other than checks to be deposited in the ordinary course of business), including all promissory notes and Instruments required to be delivered to the Collateral Agent hereunder;
(b) the Pledged Equity issued by the Borrower, each other Grantor or their respective Subsidiaries and the Pledged Debt (solely with respect to Pledged Debt issued by a Person other than any Grantor or any of their respective Subsidiaries, to the best of each Grantors knowledge) have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Equity (other than Pledged Equity consisting of limited liability company interests or partnership interests which, pursuant to the relevant organizational or formation documents, cannot be fully paid and non-assessable), are fully paid and nonassessable and (ii) in the case of Pledged Debt (solely with respect
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to Pledged Debt issued by a Person other than any Grantor or any of their respective Subsidiaries, to the best of each Grantors knowledge), are legal, valid and binding obligations of the issuers thereof, subject to applicable Debtor Relief Laws and general principles of equity and principles of good faith and fair dealing;
(c) Each of the Grantors (i) holds the Pledged Securities indicated on Schedule II as owned by such Grantor free and clear of all Liens, other than (A) Liens created by the Security Documents and, subject to the Intercreditor Agreement, the ABL Documents and the Second Lien Term Documents and (B) other Liens expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement, (ii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than (A) Liens created by the Security Documents and, subject to the Intercreditor Agreement, the ABL Documents and the Second Lien Term Documents, and (B) other Liens expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement, and (iii) will defend its title or interest thereto or therein against any and all Liens (other than the Liens permitted pursuant to this Section 2.03(c) ), however arising, of all Persons whomsoever;
(d) except for (i) restrictions and limitations imposed by the Loan Documents or securities laws generally or by Liens expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement and (ii) in the case of Pledged Equity of Persons that are not Subsidiaries, transfer restrictions that exist at the time of acquisition of Equity Interests in such Persons, the Pledged Equity is and will continue to be freely transferable and assignable, and none of the Pledged Equity is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law or other organizational document provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect in any manner material and adverse to the Secured Parties the pledge of such Pledged Equity hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;
(e) each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;
(f) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity and perfection of the pledge effected hereby (other than such as have been obtained and are in full force and effect);
(g) by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will (i) obtain a legal, valid and first-priority (subject only to any Liens permitted pursuant to Section 6.02 of the First Lien Credit Agreement that have priority as a matter of law and, subject to the Intercreditor Agreement, Liens granted to the ABL Administrative Agent and the Second Lien Term Agent pursuant to the ABL Documents and the Second Lien Term Documents, respectively, or to any other agent or trustee pursuant to any Permitted Refinancing (as defined in the Intercreditor Agreement) of the First Lien Term Credit Agreement (as defined in the Intercreditor
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Agreement), the ABL Credit Facilities and/or the Second Lien Credit Facility, as the case may be) perfected lien upon and security interest in such Pledged Securities as security for the payment and performance of the Secured Obligations, (ii) have Control of such Pledged Securities and (iii) assuming that neither the Collateral Agent nor any of the other Secured Parties have notice of an adverse claim (as defined in Section 8-105 of the UCC) with respect to such Pledged Securities at the time such Pledged Securities constituting Certificated Securities are delivered to the Collateral Agent, be a protected purchaser (within the meaning of Section 8-303 of the UCC) thereof;
(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein; and
(i) subject to the terms of this Agreement and to the extent permitted by applicable law, each Grantor hereby agrees that upon the occurrence and during the continuation of an Event of Default, it will comply with instructions of the Collateral Agent with respect to the Equity Interests in such Grantor that constitute Pledged Equity hereunder and are Uncertificated Securities without further consent by the applicable owner or holder of such Pledged Equity.
Section 2.04 Certification of Limited Liability Company and Limited Partnership Interests . Each Grantor acknowledges and agrees that, to the extent any interest in any limited liability company or limited partnership controlled by any Grantor and pledged under Section 2.01 is a security within the meaning of Article 8 of the UCC and is governed by Article 8 of the UCC, such interest shall be represented by a certificate. Each Grantor further acknowledges and agrees that with respect to any interest in any limited liability company or limited partnership controlled on or after the Closing Date by such Grantor and pledged hereunder that is not a security within the meaning of Article 8 of the UCC, such Grantor shall at no time elect to treat any such interest as a security within the meaning of Article 8 of the UCC, nor shall such interest be represented by a certificate, unless such election and such interest is thereafter represented by a certificate that is promptly delivered to the Collateral Agent, subject to the Intercreditor Agreement, pursuant to the terms hereof.
Section 2.05 Registration in Nominee Name; Denominations . If an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the Borrower prior written notice of its intent to exercise such rights, (a) the Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to cause each of the Pledged Securities to be transferred of record into the name of the Collateral Agent and (b) the Collateral Agent shall have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement; provided that, notwithstanding the foregoing, if a Bankruptcy Event of Default shall have occurred and be continuing, the Collateral Agent shall not be required to give the notice referred to above in order to exercise the rights described above. Each Grantor will promptly give to the Collateral Agent copies of any material notices received by it with respect to Pledged Securities registered in the name of such Grantor. Each Grantor will take any and all actions reasonably requested by the Collateral Agent to facilitate compliance with this Section 2.05 .
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Section 2.06 Voting Rights; Dividends and Interest . (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Borrower that the rights of the Grantors under this Section 2.06 are being suspended:
(i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the First Lien Credit Agreement and the other Loan Documents; provided that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement, the First Lien Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.
(ii) The Collateral Agent shall promptly execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request in writing for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above, in each case as shall be specified in such request and be in form and substance reasonably satisfactory to the Collateral Agent.
(iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities, to the extent (and only to the extent) that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the First Lien Credit Agreement, the other Loan Documents and applicable laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Equity or Pledged Debt, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the other Secured Parties and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). So long as no Event of Default has occurred and is continuing, the Collateral Agent shall promptly deliver to each Grantor (at the expense of such Grantor) any Pledged Securities in its possession if requested to be delivered to the issuer thereof in connection with any exchange or redemption of such Pledged Securities.
(b) Upon the occurrence and during the continuance of any Event of Default, after the Collateral Agent shall have notified the Borrower of the suspension of the rights of the Grantors under Section 2.06(a) , then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to Section 2.06(a)(iii) shall
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cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 2.06 shall be held in trust for the benefit of the Collateral Agent and the other Secured Parties, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary stock or note powers and other instruments of transfer reasonably requested by the Collateral Agent). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02 . After all Events of Default have been cured or waived and the Borrower shall have delivered to the Collateral Agent a certificate to such effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of Section 2.06(a)(iii) in the absence of any such Event of Default and that remain in such account, and such Grantors right to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities shall be automatically reinstated.
(c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Borrower of the suspension of the rights of the Grantors under Section 2.06(a) , then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to Section 2.06(a)(i) , and the obligations of the Collateral Agent under Section 2.06(a)(ii) , shall cease, and all such rights shall thereupon become, subject to the rights of the ABL Administrative Agent and the Second Lien Term Agent under the Intercreditor Agreement, vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights. After all Events of Default have been cured or waived and the Borrower shall have delivered to the Collateral Agent a certificate to such effect, each Grantor shall have the exclusive right to exercise the voting and/or consensual rights and powers that such Grantor would otherwise be entitled to exercise pursuant to the terms of Section 2.06(a)(i) , and the obligations of the Collateral Agent under Section 2.06(a)(ii) shall be reinstated.
(d) Any notice given by the Collateral Agent to the Borrower suspending the rights of the Grantors under this Section 2.06 , (i) shall be given in writing, (ii) may be given with respect to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under Sections 2.06(a)(i) or 2.06(a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agents rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing. Notwithstanding anything to the contrary contained in Section 2.06(a) , (b) or (c) , if a Bankruptcy Event of Default shall have occurred and be continuing, the Collateral Agent shall not be required to give any notice referred to in said Sections in order to exercise any of its rights
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described in such Sections, and the suspension of the rights of each of the Grantors under each such Section shall be automatic upon the occurrence of such Bankruptcy Event of Default.
Section 2.07 Collateral Agent Not a Partner or Limited Liability Company Member . Nothing contained in this Agreement shall be construed to make the Collateral Agent or any other Secured Party liable as a member of any limited liability company or as a partner of any partnership and neither the Collateral Agent nor any other Secured Party by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall have any of the duties, obligations or liabilities of a member of any limited liability company or as a partner in any partnership. The parties hereto expressly agree that, unless the Collateral Agent shall become the absolute owner of Pledged Equity consisting of a limited liability company interest or a partnership interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Collateral Agent, any other Secured Party, any Grantor and/or any other Person.
ARTICLE III
Security Interests in Personal Property
Section 3.01 Security Interest . (a) As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the Security Interest ) in, all of such Grantors right, title and interest in, to or under any and all of the following assets and properties, whether now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the Article 9 Collateral ):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
(v) all General Intangibles, including, without limitation, all Payment Intangibles;
(vi) all Instruments;
(vii) all Inventory;
(viii) all Investment Property:
(ix) all books and records pertaining to the Article 9 Collateral;
(x) all Goods and Fixtures;
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(xi) all Money, cash, cash equivalents, Deposit Accounts, Securities Accounts and Commodities Accounts;
(xii) all Letter-of-Credit Rights;
(xiii) all Commercial Tort Claims described on Schedule III from time to time;
(xiv) the Collateral Account, and all cash, Money, Securities and other investments deposited therein;
(xv) [reserved];
(xvi) all Supporting Obligations;
(xvii) all Security Entitlements in any or all of the foregoing;
(xviii) all Intellectual Property; and
(xix) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing;
provided that Collateral shall not include and the Security Interest shall not attach to (solely to the extent a Lien thereon has not been granted to the ABL Agent or the Second Lien Term Agent) any of the following assets or property, each being an Excluded Property :
(i) any lease, license, franchise, charter, authorization, contract or agreement to which any Grantor is a party, and any of its rights or interest thereunder, if and to the extent pledges thereof and security interests therein (x) are prohibited by or in violation of any applicable law, (y) requires any governmental or third party consent (to the extent that a Grantor has sought such consent using its commercially reasonable efforts and such consent has not been obtained) or (z) is prohibited by or in violation of a term, provision or condition of any such lease, license, franchise, charter, authorization, contract or agreement, except, in the case of each of the foregoing clauses (x), (y) and (z), to the extent that (1) the pledge of such rights would be rendered effective under the UCC or other applicable law or principle of equity notwithstanding such prohibition, requirement or restriction, or (2) such prohibition, requirement or restriction would be rendered ineffective under the UCC or other applicable law or principle of equity; provided , however , that, notwithstanding the foregoing, the Collateral shall include (and the Security Interest shall attach) at such time as the contractual or legal prohibition shall no longer be applicable and to the extent severable, shall attach to any portion of such lease, license, franchise, charter, authorization, contract or agreement not subject to the prohibitions specified in clauses (x), (y) or (z) above (in each case, after giving effect to the applicable anti-assignment provisions of the UCC); provided , further , that the Excluded Property referred to in this clause (i) shall not include any Proceeds and receivables of any such lease, license, franchise, charter, authorization, contract or agreement;
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(ii) the Excluded Equity Interests;
(iii) any intent-to-use application for registration of a Trademark filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. §1051, prior to the filing of a Statement of Use pursuant to Section 1(d) of the Lanham Act or an Amendment to Allege Use pursuant to Section 1(c) of the Lanham Act with respect thereto, to the extent that, and during the period, if any, in which, the grant of a security interest therein would impair the validity or enforceability of any registration that issues from such intent-to-use application under applicable federal law (it being understood that after such period such intent-to-use application shall be automatically subject to the security interest granted herein and deemed to be included in the Collateral);
(iv) (A) any leasehold interest (including any ground lease interest) in Real Property, (B) any fee interest in owned Real Property with a fair market value below $5,000,000 and (C) any Fixtures affixed to any Real Property to the extent (x) such Fixtures are affixed to any Real Property with a fair market value below $5,000,000 or (y) a security interest in such Fixtures may not be perfected by the filing of an appropriate financing statement/fixture filing in the relevant filing jurisdiction;
(v) (A) as-extracted collateral, (B) timber to be cut, (C) farm products and (D) manufactured homes, in the case of clauses (C) and (D), other than to the extent constituting Inventory;
(vi) any particular asset, if the pledge thereof or the security interest therein (A) is prohibited by applicable law, (B) requires any governmental or third party consent (to the extent that a Grantor has sought such consent using its commercially reasonable efforts and such consent has not been obtained), except, in the case of clauses (A) and (B), to the extent such prohibition or requirement would be rendered ineffective under the UCC or other applicable law notwithstanding such prohibition or requirement, or (C) would result in adverse tax consequences to any Grantor as reasonably determined by the Borrower with notice (which shall reasonably identify the basis for such determination) to the Administrative Agent; and
(vii) any specifically identified asset with respect to which the Administrative Agent has determined (in its reasonable judgment) that the costs of obtaining, perfecting or maintaining a Security Interest in such asset exceed the fair market value thereof or the practical benefit to the Secured Parties afforded thereby.
(b) Each Grantor hereby irrevocably authorizes the Collateral Agent for the benefit of the Secured Parties at any time and from time to time to file in any relevant jurisdiction any financing statements or continuation statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) describe the collateral covered thereby in any manner that the Collateral Agent reasonably determines is
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necessary or advisable to ensure the perfection of the security interest in the Article 9 Collateral granted under this Agreement including indicating the Collateral as all assets or all personal property of such Grantor or words of similar effect and (ii) contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.
(c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.
(d) Each Grantor hereby further authorizes the Collateral Agent to file a Grant of Security Interest substantially in the form of Exhibit III , IV or V , as applicable, covering relevant IP Collateral consisting of U.S. Patents (and U.S. Patents for which applications are pending), U.S. registered Trademarks (and U.S. Trademarks for which registration applications are pending) and U.S. registered Copyrights (and U.S. Copyrights for which registration applications are pending) with the United States Patent and Trademark Office or United States Copyright Office (or any successor office), as applicable, and such other documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by such Grantor hereunder, (without the signature of such Grantor after the occurrence and continuance of an Event of Default) and naming such Grantor, as debtor, and the Collateral Agent, as secured party.
Section 3.02 Representations and Warranties . Each Grantor represents and warrants, as to itself and the other Grantors, to the Collateral Agent and the Secured Parties that:
(a) Each Grantor has valid rights (not subject to any Liens other than Liens permitted by Section 6.02 of the First Lien Credit Agreement) in the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder (which rights are in any event, sufficient under Section 9-203 of the UCC), and has full power and authority to grant to the Collateral Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained.
(b) The Perfection Certificate delivered to the Administrative Agent on or prior to the Closing Date has been duly executed and delivered to the Collateral Agent and the information set forth therein, including the exact legal name of each Grantor and its jurisdiction of organization, taken as a whole, is correct and complete in all material respects as of the Closing Date. The UCC financing statements (including fixture filings, as applicable) prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule IV of this Agreement (or specified by notice from the applicable Grantor to the Collateral Agent after the Closing Date in the
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case of filings, recordings or registrations required by Sections 5.10 and 3.14 of the First Lien Credit Agreement), are all the filings, recordings and registrations (other than any filings required to be made in the United States Patent and Trademark Office or the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of Intellectual Property) necessary to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration with respect to such Article 9 Collateral is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of amendment or continuation statements. Each Grantor represents and warrants that, as of the Closing Date, to the extent required by Section 3.14 of the First Lien Credit Agreement, fully executed Grants of Security Interest in the form attached as Exhibit III , IV or V , as applicable, containing a description of all IP Collateral consisting of U.S. Patents (and U.S. Patents for which applications are pending), U.S. registered Trademarks (and U.S. Trademarks for which registration applications are pending) or U.S. registered Copyrights (and U.S. Copyrights for which registration applications are pending), as applicable, have been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office or the United States Copyright Office, as applicable, pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder.
(c) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Secured Obligations, (ii) subject to the filings described in Section 3.02(b) , a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the UCC and (iii) a perfected security interest in all Article 9 Collateral (other than with respect to any Copyright that is not material to the business of the Grantors, taken as a whole) in which a security interest may be perfected by the recording of the relevant Grants of Security Interest with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three month period (commencing as of the date hereof) pursuant to 35 U.S.C. § 261 or 15 U.S.C. § 1060 or the one month period (commencing as of the date hereof) pursuant to 17 U.S.C. § 205. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than (i) any nonconsensual Lien that is expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement and has priority as a matter of law and (ii) any other Lien that is expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement and has priority as a matter of law and which, in the case of Liens permitted pursuant to Section 6.02(34) of the First Lien Credit Agreement, is, in each case, subject at all times to the Intercreditor Agreement.
(d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement. None of the Grantors has filed or consented to the filing of (i) any
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financing statement or analogous document under the UCC or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office, or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement.
(e) All Commercial Tort Claims of each Grantor where the amount of the damages claimed by such Grantor is in excess of $5,000,000 in existence on the date of this Agreement (or on the date upon which such Grantor becomes a party to this Agreement) are described on Schedule III hereto.
(f) [Reserved].
(g) Except as could not reasonably be expected to have a Material Adverse Effect, with respect to the IP Collateral:
(i) such Grantor is the exclusive owner of all right, title and interest in and to the IP Collateral or has the right or license to use the IP Collateral subject only to the terms of the Licenses;
(ii) the operation of such Grantors business as currently conducted and the use of the IP Collateral in connection therewith do not conflict with, infringe, misappropriate, dilute, misuse or otherwise violate the intellectual property rights of any third party;
(iii) the IP Collateral set forth on the Perfection Certificate includes all of the patents, patent applications, domain names, trademark registrations and applications, copyright registrations and applications owned by such Grantor as of the date hereof;
(iv) the IP Collateral is subsisting and has not been adjudged invalid or unenforceable in whole or in part, and to such Grantors knowledge, is valid and enforceable. Such Grantor is not aware of any uses of any material item of IP Collateral that could be expected to lead to such item becoming invalid or unenforceable;
(v) such Grantor has made or performed all filings, recordings and other acts and has paid all required fees and taxes to maintain and protect its interest in each and every item of IP Collateral in full force and effect, and to protect and maintain its interest therein;
(vi) no claim, action, suit, investigation, litigation or proceeding has been asserted in writing or is pending or, to such Grantors knowledge, threatened
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against such Grantor (A) based upon or challenging or seeking to deny or restrict the Grantors rights in or use of any of the IP Collateral, (B) alleging that the Grantors rights in or use of the IP Collateral or that any services provided by, processes used by, or products manufactured or sold by, such Grantor infringe, misappropriate, dilute, misuse or otherwise violate any patent, trademark, copyright or any other proprietary right of any third party, or (C) alleging that the IP Collateral is being licensed or sublicensed in violation or contravention of the terms of any license or other agreement. To such Grantors knowledge, no Person is engaging in any activity that infringes, misappropriates, dilutes, misuses or otherwise violates the material IP Collateral or the Grantors rights in or use thereof. The consummation of the transactions contemplated by the Loan Documents will not result in the termination or impairment of any of the IP Collateral;
(vii) with respect to each License: (A) such License is valid and binding and in full force and effect; (B) such Grantor has not received any notice of termination or cancellation under such License; (C) such Grantor has not received any notice of a breach or default under such License; and (D) neither such Grantor nor, to such Grantors knowledge, any other party to such License is in breach or default thereof in any material respect, and no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such License; and
(viii) to such Grantors knowledge, (A) none of the material trade secrets of such Grantor has been used, divulged, disclosed or appropriated to the detriment of such Grantor for the benefit of any other Person other than such Grantor; (B) no employee, independent contractor or agent of such Grantor has misappropriated any material trade secrets of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of such Grantor; and (C) no employee, independent contractor or agent of such Grantor is in default or breach of any material term of any employment agreement, non-disclosure agreement, assignment of inventions agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of such Grantors material IP Collateral.
Section 3.03 Covenants . (a) The Borrower agrees to promptly (and in any event within thirty (30) calendar days of such event, or such later date as the Collateral Agent may agree in its reasonable discretion) notify the Collateral Agent of any change (i) in the legal name of any Grantor, (ii) in the identity or type of organization or corporate structure of any Grantor, (iii) in the jurisdiction of organization of any Grantor, (iv) in the location of any Grantor under the UCC or (v) in the organizational identification number of any Grantor. In addition, if any Grantor does not have an organizational identification number on the Closing Date (or the date such Grantor becomes a party to this Agreement) and later obtains one, the Borrower shall promptly thereafter notify the Collateral Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Collateral Agent to the extent necessary to maintain the security interests (and the priority thereof) of the Collateral Agent in the Collateral
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intended to be granted hereby fully perfected and in full force and effect. The Loan Parties agree not to effect or permit any change referred to in the preceding sentence unless all filings, publications and registrations, have been made (or will be made in a timely fashion) under the UCC or other applicable law that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest to the extent required under the Loan Documents (subject only to (i) any nonconsensual Lien that is expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement and has priority as a matter of law and (ii) any other Lien that is expressly permitted pursuant to Section 6.02 of the First Lien Credit Agreement and has priority as a matter of law and which, in the case of Liens permitted pursuant to Section 6.02(34) of the First Lien Credit Agreement, is, in each case, subject at all times to the Intercreditor Agreement) in all the Collateral for its own benefit and the benefit of the other Secured Parties.
(b) Each Grantor shall, at its own expense, take any and all commercially reasonable actions necessary to defend title to the Article 9 Collateral against all Persons, except with respect to Article 9 Collateral that such Grantor determines in its reasonable business judgment is no longer necessary or beneficial to the conduct of the business, and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not permitted pursuant to Section 6.02 of the First Lien Credit Agreement.
(c) At the time of delivery of annual financial statements with respect to the preceding Fiscal Year pursuant to Section 5.04(1) of the First Lien Credit Agreement and delivery of the related Compliance Certificate, the Borrower shall deliver to the Collateral Agent a certificate executed by a Responsible Officer of the Borrower setting forth the information required pursuant to the Perfection Certificate (other than Sections I(B), I(E), I(F), I(G), I(H), II(D), II(E)(1), II(E)(2) and II(E)(3) of the Perfection Certificate) or confirming that there has been no change in such information since the date of such certificate or the date of the most recent certificate delivered pursuant to this Section 3.03(c) .
(d) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and Taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral (other than by a Loan Party) that equals or exceeds $5,000,000 shall be or become evidenced by any promissory note or Instrument, such promissory note or Instrument shall be promptly pledged and, subject to the Intercreditor Agreement, delivered to the Collateral Agent, for the benefit of the Secured Parties, in a manner reasonably satisfactory to the Collateral Agent.
(e) Upon the occurrence and continuance of an Event of Default, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 6.02 of the First Lien Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so
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as required by the First Lien Credit Agreement, this Agreement or any other Loan Document and within a reasonable period of time after the Collateral Agent has requested that it do so, and each Grantor jointly and severally agrees to reimburse the Collateral Agent within ten (10) days after demand for any payment made or any reasonable out-of-pocket expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.
(f) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person the value of which equals or exceeds $5,000,000 to secure payment and performance of an Account or related contracts, such Grantor shall promptly assign such security interest to the Collateral Agent for the benefit of the applicable Secured Parties. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.
(g) Each Grantor (rather than the Collateral Agent or any Secured Party) shall remain liable (as between itself and any relevant counterparty) to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof.
(h) [Reserved].
(i) Notwithstanding anything in this Agreement to the contrary (i) other than the filing of a UCC financing statement, (A) no actions shall be required to perfect the security interest granted hereunder in Letter-of-Credit Rights, (B) no actions shall be required to perfect the security interest granted hereunder in motor vehicles and other assets subject to certificates of title or ownership (including, without limitation, aircraft, airframes, aircraft engines or helicopters, or any equipment or other assets constituting a part thereof, in each case to the extent subject to Federal Aviation Act registration requirements, and rolling stock), (C) no Grantor shall be required to complete any filings or other action with respect to the perfection of the security interests created hereby in any jurisdiction outside of the United States or any State thereof, and (D) no Grantor shall be required to deliver landlord lien waivers, estoppels or collateral access letters in any circumstances and (ii) except as provided in Section 8.12 of the ABL Credit Agreement, no action shall be required to perfect a security interest granted hereunder in Deposit Accounts, Commodities Accounts, Securities Accounts or any other similar account so long as no Event of Default has occurred and is continuing.
Section 3.04 Other Actions . In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest, each Grantor agrees, in each case at such Grantors own expense and subject to the Intercreditor Agreement, to take the following actions with respect to the following Article 9 Collateral:
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(a) Instruments . If any Grantor shall at any time hold or acquire any Instruments constituting Collateral and (x) evidencing an amount equal to or in excess of $5,000,000 or (y) otherwise required to be endorsed, assigned and delivered to the ABL Agent or the Second Lien Term Agent, such Grantor shall, in each case (subject to the Intercreditor Agreement), promptly endorse, assign and deliver the same to the Collateral Agent for the benefit of the applicable Secured Parties, accompanied by such undated instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request.
(b) Investment Property . Except to the extent otherwise provided in Article II , if any Grantor shall at any time hold or acquire any Certificated Securities, such Grantor shall promptly endorse, assign and deliver the same to the Collateral Agent for the benefit of the Secured Parties, accompanied by such undated instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request. If any Securities now or hereafter acquired by any Grantor are uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, upon the Collateral Agents request and following the occurrence and continuation of an Event of Default such Grantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agents reasonable request, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (but only to the extent such Securities and other Investment Property constitute Collateral) (i) cause the issuer to agree to comply with instructions from the Collateral Agent as to such Securities, without further consent of any Grantor or such nominee, or (ii) arrange for the Collateral Agent to become the registered owner of the Securities. If any Securities, whether certificated or uncertificated, or other Investment Property are held by any Grantor or its nominee through a Securities Intermediary, upon the Collateral Agents request and following the occurrence and continuation of an Event of Default, such Grantor shall immediately notify the Collateral Agent thereof and at the Collateral Agents request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent shall either (i) cause such Securities Intermediary to agree to comply with Entitlement Orders or other instructions from the Collateral Agent to such Securities Intermediary as to such Security Entitlements without further consent of any Grantor or such nominee, or (ii) in the case of Financial Assets or other Investment Property held through a Securities Intermediary, arrange for the Collateral Agent to become the Entitlement Holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property.
(c) Commercial Tort Claims . If any Grantor shall at any time after the date of this Agreement acquire a Commercial Tort Claim (x) in an amount (taking the greater of the aggregate claimed damages thereunder or the reasonably estimated value thereof) of $5,000,000 or more or (y) that is otherwise required to be pledged to the ABL Agent or the Second Lien Term Agent, such Grantor shall, in each case (subject to the Intercreditor Agreement), promptly notify the Collateral Agent thereof in a writing signed by such Grantor and provide supplements to Schedule III describing the details thereof and shall grant to the Collateral Agent a security interest therein and in the proceeds thereof, all upon the terms of this Agreement.
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ARTICLE IV
Special Provisions Concerning IP Collateral
Section 4.01 Grant of License to Use Intellectual Property . Without limiting the provisions of Section 3.01 hereof or any other rights of the Collateral Agent as the holder of a Security Interest in any IP Collateral, for the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent, for the benefit of the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the IP Collateral now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof, provided , however , that any such license granted by the Collateral Agent to a third party shall include reasonable and customary terms necessary to preserve the existence, validity and value of the affected IP Collateral, including without limitation, provisions requiring the continuing confidential handling of trade secrets, requiring the use of appropriate notices and prohibiting the use of false notices, protecting and maintaining the quality standards of the Trademarks in the manner set forth below (it being understood and agreed that, without limiting any other rights and remedies of the Collateral Agent under this Agreement, any other Loan Document or applicable law, nothing in the foregoing license grant shall be construed as granting the Collateral Agent rights in and to such IP Collateral above and beyond (x) the rights to such IP Collateral that each Grantor has reserved for itself and (y) in the case of IP Collateral that is licensed to any such Grantor by a third party, the extent to which such Grantor has the right to grant a sublicense to such IP Collateral hereunder).
The use of such license by the Collateral Agent may only be exercised, at the option of the Collateral Agent, during the continuation of an Event of Default; provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall immediately terminate at such time as the Collateral Agent is no longer lawfully entitled to exercise its rights and remedies under this Agreement. Nothing in this Section 4.01 shall require a Grantor to grant any license that is prohibited by any rule of law, statute or regulation, or is prohibited by, or constitutes a breach or default under or results in the termination of any contract, license, agreement, instrument or other document evidencing, giving rise to or theretofore granted, with respect to such property or otherwise unreasonably prejudices the value thereof to the relevant Grantor. In the event the license set forth in this Section 4.01 is exercised with regard to any Trademarks, then the following shall apply: (i) all goodwill arising from any licensed or sublicensed use of any Trademark shall inure to the benefit of the Grantor; (ii) the licensed or sublicensed Trademarks shall only be used in association with goods or services of a quality and nature consistent with the quality and reputation with which such Trademarks were associated when used by Grantor prior to the exercise of the license rights set forth herein; and (iii) at the Grantors request and expense, licensees and sublicensees shall provide reasonable cooperation in any effort by the Grantor to maintain the registration or otherwise secure the ongoing validity and effectiveness of such licensed Trademarks, including, without limitation the actions and conduct described in Section 4.02 below.
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Section 4.02 Protection of Collateral Agents Security . (a) Except to the extent permitted by subsection 4.02(h) below, or to the extent that failure to act could not reasonably be expected to have a Material Adverse Effect, with respect to registration or pending application of each item of its IP Collateral for which such Grantor has standing to do so, each Grantor agrees to take, at its expense, all reasonable steps, including, without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authority located in the United States to (i) maintain the validity and enforceability of any registered IP Collateral and maintain such IP Collateral in full force and effect, and (ii) pursue the registration and maintenance of each Patent, Trademark, or Copyright registration, issuance or application, now or hereafter included in such IP Collateral of such Grantor, including, without limitation, the payment of required fees and taxes, the filing of responses to office actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other governmental authorities, the filing of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings.
(b) [Reserved].
(c) In the event that any Grantor becomes aware that any material item of the IP Collateral is being infringed or misappropriated by a third party, such Grantor shall promptly notify the Collateral Agent and shall take such actions, at its expense, as such Grantor reasonably deems appropriate under the circumstances to protect or enforce such IP Collateral, including, without limitation, suing for infringement or misappropriation and for an injunction against such infringement or misappropriation.
(d) Each Grantor shall use proper statutory notice as commercially practical in connection with its use of each material item of its IP Collateral. Except to the extent permitted by subsection 4.02(h) below, or to the extent that failure to act could not reasonably be expected to have a Material Adverse Effect, no Grantor shall do or permit any act or knowingly omit to do any act whereby any of its IP Collateral may lapse, be terminated or become invalid or unenforceable or dedicated to the public domain (or, in the case of a trade secret, lose its competitive value).
(e) Except to the extent permitted by subsection 4.02(h) below, or to the extent that failure to act could not reasonably be expected to have a Material Adverse Effect, each Grantor shall take all reasonable steps to preserve and protect each item of its IP Collateral, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks, consistent with the quality of the products and services as of the date hereof, and taking all reasonable steps necessary to ensure that all licensed users of any of the Trademarks abide by the applicable licenses terms with respect to the standards of quality.
(f) Each Grantor agrees that, should it obtain an ownership or other interest in any IP Collateral after the Closing Date (the After-Acquired Intellectual Property ) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired
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Intellectual Property and, in the case of Trademarks, the goodwill symbolized thereby, shall automatically become part of the IP Collateral subject to the terms and conditions of this Agreement with respect thereto.
(g) Once every fiscal quarter of the Borrower, but in no event, in the case of Copyrights, more than twenty (20) days after filing an application with the U.S. Copyright Office, each Grantor shall sign and deliver to the Collateral Agent an appropriate Security Agreement Supplement and related Grant of Security Interest with respect to applications for U.S. registration or U.S. registrations of IP Collateral owned by it as of the last day of such fiscal quarter, to the extent that such IP Collateral is not covered by any previous Security Agreement Supplement (and Grant of Security Interests) so signed and delivered by it. In each case, it will promptly cooperate as reasonably necessary to enable the Collateral Agent to make any necessary or reasonably desirable recordations with the U.S. Copyright Office or the U.S. Patent and Trademark Office, as appropriate.
(h) Notwithstanding the foregoing provisions of this Section 4.02 or elsewhere in this Agreement, nothing in this Agreement shall prevent any Grantor from abandoning or discontinuing the use or maintenance of any or its IP Collateral, or from failing to take action to enforce license agreements or pursue actions against infringers, if such Grantor has previously determined in its reasonable business judgment that such abandonment, discontinuance, or failure to take action is desirable in the conduct of its business.
ARTICLE V
Remedies
Section 5.01 Remedies Upon Default . Upon the occurrence and during the continuance of an Event of Default, subject to the Intercreditor Agreement, it is agreed that the Collateral Agent shall have the right to exercise any and all rights afforded to a secured party under this Agreement, the UCC or other applicable law, and, subject to the Intercreditor Agreement, also may (or, at the request of the Required Lenders, shall) (i) require each Grantor to, and each Grantor agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) occupy any premises owned or, to the extent lawful and permitted, leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to or promptly after such occupancy; (iii) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to or promptly after such exercise; (iv) withdraw any and all cash or other Collateral from any Collateral Account and apply such cash and other Collateral to the payment of any and all Secured Obligations in the manner provided in Section 5.02 of this Agreement; (v) subject to the mandatory requirements of applicable law and the notice requirements described below, sell or otherwise dispose of all or any part of the Collateral securing the Secured Obligations at a public
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or private sale or at any brokers board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate; and (vi) with respect to any IP Collateral, on demand, cause the Security Interest to become an assignment, transfer and conveyance of any of or all such IP Collateral ( provided that no such demand may be made unless an Event of Default has occurred and has continued for thirty (30) days) by the applicable Grantors to the Collateral Agent, the Collateral Agent being free to sell, transfer, offer for sale, otherwise dispose of such IP Collateral, or license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such IP Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine, provided , however , that such terms shall include all terms and restrictions that customarily required to ensure the continuing validity and effectiveness of the IP Collateral at issue, such as, without limitation, notice, quality control and inurement provisions with regard to Trademarks, patent designation provisions with regard to Patents, and copyright notices and restrictions or decompilation and reverse engineering of copyrighted software, and confidentiality protections for trade secrets.
Each Grantor acknowledges and recognizes that (a) the Collateral Agent may be unable to effect a public sale of all or a part of the Collateral consisting of securities by reason of certain prohibitions contained in the Securities Act of 1933, 15 U.S.C. §77, (as amended and in effect, the Securities Act ) or the securities laws of various states (the Blue Sky Laws ), but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof, (b) private sales so made may be at prices and upon other terms less favorable to the seller than if such securities were sold at public sales, (c) neither the Collateral Agent nor any other Secured Party has any obligation to delay sale of any of the Collateral for the period of time necessary to permit such securities to be registered for public sale under the Securities Act or the Blue Sky Laws, and (d) private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner. To the maximum extent permitted by law, each Grantor hereby waives any claim against any Secured Party arising because the price at which any Collateral may have been sold at a private sale was less than the price that might have been obtained at a public sale, even if the Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree. Upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the applicable Grantors ten (10) days written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the UCC or its equivalent in other jurisdictions) of the Collateral Agents intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a brokers board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be
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held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. The Collateral Agent may conduct one or more going out of business sales, in the Collateral Agents own right or by one or more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or occupied by any Grantor. The Collateral Agent and any such agent or contractor, in conjunction with any such sale, may augment the Inventory with other goods (all of which other goods shall remain the sole property of the Collateral Agent or such agent or contractor). Any amounts realized from the sale of such goods which constitute augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in their disposition) shall be the sole property of the Collateral Agent or such agent or contractor and neither any Grantor nor any Person claiming under or in right of any Grantor shall have any interest therein. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes of determining the Grantors rights in the Collateral, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full, provided , however , that such agreements shall include all terms and restrictions that are customarily required to ensure the continuing validity and effectiveness of the IP Collateral at issue, such as, without limitation, quality control and inurement provisions with regard to Trademarks, patent designation provisions with regard to patents, and copyright notices and restrictions or decompilation and reverse engineering of copyrighted software, and protecting the confidentiality of trade secrets. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court appointed receiver. Any sale pursuant to the provisions of
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this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the UCC or its equivalent in other jurisdictions.
Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantors true and lawful agent (and attorney-in-fact) during the continuance of an Event of Default and after notice to the Borrower of its intent to exercise such rights (except in the case of a Bankruptcy Event of Default, in which case no such notice shall be required), for the purpose of, subject to the Intercreditor Agreement, (i) making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance, (ii) making all determinations and decisions with respect thereto and (iii) obtaining or maintaining the policies of insurance required by Section 5.02 of the First Lien Credit Agreement or to pay any premium in whole or in part relating thereto. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable out-of-pocket attorneys fees, court costs, expenses and other charges relating thereto, shall be payable, within ten (10) days of demand, by the Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.
By accepting the benefits of this Agreement and each other Security Document, the Secured Parties expressly acknowledge and agree that this Agreement and each other Security Document may be enforced only by the action of the Collateral Agent and that no other Secured Party shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Collateral Agent for the benefit of the Secured Parties upon the terms of this Agreement and the other Security Documents.
Section 5.02 Application of Proceeds . After the exercise of remedies provided for in Section 5.01 (or after the Loans have automatically become immediately due and payable as set forth in clause (ii) of the last paragraph of Section 8.01(1) of the First Lien Credit Agreement), subject to the Intercreditor Agreement, any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:
First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including attorney costs payable under Section 10.05 and amounts payable under Article II , in each case, of the First Lien Credit Agreement) payable to the Administrative Agent in its capacity as such;
Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including attorney costs payable under Section 10.05 and amounts payable under Article II , in each case, of the First Lien Credit Agreement), ratably among them in proportion to the amounts described in this clause Second payable to them;
Third , to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;
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Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans, the Obligations under Specified Hedge Agreements and Cash Management Obligations, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them;
Fifth , to the payment of all other Obligations of the Loan Parties that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and
Last , the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by law.
The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. It is understood and agreed that the Grantors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Secured Obligations.
Notwithstanding anything to the contrary in this Agreement or any other Loan Document, in no circumstances shall proceeds of any Collateral constituting an asset of a Loan Party or a Limited Guarantor, in each case, which is not a Qualified ECP Guarantor (as defined in the Guaranty Agreement) be applied towards the payment of any Obligations under Specified Hedge Agreements.
ARTICLE VI
Indemnity, Subrogation and Subordination
Upon payment by any Grantor of any Secured Obligations, all rights of such Grantor against the Borrower or any other Grantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior payment in full in cash of all the Secured Obligations (other than (i) contingent indemnity obligations for then unasserted claims; (ii) obligations and liabilities under Specified Hedge Agreements as to which arrangements satisfactory to the applicable Qualified Counterparty shall have been made; and (iii) Cash Management Obligations as to which arrangements satisfactory to the applicable Cash Management Bank shall have been made) and the termination of all Commitments. If any amount shall be paid to the Borrower or any other Grantor in contravention of the foregoing subordination on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower or any other Grantor, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the
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Collateral Agent to be credited against the payment of the Secured Obligations, whether matured or unmatured, in accordance with the terms of the First Lien Credit Agreement and the other Loan Documents. Subject to the foregoing, to the extent that any Grantor (other than the Borrower) shall, under this Agreement or the First Lien Credit Agreement as a joint and several obligor, repay any of the Secured Obligations (an Accommodation Payment ), then the Grantor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Grantors in an amount equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Grantors Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Grantors. As of any date of determination, the Allocable Amount of each Grantor shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Grantor hereunder and under the First Lien Credit Agreement without (a) rendering such Grantor insolvent within the meaning of Section 101 (32) of the Bankruptcy Code of the United States, Section 2 of the Uniform Fraudulent Transfer Act ( UFTA ) or Section 2 of the Uniform Fraudulent Conveyance Act ( UFCA ), (b) leaving such Grantor with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code of the United States, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Grantor unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code of the United States or Section 4 of the UFTA, or Section 5 of the UFCA.
ARTICLE VII
Miscellaneous
Section 7.01 Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.01 of the First Lien Credit Agreement. All communications and notices hereunder to a Grantor other than the Borrower shall be given in care of the Borrower.
Section 7.02 Waivers; Amendment . (a) No failure or delay by the Collateral Agent in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and under the other Loan Documents are cumulative and are not exclusive of any other rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.02 , and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of any Loan shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Collateral Agent or any other Secured Party may have had notice or knowledge of such Default or Event of Default at the time.
(b) Subject to the Intercreditor Agreement, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with
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respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 10.08 of the First Lien Credit Agreement.
Section 7.03 Collateral Agents Fees and Expenses; Indemnification . (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement for its reasonable expenses incurred hereunder to the extent provided in Section 10.05(1) of the First Lien Credit Agreement.
(b) Without limitation or duplication of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Administrative Agent, the Collateral Agent, the Arrangers and the other Indemnitees against, and hold each Indemnitee harmless from, any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (but limited, in the case of legal fees and expenses, to the Attorney Costs of one counsel to all Indemnitees taken as a whole and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interest of the Indemnitees (which may be a single local counsel acting in multiple material jurisdictions), and solely in the case of an actual conflict of interest where the Indemnitee affected by such conflict of interest informs the Borrower in writing of such conflict, one additional counsel in each relevant jurisdiction to each group of affected Indemnitees similarly situated taken as a whole) (a) the execution, delivery, enforcement, performance or administration of this Agreement or any other agreement, letter or instrument delivered in connection with the transactions contemplated hereby or the consummation of the transactions contemplated hereby, (b) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by any Grantor, or any liability arising out of the activities or operations of any Grantor that violate any Environmental Laws, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Grantor Indemnified Liabilities ); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements resulted from (w) the gross negligence, bad faith, or willful misconduct of such Indemnitee or of any Related Party, (x) a material breach of any obligations under any Loan Document by such Indemnitee or of any Related Party as determined by a final, non-appealable judgment of a court of competent jurisdiction, (y) any dispute solely among Indemnitees or of any Related Party other than any claims against an Indemnitee in its capacity or in fulfilling its role as the Collateral Agent or an Arranger under the Term Facility and other than any claims arising out of any act or omission of any Grantor or any of their respective Affiliates or (z) any settlement entered into by any Indemnitee or of any Related Party of such Indemnitee in respect of any Grantor Indemnified Liability, in each case, without each Grantors (or the Borrowers, on behalf of each Grantor) prior written consent (such consent not to be unreasonably withheld or delayed), but, if such settlement occurs with Grantors (or the Borrowers on behalf of each Grantor) written consent or if there is a final judgment for the plaintiff in any action or claim
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with respect to any of the foregoing, the Grantor shall be liable for such settlement or for such final judgment. To the extent that the undertakings to indemnify and hold harmless set forth in this Section 7.03(b) may be unenforceable in whole or in part because they are violative of any applicable law or public policy, the Grantors shall jointly with the other Grantors and severally contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Grantor Indemnified Liabilities incurred by the Indemnitees or any of them. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, except to the extent resulting from the willful misconduct, bad faith or gross negligence of such Indemnitee or any Related Party (as determined by a final and non-appealable judgment of a court of competent jurisdiction), nor shall any Indemnitee or any Grantor have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date) (other than, in the case of any Grantor, in respect of any such damages incurred or paid by an Indemnitee to a third party). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 7.03(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Grantor, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. This Section 7.03(b) shall not apply to Taxes, Other Taxes, taxes covered by Section 2.12 of the First Lien Credit Agreement or Excluded Taxes, except it shall apply to any taxes (other than taxes imposed on or measured by net income (however denominated, and including branch profits and similar taxes) and franchise or similar taxes) that represent losses, claims, damages, etc. arising from a non-tax claim (including a value added tax or similar tax charged with respect to the supply of legal or other services).
(c) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.03 shall remain operative and in full force and effect regardless of the termination of this Agreement, any other Loan Document, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, any resignation of the Collateral Agent or any investigation made by or on behalf of the Administrative Agent or any other Secured Party. All amounts due under this Section 7.03 shall be payable within twenty (20) Business Days after written demand therefor.
Section 7.04 Successors and Assigns . Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. Except in a transaction expressly permitted under the First Lien Credit Agreement, no Grantor may assign any of its rights or obligations hereunder without the written consent of the Collateral Agent.
Section 7.05 Survival of Agreement . Without limitation of any provision of the First Lien Credit Agreement or Section 7.03 hereof, all covenants, agreements, indemnities,
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representations and warranties made by the Grantors in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such Lender or on its behalf and notwithstanding that the Collateral Agent or any Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended under the First Lien Credit Agreement, and shall continue in full force and effect until this Agreement is terminated as provided in Section 7.12 hereof, or with respect to any individual Grantor until such Grantor is otherwise released from its obligations under this Agreement in accordance with the terms hereof.
Section 7.06 Counterparts; Effectiveness; Several Agreement . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which when taken together shall constitute one and the same instrument. Delivery by telecopier or by electronic .pdf copy of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. This Agreement shall become effective when it shall have been executed by each Closing Date Grantor (and, with respect to each Person that becomes a Grantor hereunder following the Closing Date, on the date of delivery of a Security Agreement Supplement by such Grantor) and the Collateral Agent and thereafter shall be binding upon and inure to the benefit of each Grantor and the Collateral Agent and the other Secured Parties and their respective permitted successors and assigns, subject to Section 7.04 hereof. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, restated, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.
Section 7.07 Severability . If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 7.08 GOVERNING LAW, ETC. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) THE GRANTORS AND THE COLLATERAL AGENT EACH IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
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DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT THE COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE OF ANY RIGHTS UNDER THIS AGREEMENT OR THE ENFORCEMENT OF ANY JUDGMENT.
(c) THE GRANTORS AND THE COLLATERAL AGENT EACH IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
Section 7.09 WAIVER OF RIGHT TO TRIAL BY JURY . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 7.10 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 7.11 Security Interest Absolute . All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the First Lien Credit Agreement, any other Loan Document, any Specified Hedge Agreements, any Cash Management Services, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all
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or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the First Lien Credit Agreement, any other Loan Document, any Specified Hedge Agreements, any Cash Management Services, or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) subject only to termination of a Grantors obligations hereunder in accordance with the terms of Section 7.12 , but without prejudice to reinstatement rights under Section 2.04 of the Guaranty Agreement, any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Secured Obligations or this Agreement.
Section 7.12 Termination or Release . (a) This Agreement, the Security Interest and all other security interests granted hereby shall terminate with respect to all Secured Obligations when (i) all Commitments have expired or been terminated and the Lenders have no further commitment to lend under the Credit Agreement and (ii) all outstanding Secured Obligations (other than (A) contingent indemnification obligations with respect to then unasserted claims and (B) Secured Obligations in respect of obligations that may thereafter arise with respect to Obligations in respect of Specified Hedge Agreements and Cash Management Obligations, in each case, not yet due and payable; unless the Collateral Agent has received written notice, at least two (2) Business Days prior to the proposed date of any such release of the Security Interest, stating that arrangements reasonably satisfactory to the applicable Cash Management Bank or Qualified Counterparty or applicable Secured Party, as the case may be, in respect thereof have not been made) shall have been paid in full in cash, provided , however , that in connection with the termination of this Agreement, the Collateral Agent may require such indemnities as it shall reasonably deem necessary or appropriate to protect the Secured Parties against (x) loss on account of credits previously applied to the Secured Obligations that may subsequently be reversed or revoked, and (y) any obligations that may thereafter arise with respect to the Obligations in respect of Specified Hedge Agreements and Cash Management Obligations, in each case to the extent not provided for thereunder.
(b) The Security Interest in any Collateral shall be automatically released in the circumstances set forth in Sections 10.18 or 9.01(4) of the First Lien Credit Agreement or upon any release of the Lien on such Collateral in accordance with Sections 10.18, 9.01(4)(c) or (b) of the First Lien Credit Agreement, including, without limitation, in connection with any property (and any related rights and any related assets) that is sold or otherwise transferred in connection with a sale and leaseback transaction permitted by the Loan Documents.
(c) In connection with any termination or release pursuant to paragraph (a) or (b) above, the Collateral Agent shall promptly execute and deliver to any Grantor, at such Grantors expense, all documents that such Grantor shall reasonably request to evidence such termination or release and take all other actions reasonably requested by any Grantor, at such Grantors expense, in connection with such release, including authorizing such Grantor or its representatives to file any UCC amendment or termination statements with respect to such release. Any execution and delivery of documents pursuant to this Section 7.12 shall be without recourse to or warranty by the Collateral Agent.
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(d) At any time that the respective Grantor desires that the Collateral Agent take any of the actions described in immediately preceding clause (c) , it shall, upon request of the Collateral Agent, deliver to the Collateral Agent an officers certificate certifying that the release of the respective Collateral is permitted pursuant to paragraph (a) or (b). The Collateral Agent shall have no liability whatsoever to any Secured Party as the result of any release of Collateral by it as permitted (or which the Collateral Agent in good faith believes to be permitted) by this Section 7.12 .
Section 7.13 Additional Restricted Subsidiaries . To the extent required by Section 5.10 of the First Lien Credit Agreement a Restricted Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein, and such Restricted Subsidiary shall execute and deliver to the Administrative Agent a Security Agreement Supplement. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.
Section 7.14 Collateral Agent Appointed Attorney-in-Fact . (a) Each Grantor hereby appoints the Collateral Agent the true and lawful attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof at any time after and during the continuance of an Event of Default, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, subject to the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default and (unless a Bankruptcy Event of Default has occurred and is continuing, in which case no such notice shall be required) delivery of notice by the Collateral Agent to the Borrower of its intent to exercise such rights, with full power of substitution either in the Collateral Agents name or in the name of such Grantor (i) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (ii) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (iii) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (iv) to send verifications of Accounts to any Account Debtor; (v) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (vi) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (vii) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent or to a Collateral Account and adjust, settle or compromise the amount of payment of any Account or related contracts; (viii) to make, settle and adjust claims in respect of Collateral under policies of insurance and to endorse the name of such Grantor on any check, draft, instrument or any other item of payment with respect to the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto; and (ix) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as
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requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct or that of any of their Affiliates, directors, officers, employees, counsel, agents or attorneys-in-fact.
(b) All acts in accordance with this Section 7.14 of said attorney or designee are hereby ratified and approved by the Grantors. The powers conferred on the Collateral Agent, for the benefit of the Secured Parties, under this Section 7.14 are solely to protect the Collateral Agents interests in the Collateral and shall not impose any duty upon the Collateral Agent or any Secured Party to exercise any such powers.
Section 7.15 General Authority of the Collateral Agent . By acceptance of the benefits of this Agreement and any other Security Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (a) to consent to the appointment of the Collateral Agent as its agent hereunder and under such other Security Documents, (b) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provisions of this Agreement and such other Security Documents against any Grantor, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder or thereunder relating to any Collateral or any Grantors obligations with respect thereto, (c) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Security Document against any Grantor, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Security Document and (d) to agree to be bound by the terms of this Agreement and any other Security Documents.
Section 7.16 Collateral Agents Duties . Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property.
Section 7.17 Recourse; Limited Obligations . This Agreement is made with full recourse to each Grantor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Grantor contained herein, in the First Lien Credit Agreement and the other Loan Documents and otherwise in writing in connection herewith or therewith, with respect to the Secured Obligations of each applicable Secured Party. It is the desire and intent of each Grantor and each applicable Secured Party that this Agreement shall be enforced
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against each Grantor to the fullest extent permissible under applicable law applied in each jurisdiction in which enforcement is sought.
Section 7.18 Mortgages . In the event that any of the Collateral hereunder is also subject to a valid and enforceable Lien under the terms of a Mortgage and the terms thereof are inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such Mortgage shall control in the case of fixtures and real property leases, letting and licenses of, and contracts, and agreements relating to the lease of, real property, and the terms of this Agreement shall control in the case of all other Collateral.
Section 7.19 Intercreditor Agreement . (a) Notwithstanding anything herein to the contrary, the Liens granted to the Collateral Agent under this Agreement and the exercise of the rights and remedies of the Collateral Agent hereunder and under any other Security Document are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement or any other Security Document, the terms of the Intercreditor Agreement shall govern and control. Notwithstanding anything to the contrary herein, the Collateral Agent acknowledges and agrees that no Grantor shall be required to take or refrain from taking any action at the request of the Collateral Agent with respect to the Collateral if such action or inaction would be inconsistent with the terms of the Intercreditor Agreement.
(b) Subject to the foregoing, (i) to the extent the provisions of this Agreement (or any other Security Documents) require the delivery of, or control over, ABL Priority Collateral to be granted to the Collateral Agent at any time prior to the Discharge of ABL Obligations, then delivery of such ABL Priority Collateral (or control with respect thereto, (and any related approval or consent rights)) shall instead be granted to the ABL Agent, to be held in accordance with the ABL Documents (as defined in the Intercreditor Agreement) and subject to the Intercreditor Agreement and (ii) any provision of this Agreement (or any other Security Documents) requiring Grantors to name the Collateral Agent as an additional insured or a loss payee under any insurance policy or a beneficiary of any letter of credit, such requirement shall have been complied with if any such insurance policy or letter of credit also names the ABL Agent and/or the Second Lien Term Agent as an additional insured, loss payee or beneficiary, as the case may be, in each case pursuant and subject to the terms of the Intercreditor Agreement.
(c) Furthermore, at all times prior to the Discharge of ABL Obligations, the Collateral Agent is authorized by the parties hereto to effect transfers of ABL Priority Collateral at any time in its possession (and any control or similar agreements with respect to ABL Priority Collateral) to the ABL Agent .
(d) Notwithstanding anything to the contrary herein but subject to the Intercreditor Agreement, in the event the ABL Documents (as defined in the Intercreditor Agreement) and/or Second Lien Term Documents (as defined in the Intercreditor Agreement) provide for the grant of a security interest or pledge over the assets of any Grantor and such assets do not otherwise constitute Collateral under this Agreement or any other Loan Document, such Grantor shall (i) promptly grant a security interest in or pledge such assets to secure the Secured Obligations, (ii) promptly take any actions necessary to perfect such security interest or pledge to the extent set forth in the ABL Facilities Documentation and/or Second Lien Facilities
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Documentation and (iii) take all other steps reasonably requested by the Collateral Agent in connection with the foregoing.
(e) Nothing contained in the Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement, which, as among the Grantors and the Collateral Agent shall remain in full force and effect in accordance with its terms.
Section 7.20 Right of Setoff
Subject to Section 2.15 of the First Lien Credit Agreement, if an Event of Default shall have occurred and be continuing, each Lender and each other Secured Party is hereby authorized by each Grantor at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Secured Party to or for the credit or the account of any Grantor against any and all of the obligations of the Grantor now or hereafter existing under this Agreement or any other Loan Document to such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations of such Grantor may be contingent or unmatured or are owed to a branch or office of such Secured Party different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Secured Party under this Section are in addition to other rights and remedies (including other rights of setoff) that such Secured Party may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
BJS WHOLESALE CLUB, INC., as the Borrower |
By: |
|
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Name: | ||
Title: |
BEACON HOLDING INC., as Holdings |
By: |
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|
Name: | ||
Title: |
SUBSIDIARY LOAN PARTIES: | ||
BJME OPERATING CORP., as a Subsidiary Loan Party |
By: |
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|
Name: | ||
Title: |
BJNH OPERATING CO., LLC, as a Subsidiary Loan Party |
By: |
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|
Name: | ||
Title: |
NATICK REALTY, INC., as a Subsidiary Loan Party |
By: |
|
|
Name: | ||
Title: |
COLLATERAL AGENT: | ||
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent |
By: |
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Name: | ||
Title: |
SCHEDULE II TO SECURITY AGREEMENT
EQUITY INTERESTS
Issuer |
Registered
|
Percentage of Equity Interests |
Number of Shares |
Class of Equity Interest |
Number of Certificate |
|||||
BJs Wholesale Club, Inc. | Beacon Holding Inc. | 100% | 10 | Common Stock | 1 | |||||
CWC Beverages Corp | BJs Wholesale Club, Inc. | 100% | 1 | Common Stock | 3 | |||||
JWC Beverages Corp. | BJs Wholesale Club, Inc. | 100% | 1 | Common Stock | 3 | |||||
Mormax Beverages Corp. | BJs Wholesale Club, Inc. | 100% | 100 | Common Stock | 2 | |||||
Mormax Corporation | BJs Wholesale Club, Inc. | 100% | 5,000 | Common Stock | 4 | |||||
Natick GA Beverage Corp. | BJs Wholesale Club, Inc. | 100% | 100 | Common Stock | 1 | |||||
YWC Beverages Corp. | BJs Wholesale Club, Inc. | 100% | 1 | Common Stock | 3 | |||||
BJME Operating Corp. | BJs Wholesale Club, Inc. | 100% | 1,000 | Common Stock | 4 | |||||
Natick Realty, Inc. | BJME Operating Corp. | 100% | 105,000* | Common Stock | 5 | |||||
BJNH Operating Co., LLC | BJME Operating Corp. | 100% | n/a | n/a | Uncertificated | |||||
Natick Fifth Realty Corp. | Natick Realty, Inc. | 100% | 1,000 | Common Stock | 2 | |||||
Natick NH Hooksett Realty Corp. | Natick Realty, Inc. | 100% | 100 | Common Stock | 1 | |||||
Natick NJ 1993 Realty Corp. | Natick Realty, Inc. | 100% | 1,000 | Common Stock | 2 | |||||
Natick NJ Flemington Realty Corp. | Natick Realty, Inc. | 100% | 1,000 | Common Stock | 2 | |||||
Natick NJ Manahawkin | Natick Realty, Inc. | 100% | 100 | Common Stock | 2 |
Security Agreement (First Lien) |
Issuer |
Registered
|
Percentage of Equity Interests |
Number of Shares |
Class of Equity Interest |
Number of Certificate |
|||||
Realty Corp. | ||||||||||
Natick NJ Realty Corp. | Natick Realty, Inc. | 100% | 1,000 | Common Stock | 2 |
PLEDGED DEBT
(a) |
Intercompany Notes: |
$200,000,000 revolving facility note by BJs Wholesale Club, Inc. in favor of BJME Operating Corp. (as successor in interest to BJs Northeast Business Trust).
(b) |
Promissory notes or Other Pledged Debt: |
None.
SCHEDULE IV TO SECURITY AGREEMENT
UCC FILING OFFICES
Grantor | Jurisdiction | |
BEACON HOLDING INC. | Delaware | |
BJS WHOLESALE CLUB, INC. | Delaware | |
BJME OPERATING CORP. | Massachusetts | |
BJNH OPERATING CO., LLC | Delaware | |
NATICK REALTY, INC. | Maryland |
Security Agreement (First Lien) |
EXHIBIT I TO SECURITY AGREEMENT
FORM OF SECURITY AGREEMENT SUPPLEMENT
SUPPLEMENT NO. dated as of , 20 (this Supplement ), to the Security Agreement dated as of February 3, 2017 (the Security Agreement ), among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), BEACON HOLDING INC., a Delaware corporation ( Holdings ), the Subsidiary Loan Parties party thereto and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent for the Secured Parties.
A. Reference is made to (i) the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, supplemented and/or otherwise modified from time to time, the First Lien Credit Agreement ), by, among others, the Borrower, Holdings, the Lenders from time to time party thereto, and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent for the Lenders and Collateral Agent for the Secured Parties and (ii) the Guaranty Agreement (as defined in the First Lien Credit Agreement).
B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the First Lien Credit Agreement and the Security Agreement, as applicable.
C. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Term Loans. Section 7.13 of the Security Agreement provides that additional Restricted Subsidiaries of the Grantors may become Grantors under the Security Agreement by execution and delivery of an instrument substantially in the form of this Supplement. The undersigned Restricted Subsidiary (the New Subsidiary ) is executing this Supplement in accordance with the requirements of the First Lien Credit Agreement to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and as consideration for Term Loans previously made.
Accordingly, the Collateral Agent and the New Subsidiary agree as follows:
Section 1. In accordance with Section 7.13 of the Security Agreement, the New Subsidiary by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct in all material respects (except to the extent any such representation and warranty is qualified as to materiality, in which case such representation and warranty, to the extent qualified by materiality, shall be true and correct in all respects) on and as of the date hereof; provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects (except to the extent any such representation and warranty is qualified as to materiality, in which case such representation and warranty, to the extent qualified by materiality, shall be true and correct
I-1 | Security Agreement (First Lien) |
Exhibit I
to
Security Agreement
in all respects) as of such earlier date. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Secured Obligations does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Subsidiarys right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Subsidiary. Each reference to a Grantor in the Security Agreement shall be deemed to include the New Subsidiary as if originally named therein as a Grantor. The Security Agreement is hereby incorporated herein by reference.
Section 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity and principles of good faith and fair dealing.
Section 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by facsimile or electronic (including .pdf file) transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.
Section 4. The New Subsidiary hereby represents and warrants that the Perfection Certificate attached hereto and updated schedules to the Security Agreement attached hereto as Schedule I have been duly executed and delivered to the Collateral Agent and the information set forth therein, including the exact legal name of the New Subsidiary and its jurisdiction of organization, is correct and complete in all material respects as of the date hereof.
Section 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect.
Section 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
I-2 | Security Agreement (First Lien) |
Exhibit I
to
Security Agreement
Section 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Security Agreement.
Section 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including all Attorney Costs of counsel for the Collateral Agent as provided in Section 7.03(a) of the Security Agreement.
I-3 | Security Agreement (First Lien) |
IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written.
[NAME OF NEW SUBSIDIARY] |
By: |
|
|
Name: | ||
Title: | ||
Legal Name: | ||
Jurisdiction of Formation: | ||
Location of Chief Executive Office: | ||
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent |
By: |
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Name: | ||
Title: | ||
By: |
|
|
Name: | ||
Title: |
I-4 | Security Agreement (First Lien) |
SCHEDULE I TO SECURITY AGREEMENT SUPPLEMENT
[ATTACH COMPLETED PERFECTION CERTIFICATE FOR NEW SUBSIDIARY AND
ALL SCHEDULES TO SECURITY AGREEMENT, UPDATED FOR NEW SUBSIDIARY]
I-5 | Security Agreement (First Lien) |
EXHIBIT II TO SECURITY AGREEMENT
FORM OF PERFECTION CERTIFICATE
[ ], Reference is made to (i) the Credit Agreement dated as of February 3, 2017 (the ABL Facility), by and among BJs Wholesale Club, Inc. (the Borrower), Beacon Holding Inc. (Holdings), the lenders from time to time party thereto and Wells Fargo Bank, National Association (Wells) as administrative agent and collateral agent, (ii) the First Lien Credit Agreement dated as of [ ], 2017 (the First Lien Facility), by and among Borrower, Holdings, the lenders from time to time party thereto and Nomura Corporate Funding Americas, LLC (Nomura), as administrative agent and collateral agent and (iii) the Second Lien Credit Agreement dated as of [ ], 2017 (the Second Lien Facility) by and among Borrower, Holdings, the lenders from time to time party thereto and Jefferies Finance LLC (Jefferies) as administrative agent and collateral agent. Capitalized terms used but not defined herein have the meanings assigned in the ABL Facility, First Lien Facility or Second Lien Facility or the Security Agreement referred to therein, as applicable.
Each of the undersigned, a Responsible Officer of the Loan Parties set above his/her name on the signature pages hereto, hereby certifies to Wells as administrative agent with respect to the ABL Facility and the lenders party thereto and Nomura, as collateral agent with respect to the First Lien Facility and to Jefferies, as collateral agent with respect to the Second Lien Facility, as applicable, and the lenders party thereto, as applicable, on behalf of the Borrower, Holdings and the Subsidiary Guarantors (collectively, the Loan Parties and each, a Loan Party) as follows:
I. |
CURRENT INFORMATION |
A. Legal Names, Organizations, Jurisdictions of Organization, Organizational Identification Numbers and Federal Employer Identification Numbers . The full and exact legal name (as it appears in each respective certificate or articles of incorporation, limited liability membership agreement or similar organizational documents, in each case as amended to date), the type of organization, the jurisdiction of organization or formation, as applicable, the organizational identification number, and the Federal Employer Identification Number of the Borrower and each other Loan Party are as follows:
Name of Borrower/Loan Party |
Type of Organization
(e.g. corporation, limited
|
Jurisdiction of Organization/
|
Organizational
|
Federal Employer
|
Exhibit II
to
Security Agreement
B. Chief Executive Offices and Mailing Addresses . The chief executive office address and the preferred mailing address (if different than chief executive office or residence) of the Borrower and each other Loan Party are as follows:
Name of Borrower/Loan Party |
Address of Chief Executive Office |
Mailing Address (if different than CEO) |
||||
C. Special Debtors . Except as specifically identified below none of the Loan Parties is a: (i) transmitting utility (as defined in Section 9-102(a)(80)), (ii) primarily engaged in farming operations (as defined in Section 9-102(a)(35)), (iii) a trust, (iv) a foreign air carrier within the meaning of the federal aviation act of 1958, as amended or (v) a branch or agency of a bank which bank is not organized under the law of the United States or any state thereof.
Name of Borrower/Loan Party |
Type of Special Debtor |
|||
D. |
Trade Names/Assumed Names . |
Current Trade Names. Set forth below is each trade name or assumed name currently used by the Borrower or any other Loan Party or by which the Borrower or any Loan Party is known or is transacting any business:
Borrower/Loan Party |
Trade/Assumed Name |
|||
Exhibit II
to
Security Agreement
E. |
Changes in Names, Jurisdiction of Organization or Corporate Structure . |
Except as set forth below, neither the Borrower nor any other Loan Party has changed its name, jurisdiction of organization or its corporate structure in any way (e.g. by merger, consolidation, change in corporate form, change in jurisdiction of organization or otherwise) within the past five (5) years:
F. |
Prior Addresses . |
Except as set forth below, neither the Borrower nor any other Loan Party has changed its chief executive office, or principal residence if the Borrower or a particular Loan Party is a natural person, within the past five (5) years:
Borrower/Loan Party |
Prior Address/City/State/Zip Code |
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G. |
Acquisitions of Equity Interests or Assets . |
Except as set forth below, neither the Borrower nor any Loan Party has acquired the equity interests of another entity or substantially all the assets of another entity within the past five (5) years:
H . |
Corporate Ownership and Organizational Structure . |
II. |
INFORMATION REGARDING CERTAIN COLLATERAL |
A. Investment Related Property
1. Equity Interests . Set forth below is a list of all equity interests owned by the Borrower and each Loan Party together with the type of organization which issued such equity interests (e.g. corporation, limited liability company, partnership or trust):
Borrower/Loan Party |
Issuer |
Type of Organization |
# of
|
Total Shares
|
% of
Interest Pledged |
Certificate No.
|
Par Value |
|||||||
2. Securities Accounts . Set forth below is a list of all securities accounts in which the Borrower or any other Loan Party customarily maintains securities or other assets:
Exhibit II
to
Security Agreement
3. Deposit Accounts . Set forth below is a list of all bank accounts (checking, savings, money market or the like) maintained by the Borrower or any other Loan Party:
Borrower/Loan Party |
Type of Account |
Name & Address of Financial Institutions |
Account
|
|||
4. Debt Securities & Instruments . Set forth below is a list of all debt securities and instruments owed to the Borrower or any other Loan Party, other than such debt securities and instruments with a principal amount less than or equal to $500,000 individually and $2,000,000 in the aggregate:
Borrower/Loan Party |
Issuer of Instrument |
Principal Amount of Instrument |
Maturity Date |
|||
B. Intellectual Property . Set forth below is a list of all copyrights, patents, and trademarks, all applications and licenses thereof and other intellectual property owned or used, or hereafter adopted, held or used, by the Borrower and each other Loan Party:
1. |
Copyrights, Copyright Applications and Copyright Licenses |
Borrower/Loan Party |
Title |
Application No./Application Date |
Status |
Registration
|
||||
2. |
Patents, Patent Applications and Patent Licenses |
Borrower/Loan Party |
Title |
Application No./Application Date |
Status |
Registration
|
||||
None | ||||||||
Exhibit II
to
Security Agreement
3. |
Trademarks, Trademark Applications and Trademark Licenses |
Borrower/Loan Party |
Title |
Application No./Application Date |
Status |
Registration
|
||||
4. |
Trademark Licenses |
5. |
Domain Names |
Name |
Expires |
Status |
||||
6. |
BJs.com Sub-Domain Listings |
Name |
||||||
C. Tangible Personal Property in Possession of Warehousemen, Bailees and Other Third Parties . Except as set forth below, no persons (including, without limitation, warehousemen and bailees) other than the Borrower or any other Loan Party have possession of any material amount (fair market value of $2,000,000 or more) of tangible personal property of the Borrower or any other Loan Party:
Debtor/Grantor |
Address/City/State/Zip Code |
County |
Description of
|
|||
D. Tangible Personal Property in Former Article 9 Jurisdictions and Canada . Set forth below are all the locations within the Commonwealth of Puerto Rico and any Province of Canada where the Borrower or any other Loan Party currently maintains or has maintained any material amount (fair market value of $2,000,000 or more) of its tangible personal property (including goods, inventory and equipment) of such Borrower or any other Loan Party (whether or not in the possession of such Borrower or any other Loan Party) within the past five (5) years:
Exhibit II
to
Security Agreement
E. |
Real Estate Related UCC Collateral |
1. Fixtures . Set forth below are all the locations where the Borrower or any other Loan Party owns or leases any real property with a fair market value above $5,000,000:
Owned Property
Borrower/Loan Party |
Address/City/State/Zip Code |
County |
||
Leased Property
Location |
Lease Agreement |
|
2. As Extracted Collateral . Set forth below are all the locations where the Borrower or any other Loan Party owns, leases or has an interest in any wellhead or minehead:
3. Timber to be Cut . Set forth below are all locations where the Borrower or any other Loan Party owns goods that are timber to be cut:
F. Commercial Tort Claims . Set forth below is a true and correct list of commercial tort claims in excess of $5,000,000 held by the Borrower or any other Loan Party, including a brief description thereof.
Exhibit II
to
Security Agreement
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate on the date above first written.
LOAN PARTIES | ||
BEACON HOLDING INC. |
By: |
|
|
Name: | ||
Title: | ||
BJS WHOLESALE CLUB, INC. |
By: |
|
|
Name: | ||
Title: |
Exhibit II
to
Security Agreement
LOAN PARTIES (Contd) |
BJME OPERATING CORP., |
By: |
|
|||
Name: | ||||
Title: |
BJNH OPERATING CO., LLC, |
By: |
|
|||
Name: | ||||
Title: |
NATICK REALTY, INC., |
By: |
|
|||
Name: | ||||
Title: |
Exhibit A
Security Agreement (First Lien) |
EXHIBIT III TO SECURITY AGREEMENT
[FORM OF] TRADEMARK SECURITY AGREEMENT
This TRADEMARK SECURITY AGREEMENT (as amended, amended and restated, supplemented and/or otherwise modified from time to time, this Trademark Security Agreement ) dated , 20 , is made by the Persons listed on the signature pages hereof (collectively, the Grantors ) in favor of Nomura Corporate Funding Americas, LLC, as collateral agent (the Collateral Agent ) for the Secured Parties (as defined in the First Lien Credit Agreement referred to below).
Reference is made to (i) the First Lien Term Loan Credit Agreement, dated as of [ ], 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the First Lien Credit Agreement ), by and among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and Nomura Corporate Funding Americas, LLC, as Administrative Agent and Collateral Agent, (ii) each Specified Hedge Agreement, and (iii) each agreement relating to Cash Management Services. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the First Lien Credit Agreement, the Qualified Counterparties have agreed to enter into and/or maintain one or more Specified Hedge Agreements and the Cash Management Banks have agreed to enter into and/or maintain Cash Management Services, on the terms and conditions set forth in the First Lien Credit Agreement, in such Specified Hedge Agreements or agreements relating to Cash Management Services, as applicable.
Whereas, as a condition precedent to the Lenders extension of such credit, the obligation of the Qualified Counterparties to enter into and/or maintain such Specified Hedge Agreements and the obligation of the Cash Management Banks to enter into and/or maintain such Cash Management Services, each Grantor has executed and delivered that certain Security Agreement, dated as of [ ], 2017, made by the Grantors to the Collateral Agent (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Security Agreement ).
Whereas, under the terms of the Security Agreement, the Grantors have granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of the Grantors, and have agreed as a condition thereof to execute this Trademark Security Agreement for recording with the U.S. Patent and Trademark Office.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
III-1 | Security Agreement (First Lien) |
Exhibit III
to
Security Agreement
SECTION 1. Terms . Terms defined in the First Lien Credit Agreement and Security Agreement and not otherwise defined herein are used herein as defined in the First Lien Credit Agreement and Security Agreement.
SECTION 2. Grant of Security . Each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties a continuing security interest in all of such Grantors right, title and interest in, to and under the Trademarks, including the Trademarks set forth on Schedule A attached hereto; provided that, in no event shall any security interest be granted in any intent-to-use application for registration of a Trademark filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. §1051, prior to the filing of a Statement of Use pursuant to Section 1(d) of the Lanham Act or an Amendment to Allege Use pursuant to Section 1(c) of the Lanham Act with respect thereto, to the extent that, and during the period, if any, in which, the grant of a security interest therein would impair the validity or enforceability of any registration that issues from such intent-to-use application under applicable federal law (it being understood that after such period such intent-to-use application shall be automatically subject to the security interest granted herein).
SECTION 3. Security for Obligations . The grant of a security interest in the Trademarks by each Grantor under this Trademark Security Agreement is made to secure the payment or performance, as the case may be, in full of the Secured Obligations.
SECTION 4. Recordation . Each Grantor authorizes and requests that the Commissioner for Trademarks record this Trademark Security Agreement.
SECTION 5. Execution in Counterparts . This Trademark Security Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed signature page to this Trademark Security Agreement by facsimile or electronic (including .pdf file) transmission shall be as effective as delivery of a manually signed counterpart of this Trademark Security Agreement.
SECTION 6. Security Agreement . This Trademark Security Agreement has been entered into in conjunction with the provisions of the Security Agreement. Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Collateral Agent with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control.
SECTION 7. Governing Law . THIS TRADEMARK SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[Remainder of this page intentionally left blank]
III-2 | Security Agreement (First Lien) |
IN WITNESS WHEREOF, the undersigned have executed this Trademark Security Agreement as of the date first above written.
[NAME OF GRANTOR], Grantor |
By: |
|
|
Name: | ||
Title: |
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent and Grantee |
By: |
|
|
Name: | ||
Title: | ||
By: |
|
|
Name: | ||
Title: |
III-1 | Security Agreement (First Lien) |
SCHEDULE A
MARK |
SERIAL/REG. NO. |
APP./REG. DATE |
||
III-2 | Security Agreement (First Lien) |
EXHIBIT IV TO SECURITY AGREEMENT
[FORM OF] PATENT SECURITY AGREEMENT
This PATENT SECURITY AGREEMENT (as amended, amended and restated, supplemented and/or otherwise modified from time to time, this Patent Security Agreement ) dated , 20 , is made by the Persons listed on the signature pages hereof (collectively, the Grantors ) in favor of Nomura Corporate Funding Americas, LLC, as collateral agent (the Collateral Agent ) for the Secured Parties (as defined in the First Lien Credit Agreement referred to below).
Reference is made to (i) the First Lien Term Loan Credit Agreement, dated as of [ ], 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the First Lien Credit Agreement ), by and among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and Nomura Corporate Funding Americas, LLC, as Administrative Agent and Collateral Agent, (ii) each Specified Hedge Agreement and (iii) each agreement relating to Cash Management Services. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the First Lien Credit Agreement, the Qualified Counterparties have agreed to enter into and/or maintain one or more Specified Hedge Agreements and the Cash Management Banks have agreed to enter into and/or maintain Cash Management Services, on the terms and conditions set forth in the First Lien Credit Agreement, in such Specified Hedge Agreements or agreements relating to Cash Management Services, as applicable.
Whereas, as a condition precedent to the Lenders extension of such credit, the obligation of the Qualified Counterparties to enter into and/or maintain such Specified Hedge Agreements and the obligation of the Cash Management Banks to enter into and/or maintain such Cash Management Services, each Grantor has executed and delivered that certain Security Agreement, dated as of [ ], 2017, made by the Grantors to the Collateral Agent (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Security Agreement ).
Whereas, under the terms of the Security Agreement, the Grantors have granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of the Grantors, and have agreed as a condition thereof to execute this Patent Security Agreement for recording with the U.S. Patent and Trademark Office.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
SECTION 1. Terms . Terms defined in the First Lien Credit Agreement and Security Agreement and not otherwise defined herein are used herein as defined in the First Lien Credit Agreement and Security Agreement.
IV-1 | Security Agreement (First Lien) |
Exhibit IV
to
Security Agreement
SECTION 2. Grant of Security . Each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties a security interest in all of such Grantors right, title and interest in, to and under the Patents, including the Patents set forth on Schedule A attached hereto.
SECTION 3. Security for Obligations . The grant of a security interest in the Patent by each Grantor under this Patent Security Agreement is made to secure the payment or performance, as the case may be, in full of the Secured Obligations.
SECTION 4. Recordation . Each Grantor authorizes and requests that the Commissioner for Patents record this Patent Security Agreement.
SECTION 5. Execution in Counterparts . This Patent Security Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed signature page to this Patent Security Agreement by facsimile or electronic (including .pdf file) transmission shall be as effective as delivery of a manually signed counterpart of this Patent Security Agreement.
SECTION 6. Security Agreement . This Patent Security Agreement has been entered into in conjunction with the provisions of the Security Agreement. Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Collateral Agent with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein. In the event that any provision of this Patent Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control.
SECTION 6. Governing Law . THIS PATENT SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[Remainder of this page intentionally left blank]
IV-2 | Security Agreement (First Lien) |
Exhibit IV
to
Security Agreement
IN WITNESS WHEREOF, the undersigned have executed this Patent Security Agreement as of the date first above written.
[NAME OF GRANTOR], Grantor |
By: |
|
|
Name: | ||
Title: |
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent and Grantee |
By: |
|
|
Name: | ||
Title: | ||
By: |
|
|
Name: | ||
Title: |
IV-3 | Security Agreement (First Lien) |
SCHEDULE A
PATENT |
PATENT NO. |
FILING/ISSUE DATE |
||
IV-4 | Security Agreement (First Lien) |
EXHIBIT V TO SECURITY AGREEMENT
[FORM OF] COPYRIGHT SECURITY AGREEMENT
This COPYRIGHT SECURITY AGREEMENT (as amended, amended and restated, supplemented and/or otherwise modified from time to time, this Copyright Security Agreement ) dated , 20 , is made by the Persons listed on the signature pages hereof (collectively, the Grantors ) in favor of Nomura Corporate Funding Americas, LLC, as collateral agent (the Collateral Agent ) for the Secured Parties (as defined in the First Lien Credit Agreement referred to below).
Reference is made to (i) the First Lien Term Loan Credit Agreement, dated as of [ ], 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the First Lien Credit Agreement ), by and among BJs Wholesale Club, Inc., a Delaware corporation (the Borrower ), Beacon Holding Inc., a Delaware corporation ( Holdings ), the Lenders party thereto from time to time and Nomura Corporate Funding Americas, LLC, as Administrative Agent and Collateral Agent, (ii) each Specified Hedge Agreement and (iii) each agreement relating to Cash Management Services. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the First Lien Credit Agreement, the Qualified Counterparties have agreed to enter into and/or maintain one or more Specified Hedge Agreements and the Cash Management Banks have agreed to enter into and/or maintain Cash Management Services, on the terms and conditions set forth in the First Lien Credit Agreement, in such Specified Hedge Agreements or agreements relating to Cash Management Services, as applicable.
Whereas, as a condition precedent to the Lenders extension of such credit, the obligation of the Qualified Counterparties to enter into and/or maintain such Specified Hedge Agreements and the obligation of the Cash Management Banks to enter into and/or maintain such Cash Management Services, each Grantor has executed and delivered that certain Security Agreement, dated as of [ ], 2017, made by the Grantors to the Collateral Agent (as amended, amended and restated, supplemented and/or otherwise modified from time to time, the Security Agreement ).
Whereas, under the terms of the Security Agreement, the Grantors have granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of the Grantors, and have agreed as a condition thereof to execute this Copyright Security Agreement for recording with the U.S. Copyright Office.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
SECTION 1. Terms . Terms defined in the First Lien Credit Agreement and Security Agreement and not otherwise defined herein are used herein as defined in the First Lien Credit Agreement and Security Agreement.
V-1 | Security Agreement (First Lien) |
Exhibit V
to
Security Agreement
SECTION 2. Grant of Security . Each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties a security interest in all of such Grantors right, title and interest in, to and under the Copyrights, including the Copyrights set forth on Schedule A attached hereto.
SECTION 3. Security for Obligations . The grant of a security interest in the Copyrights and exclusive Copyright Licenses by each Grantor under this Copyright Security Agreement is made to secure the payment or performance, as the case may be, in full of the Secured Obligations.
SECTION 4. Recordation . Each Grantor authorizes and requests that the Commissioner for Copyrights record this Copyright Security Agreement.
SECTION 5. Execution in Counterparts . This Copyright Security Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed signature page to this Copyright Security Agreement by facsimile or electronic (including .pdf file) transmission shall be as effective as delivery of a manually signed counterpart of this Copyright Security Agreement.
SECTION 6. Security Agreement . This Copyright Security Agreement has been entered into in conjunction with the provisions of the Security Agreement. Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Collateral Agent with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein. In the event that any provision of this Copyright Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control.
SECTION 7. Governing Law . THIS COPYRIGHT SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[Remainder of this page intentionally left blank]
V-2 | Security Agreement (First Lien) |
Exhibit V
to
Security Agreement
IN WITNESS WHEREOF, the undersigned have executed this Copyright Security Agreement as of the date first above written.
[NAME OF GRANTOR], Grantor |
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Name: | ||
Title: |
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Collateral Agent and Grantee |
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Name: | ||
Title: | ||
By: |
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Name: | ||
Title: |
V-3 | Security Agreement (First Lien) |
SCHEDULE A
COPYRIGHTS
COPYRIGHT |
COPYRIGHT NO. |
APP./REG. DATE |
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Security Agreement (First Lien) |
EXHIBIT K
[FORM OF]
FIRST LIEN TERM LOAN GUARANTY AGREEMENT
EXECUTION VERSION
TERM LOAN GUARANTY AGREEMENT
dated as of
February 3, 2017
among
BEACON HOLDING INC.,
as Holdings,
THE OTHER GUARANTORS PARTY HERETO FROM TIME TO TIME,
and
NOMURA CORPORATE FUNDING AMERICAS, LLC,
as Administrative Agent
Guaranty (First Lien) |
Table of Contents
Page | ||||||||
ARTICLE I Definitions |
1 | |||||||
Section 1.01 |
First Lien Credit Agreement Definitions | 1 | ||||||
Section 1.02 |
Other Defined Terms |
1 | ||||||
ARTICLE II Guarantee |
2 | |||||||
Section 2.01 |
Guarantee | 2 | ||||||
Section 2.02 |
Guarantee of Payment | 3 | ||||||
Section 2.03 |
No Limitations | 3 | ||||||
Section 2.04 |
Reinstatement | 4 | ||||||
Section 2.05 |
Agreement To Pay; Subrogation | 5 | ||||||
Section 2.06 |
Information | 5 | ||||||
ARTICLE III Indemnity, Subrogation and Subordination |
5 | |||||||
ARTICLE IV Miscellaneous |
6 | |||||||
Section 4.01 |
Notices | 6 | ||||||
Section 4.02 |
Waivers; Amendment | 6 | ||||||
Section 4.03 |
Administrative Agents Fees and Expenses; Indemnification | 6 | ||||||
Section 4.04 |
Successors and Assigns | 8 | ||||||
Section 4.05 |
Survival of Agreement | 8 | ||||||
Section 4.06 |
Counterparts; Effectiveness; Several Agreement | 9 | ||||||
Section 4.07 |
Severability | 9 | ||||||
Section 4.08 |
GOVERNING LAW, ETC. | 9 | ||||||
Section 4.09 |
WAIVER OF RIGHT TO TRIAL BY JURY | 10 | ||||||
Section 4.10 |
Headings | 10 | ||||||
Section 4.11 |
Obligations Absolute | 10 | ||||||
Section 4.12 |
Termination or Release | 11 | ||||||
Section 4.13 |
Additional Restricted Subsidiaries | 11 | ||||||
Section 4.14 |
Recourse; Limited Obligations | 12 | ||||||
Section 4.15 |
Intercreditor Agreement | 12 |
SCHEDULES
Schedule I Guarantors
EXHIBITS
Exhibit I Form of Guaranty Supplement
(i) | Guaranty (First Lien) |
This TERM LOAN GUARANTY AGREEMENT, dated as of February 3, 2017, is among BEACON HOLDING INC., a Delaware corporation ( Holdings ), and the other Guarantors set forth on Schedule I hereto and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent for the Secured Parties (as defined below).
Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017, (as amended, extended, supplemented, amended and restated and/or otherwise modified from time to time, the First Lien Credit Agreement ), by and among BJS WHOLESALE CLUB, INC., a Delaware corporation (the Borrower ), Holdings, the Lenders from time to time party thereto, and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and Collateral Agent for the Lenders.
The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the First Lien Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement by each Guarantor (as defined below). The Guarantors are Affiliates of one another and will derive substantial direct and indirect benefits from the extensions of credit to the Borrower pursuant to the First Lien Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. The Intercreditor Agreement governs the relative rights and priorities of the First Lien Term Secured Parties (as defined in the Intercreditor Agreement), the Second Lien Term Secured Parties (as defined in the Intercreditor Agreement) and the ABL Secured Parties (as defined in the Intercreditor Agreement) in respect of the Term Priority Collateral (as defined in the Intercreditor Agreement) and the ABL Priority Collateral (as defined in the Intercreditor Agreement) and with respect to certain other matters as described therein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 First Lien Credit Agreement Definitions . (a) Capitalized terms used in this Agreement, including the preamble and introductory paragraphs hereto, and not otherwise defined herein have the meanings specified in Section 1.01 of the First Lien Credit Agreement.
(b) The rules of construction specified in Sections 1.02 through 1.08 (inclusive) of the First Lien Credit Agreement also apply to this Agreement.
Section 1.02 Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
Accommodation Payment has the meaning assigned to such term in Article III .
Agreement means this Term Loan Guaranty Agreement, as amended, restated, supplemented and/or otherwise modified from time to time.
Allocable Amount has the meaning assigned to such term in Article III .
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Attorney Costs means all reasonable and documented in reasonable detail fees, expenses and disbursements of any law firm or other external legal counsel.
First Lien Credit Agreement has the meaning assigned to such term in the preliminary statement of this Agreement.
Guaranteed Obligations mean the Obligations as defined in the First Lien Credit Agreement.
Guarantors means, collectively, Holdings, each other Restricted Subsidiary listed on Schedule I hereto and any other Person that becomes a party to this Agreement after the Closing Date pursuant to Section 4.13 ; provided that if any such Guarantor is released from its obligations hereunder as provided in Section 4.12(b) , such Person shall cease to be a Guarantor hereunder and for all purposes effective upon such release.
Guaranty Supplement means an instrument substantially in the form of Exhibit I hereto.
Qualified ECP Guarantor means, in respect of any Swap Obligation, each Loan Party or Limited Guarantor that has total assets exceeding $10,000,000 at the time the relevant Guarantee or Limited Recourse Guaranty or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an eligible contract participant under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an eligible contract participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Secured Parties has the meaning provided in the First Lien Credit Agreement.
UFCA has the meaning assigned to such term in Article III .
UFTA has the meaning assigned to such term in Article III .
ARTICLE II
Guarantee
Section 2.01 Guarantee . Each Guarantor irrevocably, absolutely and unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Guaranteed Obligations, in each case, whether such Guaranteed Obligations are now existing or hereafter incurred under, arising out of or in connection with any Loan Document, Specified Hedge Agreements or Cash Management Services, and whether at maturity, by acceleration or otherwise. Each of the Guarantors further agrees that the Guaranteed Obligations may be extended, increased or renewed, amended or modified, in whole or in part, without notice to, or further assent from, such Guarantor and that such Guarantor will remain bound upon its guarantee hereunder notwithstanding any such extension, increase, renewal, amendment or modification of any Guaranteed Obligation. Each of the Guarantors waives promptness,
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presentment to, demand of payment from, and protest to, any Guarantor or any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.
Section 2.02 Guarantee of Payment . Each of the Guarantors further agrees that its guarantee hereunder constitutes a guarantee of payment when due (whether or not any proceeding under Title 11 of the United States Code, as now constituted or hereinafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law shall have stayed the accrual of collection of any of the Guaranteed Obligations or operated as a discharge thereof) and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any other Secured Party to any Collateral or other security held for the payment of any of the Guaranteed Obligations, or to any balance of any deposit account or credit on the books of the Administrative Agent or any other Secured Party in favor of any other Guarantor or any other Person. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor or the Borrower and whether or not any other Guarantor or the Borrower be joined in any such action or actions. Any payment required to be made by a Guarantor hereunder may be required by the Administrative Agent or any other Secured Party on any number of occasions.
Section 2.03 No Limitations . (a) Except for termination or release of a Guarantors obligations hereunder as expressly provided in Section 4.12 , to the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Guaranteed Obligations, any impossibility in the performance of any of the Guaranteed Obligations, or otherwise. Without limiting the generality of the foregoing, to the fullest extent permitted by applicable law and except for termination or release of a Guarantors obligations hereunder in accordance with the terms of Section 4.12 (but without prejudice to Section 2.04 ), the obligations of each Guarantor hereunder shall not be discharged, impaired or otherwise affected by (i) the failure of the Administrative Agent, any other Secured Party or any other Person to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement; (iii) the release of, or any impairment of any security held by the Administrative Agent or any other Secured Party for the Guaranteed Obligations; (iv) any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations; (v) the failure to perfect any security interest in, or the release of, any of the Collateral held by or on behalf of the Administrative Agent or any other Secured Party; (vi) any change in the corporate existence, structure or ownership of any Loan Party, the lack of legal existence of the Borrower or any other Guarantor or legal obligation to discharge any of the Guaranteed Obligations by the Borrower or any other Guarantor for any reason whatsoever, including, without limitation, in any insolvency, bankruptcy or reorganization of any Loan Party; (vii) the existence of any claim, set-off or other rights that any Guarantor may have at any time against the Borrower, the Administrative Agent, any other Secured Party or any other Person, whether in connection with
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the First Lien Credit Agreement, the other Loan Documents or any unrelated transaction; (viii) this Agreement having been determined (on whatsoever grounds) to be invalid, non-binding or unenforceable against any other Guarantor ab initio or at any time after the Closing Date or (ix) any other circumstance (including statute of limitations), any act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a defense to, or discharge of, the Borrower, any Guarantor or any other guarantor or surety as a matter of law or equity (in each case, other than the payment in full in cash of all the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made)). Each Guarantor expressly authorizes the applicable Secured Parties, to the extent permitted by the Security Agreement, to take and hold security for the payment and performance of the Guaranteed Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed Obligations all without affecting the obligations of any Guarantor hereunder. Anything contained in this Agreement to the contrary notwithstanding, the obligations of each Guarantor under this Agreement shall be limited to an aggregate amount equal to the largest amount that would not render its obligations under this Agreement subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code of the United States or any comparable provisions of any similar federal or state law.
(b) To the fullest extent permitted by applicable law and except for termination or release of a Guarantors obligations hereunder in accordance with the terms of Section 4.12 (but without prejudice to Section 2.04 ), each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Guarantor or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Guarantor, other than the payment in full in cash of all the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made). The Administrative Agent and the other Secured Parties may in accordance with the terms of the Security Documents, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with the Borrower or any other Guarantor or exercise any other right or remedy available to them against any Guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full in cash (excluding contingent obligations as to which no claim has been made). To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor, as the case may be, or any security. To the fullest extent permitted by applicable law, each Guarantor waives any and all suretyship defenses.
Section 2.04 Reinstatement . Notwithstanding anything to the contrary contained in this Agreement, each of the Guarantors agrees that (a) its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored by the Administrative
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Agent or any other Secured Party upon the bankruptcy or reorganization (or any analogous proceeding in any jurisdiction) of the Borrower or any other Guarantor or otherwise and (b) the provisions of this Section 2.04 shall survive the termination of this Agreement.
Section 2.05 Agreement To Pay; Subrogation . In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Guarantor to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Guaranteed Obligation. Upon payment by any Guarantor of any sums to the Administrative Agent as provided above, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article III .
Section 2.06 Information . Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrowers and each other Guarantors financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.
ARTICLE III
Indemnity, Subrogation and Subordination
Upon payment by any Guarantor of any Guaranteed Obligations, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior payment in full in cash of all the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made) and the termination of all Commitments to the Borrower under the First Lien Credit Agreement. If any amount shall be paid to the Borrower or any other Guarantor in violation of the foregoing restrictions on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower or any other Guarantor, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the First Lien Credit Agreement and the other Loan Documents. Subject to the foregoing, to the extent that any Guarantor shall, under this Agreement or the First Lien Credit Agreement as a joint and several obligor, repay any of the Guaranteed Obligations constituting Loans or other advances made to another Loan Party under the First Lien Credit Agreement (an Accommodation Payment ), then the Guarantor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Guarantors in an amount equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Guarantors
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Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Guarantors; provided that such rights of contribution and indemnification shall be subordinated to the prior payment in full, in cash, of all of the Guaranteed Obligations (excluding contingent obligations as to which no claim has been made). As of any date of determination, the Allocable Amount of each Guarantor shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Guarantor hereunder and under the First Lien Credit Agreement without (a) rendering such Guarantor insolvent within the meaning of Section 101 (32) of the Bankruptcy Code of the United States, Section 2 of the Uniform Fraudulent Transfer Act ( UFTA ) or Section 2 of the Uniform Fraudulent Conveyance Act ( UFCA ), (b) leaving such Guarantor with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code of the United States, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Guarantor unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code of the United States or Section 4 of the UFTA, or Section 5 of the UFCA.
ARTICLE IV
Miscellaneous
Section 4.01 Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.01 of the First Lien Credit Agreement. All communications and notice hereunder to a Guarantor other than Holdings shall be given in care of the Borrower.
Section 4.02 Waivers; Amendment . (a) No failure by any Secured Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 4.02 , and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.
(b) Subject to the Intercreditor Agreement, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 10.08 of the First Lien Credit Agreement.
Section 4.03 Administrative Agents Fees and Expenses; Indemnification . (a) Each Guarantor, jointly with the other Guarantors and severally, agrees to reimburse the Administrative Agent for its fees and expenses incurred hereunder to the extent provided in Section 10.05(1) of the First Lien Credit Agreement; provided that each reference therein to the Borrower shall be deemed to be a reference to each Guarantor.
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(b) Without limitation of the indemnification obligations under the other Loan Documents, but without duplication of amounts paid by the Borrower pursuant to Section 10.05 of the First Lien Credit Agreement, each Guarantor jointly and severally agrees to indemnify the Administrative Agent, the Collateral Agent, the Arrangers, each Lender and the other Indemnitees against, and hold each Indemnitee harmless from, any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (but limited, in the case of legal fees and expenses, to the Attorney Costs of one counsel to all Indemnitees taken as a whole and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interest of the such Indemnitees (which may be a single local counsel acting in multiple material jurisdictions), and solely in the case of an actual conflict of interest where the Indemnitee affected by such conflict of interest informs the Borrower in writing of such conflict of interest, one additional counsel in each relevant jurisdiction to each group of affected Indemnitees similarly situated taken as a whole) (a) the execution, delivery, enforcement, performance or administration of this Agreement or any other agreement, letter or instrument delivered in connection with the Transactions contemplated hereby or the consummation of the transactions contemplated hereby (including the reliance in good faith by any Indemnitee on any notice purportedly given by or on behalf of the Borrower), (b) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by any Guarantor, or any Environmental Liability arising out of the activities or operations of any Guarantor, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Guarantor Indemnified Liabilities ); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements resulted from (w) the gross negligence, bad faith, or willful misconduct of such Indemnitee or of any Related Party, (x) a material breach of any obligations under any Loan Document by such Indemnitee or of any Related Party as determined by a final, non-appealable judgment of a court of competent jurisdiction, (y) any dispute solely among Indemnitees or of any Related Party other than any claims against an Indemnitee in its capacity or in fulfilling its role as the Administrative Agent or an Arranger under the Facility and other than any claims arising out of any act or omission of the Borrower or any of its Affiliates or (z) any settlement entered into by any Indemnitee or of any Related Party of such Indemnitee in respect of any Guarantor Indemnified Liability, in each case, without each Guarantors (or the Borrowers, on behalf of each Guarantor) prior written consent (such consent not to be unreasonably withheld or delayed), but, if such settlement occurs with Guarantors (or the Borrowers on behalf of each Guarantor) written consent or if there is a final judgment for the plaintiff in any action or claim with respect to any of the foregoing, the Guarantor shall be liable for such settlement or for such final judgment. To the extent that the undertakings to indemnify and hold harmless set forth in this Section 4.03(b) may be unenforceable in whole or in part because they are violative of any applicable law or public policy, the Guarantors shall jointly with the other Guarantors and severally contribute the maximum portion that it is permitted to
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pay and satisfy under applicable law to the payment and satisfaction of all Guarantor Indemnified Liabilities incurred by the Indemnitees or any of them. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, except to the extent resulting from the willful misconduct, bad faith or gross negligence of such Indemnitee or any Related Party (as determined by a final and non-appealable judgment of a court of competent jurisdiction), nor shall any Indemnitee or any Guarantor have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date) (other than, in the case of any Guarantor, in respect of any such damages incurred or paid by an Indemnitee to a third party). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 4.03(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Guarantor, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. This Section 4.03(b) shall not apply to Taxes, Other Taxes, taxes covered by Section 2.12 of the First Lien Credit Agreement or Excluded Taxes, except it shall apply to any taxes (other than taxes imposed on or measured by net income (however denominated, and including branch profits and similar taxes) and franchise or similar taxes) that represent losses, claims, damages, etc. arising from a non-tax claim (including a value added tax or similar tax charged with respect to the supply of legal or other services).
(c) Any such amounts payable as provided hereunder shall be additional Guaranteed Obligations guaranteed hereby and secured by the Security Documents. The provisions of this Section 4.03 shall remain operative and in full force and effect regardless of the termination of this Agreement, any other Loan Document, any Specified Hedge Agreement or any Cash Management Services agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Guaranteed Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, any resignation of the Administrative Agent or the Collateral Agent or any document governing any of the Obligations arising under any Specified Hedge Agreements or any Cash Management Services, or any investigation made by or on behalf of the Administrative Agent or any other Secured Party. All amounts due under this Section 4.03 shall be payable within twenty (20) Business Days after written demand therefor.
Section 4.04 Successors and Assigns . Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Guarantor or any Secured Party that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. No Guarantor may assign any of its rights or obligations hereunder without the written consent of the Administrative Agent.
Section 4.05 Survival of Agreement . All covenants, agreements, indemnities, representations and warranties made by the Guarantors in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Secured Parties
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and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any Secured Party or on its behalf and notwithstanding that any Secured Party may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended under the First Lien Credit Agreement or any other Loan Document, and shall continue in full force and effect until this Agreement is terminated as provided in Section 4.12 hereof, or with respect to any individual Guarantor until such Guarantor is otherwise released from its obligations under this Agreement in accordance with the terms hereof.
Section 4.06 Counterparts; Effectiveness; Several Agreement . This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall become effective when it shall have been executed by the Guarantors and the Administrative Agent and thereafter shall be binding upon and inure to the benefit of each Guarantor, the Administrative Agent, the other Secured Parties and their respective permitted successors and assigns, subject to Section 4.04 hereof. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means (including in .pdf format via electronic mail) shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, restated, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder.
Section 4.07 Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 4.08 GOVERNING LAW, ETC . (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) THE GUARANTORS AND THE ADMINISTRATIVE AGENT EACH IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE
9 | Guaranty (First Lien) |
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT THE ADMINISTRATIVE AGENT AND THE OTHER SECURED PARTIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE OF ANY RIGHTS UNDER THIS AGREEMENT OR THE ENFORCEMENT OF ANY JUDGMENT.
(c) THE GUARANTORS AND THE ADMINISTRATIVE AGENT EACH IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
Section 4.09 WAIVER OF RIGHT TO TRIAL BY JURY . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 4.10 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 4.11 Obligations Absolute . All rights of the Administrative Agent and the other Secured Parties hereunder and all obligations of each Guarantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the First Lien Credit Agreement, any other Loan Document, any agreement with respect to any of the Guaranteed Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to any departure from the First Lien Credit Agreement, any other Loan Document, or any other agreement or instrument, (c) any release or amendment or waiver of or consent under or
10 | Guaranty (First Lien) |
departure from any guarantee guaranteeing all or any of the Guaranteed Obligations or (d) subject only to termination or release of a Guarantors obligations hereunder in accordance with the terms of Section 4.12 , but without prejudice to reinstatement rights under Section 2.04 , any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Guarantor in respect of the Guaranteed Obligations or this Agreement.
Section 4.12 Termination or Release . (a) This Agreement and the Guarantees made herein shall terminate with respect to all Guaranteed Obligations when (i) all Commitments have expired or been terminated and the Lenders have no further commitment to lend under the First Lien Credit Agreement and (ii) all principal and interest in respect of each Term Loan and all other Guaranteed Obligations (other than (A) contingent indemnification obligations with respect to then unasserted claims and (B) Guaranteed Obligations in respect of Obligations that may thereafter arise with respect to any Specified Hedge Agreement or any Cash Management Services agreement, in each case, not yet due and payable, unless the Administrative Agent has received written notice, at least two (2) Business Days prior to the proposed date of any such termination, stating that arrangements reasonably satisfactory to each applicable Qualified Counterparty or Cash Management Bank, as the case may be, in respect thereof have not been made) shall have been paid in full in cash, provided , however , that in connection with the termination of this Agreement, the Administrative Agent may require such indemnities as it shall reasonably deem necessary or appropriate to protect the Secured Parties against (x) loss on account of credits previously applied to the Guaranteed Obligations that may subsequently be reversed or revoked, and (y) any Obligations that may thereafter arise with respect to the Specified Hedge Agreements or Cash Management Obligations to the extent not provided for thereunder.
(b) A Guarantor that is a Restricted Subsidiary shall automatically be released in the circumstances set forth in Section 10.18 of the First Lien Credit Agreement.
(c) In connection with any termination or release pursuant to clauses (a) or (b) above, the Administrative Agent shall promptly execute and deliver to any Guarantor, at such Guarantors expense, all documents that such Guarantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 4.12 shall be without recourse to or warranty by the Administrative Agent.
(d) At any time that the respective Guarantor desires that the Administrative Agent take any of the actions described in immediately preceding clause (c), it shall, upon request of the Administrative Agent, deliver to the Administrative Agent an officers certificate certifying that the release of the respective Guarantor is permitted pursuant to clause (a) or (b) above. The Administrative Agent shall have no liability whatsoever to any Secured Party as a result of any release of any Guarantor by it as permitted (or which the Administrative Agent in good faith believes to be permitted) by this Section 4.12 .
Section 4.13 Additional Restricted Subsidiaries . To the extent required by Section 5.10 of the First Lien Credit Agreement, a Restricted Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein, and such Restricted Subsidiary shall execute and deliver to the Administrative Agent a Guaranty Supplement. Upon execution and delivery by the Administrative Agent and a Restricted
11 | Guaranty (First Lien) |
Subsidiary of a Guaranty Supplement, such Restricted Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement.
Section 4.14 Recourse; Limited Obligations . This Agreement is made with full recourse to each Guarantor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Guarantor contained herein, in the First Lien Credit Agreement and the other Loan Documents and otherwise in writing in connection herewith or therewith. It is the desire and intent of each Guarantor and each applicable Secured Party that this Agreement shall be enforced against each Guarantor to the fullest extent permissible under applicable law applied in each jurisdiction in which enforcement is sought.
Section 4.15 Intercreditor Agreement . The Guarantors and the Administrative Agent acknowledge that the exercise of certain of the Administrative Agents rights and remedies hereunder may be subject to, and restricted by, the provisions of the Intercreditor Agreement. Except as specified herein, nothing contained in the Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement, which, as among the Guarantors and the Administrative Agent shall remain in full force and effect.
Section 4.16 Keepwell
Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party and each Limited Guarantor, as the case may be, to honor all of its obligations under this Agreement or the Limited Recourse Guaranty of such Limited Guarantor in respect of Swap Obligations (provided, however, that any Qualified ECP Guarantor shall only be liable under this Section 4.16 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 4.16, or otherwise under this Agreement, as it relates to such other Loan Party or such Limited Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section 4.16 shall remain in full force and effect until the termination of this Agreement pursuant to its terms. Each Qualified ECP Guarantor intends that this Section 4.16 constitute, and this Section 4.16 shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each other Loan Party and each Limited Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
[Signature Pages Follow]
12 | Guaranty (First Lien) |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
GUARANTORS: |
BEACON HOLDING INC. |
By: |
|
|
Name: | ||
Title: |
Guaranty (First Lien) |
GUARANTORS: |
BJME OPERATING CORP., as Guarantor |
By: |
|
|
Name: | ||
Title: |
BJNH OPERATING CO., LLC, as Guarantor |
By: |
|
|
Name: | ||
Title: |
NATICK REALTY, INC., as Guarantor |
By: |
|
|
Name: | ||
Title: |
Guaranty (First Lien) |
ADMINISTRATIVE AGENT: |
NOMURA CORPORATE FUNDING |
AMERICAS, LLC, as Administrative Agent |
By: |
|
|
Name: | ||
Title: |
Guaranty (First Lien) |
SCHEDULE I TO GUARANTY
GUARANTORS
BEACON HOLDING INC.
BJME OPERATING CORP.
BJNH OPERATING CO., LLC
NATICK REALTY, INC.
Guaranty (First Lien) |
EXHIBIT I TO GUARANTY
FORM OF GUARANTY SUPPLEMENT
SUPPLEMENT NO. dated as of , 20 , to the Term Loan Guaranty Agreement dated as of February 3, 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the Guaranty), among BEACON HOLDING INC., a Delaware corporation ( Holdings ), the other Guarantors party thereto from time to time and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent for the Secured Parties.
A. Reference is made to the First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the First Lien Credit Agreement ), by, among others, the Borrower, Holdings, the Lenders party thereto from time to time, and NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent and Collateral Agent for the Lenders.
B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the First Lien Credit Agreement and the Guaranty, as applicable.
C. The Guarantors have entered into the Guaranty in order to induce the Lenders to make Term Loans to the Borrower. Section 4.13 of the Guaranty provides that additional Restricted Subsidiaries may become Guarantors under the Guaranty by execution and delivery of an instrument in the form of this Supplement. The undersigned Restricted Subsidiary (the New Subsidiary ) is executing this Supplement in accordance with the requirements of the First Lien Credit Agreement to become a Guarantor under the Guaranty as consideration for Term Loans previously made.
Accordingly, the Administrative Agent and the New Subsidiary agree as follows:
Section 1 . In accordance with Section 4.13 of the Guaranty, the New Subsidiary by its signature below becomes a Guarantor under the Guaranty with the same force and effect as if originally named therein as a Guarantor and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Guaranty applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by the Borrower with respect to the Guarantors under the First Lien Credit Agreement are true and correct in all material respects (except to the extent any such representations and warranty is qualified as to Material Adverse Effect, in which case such representation and warranty, to the extent qualified by a Material Adverse Effect, shall be true and correct in all respects) with respect to the New Subsidiary on and as of the date hereof, provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects (except to the extent any such representations and warranty is qualified as to Material Adverse Effect, in which case such representation and warranty, to the extent qualified by a Material Adverse Effect, shall be true and correct in all respects) as of such earlier date. Each reference to a Guarantor in the Guaranty shall be deemed to include the
I-1 | Guaranty (First Lien) |
Exhibit I
to
Guaranty
New Subsidiary as if originally named therein as a Guarantor. The Guaranty is hereby incorporated herein by reference.
Section 2 . The New Subsidiary represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by Title 11 of the United States Code, as now constituted or hereinafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law and by general principles of equity and principles of good faith and fair dealing.
Section 3 . This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Administrative Agent has executed a counterpart hereof. Delivery of an executed counterpart of a signature page of this Supplement by telecopy or other electronic imaging means (including in .pdf format via electronic mail) shall be effective as delivery of a manually executed counterpart of this Supplement.
Section 4 . Except as expressly supplemented hereby, the Guaranty shall remain in full force and effect.
Section 5 . (a) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT THE ADMINISTRATIVE AGENT AND THE OTHER SECURED PARTIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE
I-2 | Guaranty (First Lien) |
Exhibit I
to
Guaranty
OF ANY RIGHTS UNDER THIS SUPPLEMENT OR THE ENFORCEMENT OF ANY JUDGMENT.
(c) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SUPPLEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SUPPLEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 6 . If any provision of this Supplement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Supplement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 7 . All communications and notices hereunder shall be in writing and given as provided in Section 4.01 of the Guaranty.
Section 8 . The New Subsidiary agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, as provided in Section 4.03(a) of the Guaranty.
I-3 | Guaranty (First Lien) |
Exhibit I
to
Guaranty
IN WITNESS WHEREOF, the New Subsidiary and the Administrative Agent have duly executed this Supplement to the Guaranty as of the day and year first above written.
[NAME OF NEW SUBSIDIARY] |
By: |
|
|
Name: |
||
Title: |
NOMURA CORPORATE FUNDING AMERICAS, LLC, as Administrative Agent |
By: |
|
|
Name: |
||
Title: |
||
By: |
|
|
Name: |
||
Title: |
I-4 | Guaranty (First Lien) |
Execution Version
Schedule 1.01S
Specified Sale and Lease-Back Properties
Club# |
Owner |
Address/City/State/Zip Code |
County |
|||
31 | Natick Realty, Inc. |
40 Black Rock Turnpike Fairfield, CT 06825-5507 |
Fairfield | |||
52 | Natick Realty, Inc. |
Court at Oxford Valley 350 Commerce Blvd. Fairless Hills, PA 19030 |
Bucks | |||
57 | Natick Realty, Inc. |
550 Madison Avenue Reading, PA 19605 |
Berks | |||
61 | Natick Fifth Realty Corp. |
55 Music Fair Road Owings Mills, MD 21117 |
Baltimore | |||
67 | Natick NJ 1993 Realty Corp. |
1001 East Edgar Road Linden, NJ 07036 |
Union | |||
107 | BJs Wholesale Club, Inc. |
4150 NW Federal Highway Jensen Beach, FL 34957 |
Martin | |||
126 | BJs Wholesale Club, Inc. |
1155 Palm Bay Road NE Melbourne, FL 32904 |
Brevard | |||
149 | Natick NH Hooksett Realty Corp. |
400 Quality Drive Hooksett, NH 03106 |
Merrimack | |||
198 | Natick Realty, Inc. |
1320 Starling Drive Richmond, VA 23229 |
Henrico | |||
199 | BJs Wholesale Club, Inc. |
2577 S. Highway 27 Clermont, FL 34711 |
Lake | |||
303 | Natick Realty, Inc. |
756 State Highway 28 Oneonta, NY 13820 |
Otsego | |||
308 | Natick NJ Flemington Realty Corp. |
186 Highway 31 Flemington, NJ 08822 |
Hunterdon |
Schedule 2.01
Commitments
Lender |
Tranche B Term
Loan Commitment |
|||
Nomura Corporate Funding Americas, LLC |
$ | 1,925,000,000.00 |
Schedule 3.04
Governmental Approvals
None.
Schedule 3.05
Possession under Leases
None.
Schedule 3.06
Subsidiaries
Holder |
Issuer |
Type of
|
Jurisdiction of Organization / Formation |
# of
Shares Owned |
Total
Shares Outstanding |
% of
Interest Pledged |
Certificate
No. |
Par
Value |
||||||||
Beacon Holding Inc. | BJs Wholesale Club, Inc. | Corporation | Delaware | 10 | 10 | 100% | 1 | $0.01 | ||||||||
BJs Wholesale Club, Inc. | CWC Beverages Corp. | Corporation | Connecticut | 1 | 1 | 100% | 3 | n/a | ||||||||
BJs Wholesale Club, Inc. | JWC Beverages Corp. | Corporation | New Jersey | 1 | 1 | 100% | 3 | n/a | ||||||||
BJs Wholesale Club, Inc. | Mormax Beverages Corp. | Corporation | Delaware | 100 | 100 | 100% | 2 | $0.01 | ||||||||
BJs Wholesale Club, Inc. | Mormax Corporation | Corporation | Massachusetts | 5,000 | 5,000 | 100% | 4 | $1.00 | ||||||||
BJs Wholesale Club, Inc. | Natick GA Beverage Corp. | Corporation | Georgia | 100 | 100 | 100% | 1 | $1.00 | ||||||||
BJs Wholesale Club, Inc. | YWC Beverages Corp. | Corporation | New York | 1 | 1 | 100% | 3 | n/a | ||||||||
BJs Wholesale Club, Inc. | BJME Operating Corp. | Corporation | Massachusetts | 1,000 | 1,000 | 100% | 4 | $1.00 |
Schedule 3.06-1
Holder |
Issuer |
Type of
|
Jurisdiction of
|
# of
Shares Owned |
Total
Shares Outstanding |
% of
Interest Pledged |
Certificate No. |
Par Value |
||||||||
BJME Operating Corp. | Natick Realty, Inc. | Corporation | Maryland | 105,000 | 105,000 1 | 100% | 5 | $0.01 per share | ||||||||
BJME Operating Corp. | BJNH Operating Co., LLC | Limited Liability Company | Delaware | n/a | n/a | 100% | Uncertificated | n/a | ||||||||
Natick Realty, Inc. | Natick Fifth Realty Corp. | Corporation | Maryland | 1,000 | 1,000 | 100% | 2 | $1.00 per share | ||||||||
Natick Realty, Inc. | Natick NH Hooksett Realty Corp. | Corporation | New Hampshire | 100 | 100 | 100% | 1 | $1.00 per share | ||||||||
Natick Realty, Inc. | Natick NJ 1993 Realty Corp. | Corporation | New Jersey | 1,000 | 1,000 | 100% | 2 | $1.00 per share | ||||||||
Natick Realty, Inc. | Natick NJ Flemington Realty Corp. | Corporation | New Jersey | 1,000 | 1,000 | 100% | 2 | $1.00 per share | ||||||||
Natick Realty, Inc. | Natick NJ Manahawkin Realty Corp. | Corporation | New Jersey | 100 | 100 | 100% | 2 | $1.00 per share | ||||||||
Natick Realty, Inc. | Natick NJ Realty Corp. | Corporation | New Jersey | 1,000 | 1,000 | 100% | 2 | $1.00 per share |
1 |
Approximately 120 shares of Series A Non-Voting Preferred Stock of Natick Realty, Inc. are held by various current and former employees of BJs Wholesale Club, Inc. or their estates. BJME Operating Corp. holds all of the outstanding Common Stock of Natick Realty, Inc. |
Schedule 3.06-2
Schedule 3.11
Taxes
None.
Schedule 3.13
Environmental Matters
None.
Schedule 3.15(1)
Owned Material Real Property
Club # |
Owner |
Address/City/State/Zip Code |
County |
|||
31 | Natick Realty, Inc. |
40 Black Rock Turnpike Fairfield, CT 06825-5507 |
Fairfield | |||
52 | Natick Realty, Inc. |
Court at Oxford Valley 350 Commerce Blvd. Fairless Hills, PA 19030 |
Bucks | |||
57 | Natick Realty, Inc. |
550 Madison Avenue Reading, PA 19605 |
Berks | |||
61 | Natick Fifth Realty Corp. |
55 Music Fair Road Owings Mills, MD 21117 |
Baltimore | |||
67 | Natick NJ 1993 Realty Corp. |
1001 East Edgar Road Linden, NJ 07036 |
Union | |||
107 | BJs Wholesale Club, Inc. |
4150 NW Federal Highway Jensen Beach, FL 34957 |
Martin | |||
126 | BJs Wholesale Club, Inc. |
1155 Palm Bay Road NE Melbourne, FL 32904 |
Brevard | |||
149 | Natick NH Hooksett Realty Corp. |
400 Quality Drive Hooksett, NH 03106 |
Merrimack | |||
198 | Natick Realty, Inc. |
1320 Starling Drive Richmond, VA 23229 |
Henrico | |||
199 | BJs Wholesale Club, Inc. |
2577 S. Highway 27 Clermont, FL 34711 |
Lake | |||
303 | Natick Realty, Inc. |
756 State Highway 28 Oneonta, NY 13820 |
Otsego | |||
308 | Natick NJ Flemington Realty Corp. |
186 Highway 31 Flemington, NJ 08822 |
Hunterdon |
Schedule 3.15(2)
Leased Material Real Property
Club # |
Location |
Lease Agreement |
||
1 | 278 Middlesex Avenue, Medford, MA 02155 | Lease dated April 12, 1984 between Pepperlane Realty Trust and BJs Wholesale Club, Inc. | ||
7 |
1440 Central Ave. Albany, NY 12205 |
Lease dated May 23, 1985 between Colonie Associates and BJs Wholesale Club, Inc. | ||
8 |
300 Route 17 E. Rutherford, NJ 07073 |
Lease dated August 26, 1985 between Management Investment Company and BJs Wholesale Club, Inc. | ||
10 |
6924 Frank Ave., NW North Canton, OH 44720 |
Lease dated June 4, 1998, between BJs Portage Limited and BJs Wholesale Club, Inc. | ||
11 |
4000 Nesconset Highway East Setauket, NY 11733 |
Lease dated June 23, 1998 between AVR Realty Company and BJs Wholesale Club, Inc. | ||
13 |
131 East Kings Highway Maple Shade, NJ 08052 |
Lease dated October 17, 1985 between Man-Tex Associates and BJs Wholesale Club, Inc. | ||
15 |
124 Sunset Blvd. New Castle, DE 19720 |
Lease dated 4/30/1987 between 326 Associations, LP, (LL) and BJs Wholesale Club, Inc., as successor to Mormax Corporation. | ||
17 |
70 Cluff Road Salem, NH 03079 |
Lease dated 6/26/1986 between Cluff Road Associates and BJs Wholesale Club, Inc., as successor to Mormax Corporation. |
Schedule 3.15(2)-1
Club # |
Location |
Lease Agreement |
||
18 |
622 Washington Street Weymouth, MA 02188 |
Lease dated 8/6/1986 between Barry H. Dimson and Joshua W. Yatzen, Trustees of Weymouth S.C. Associates Realty Trust, as Landlord, and BJs Wholesale Club, Inc., as successor to Mormax Corporation. | ||
19 |
110 Centerville Road Lancaster, PA 17603 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
20 |
650 Memorial Drive Chicopee, MA 01013 |
Lease dated November 19, 1986 between Chicopee Corporation, Inc. and Waban, Inc. 2 | ||
21 |
1785 Airport Road South Allentown (Hanover Township), PA 18109 |
Lease dated November 22, 1991 between OpCo. Inc. and Waban Inc. | ||
22 |
2044 Red Lion Road Philadelphia, PA 19115 |
Lease dated June 23, 2015 between Baker Red Lion LLC and Angel Red Lion LLC and BJs Wholesale Club, Inc. | ||
23 |
460 State Road N. Dartmouth, MA 02747 |
Lease dated 9/21/12 between Ladder Capital Finance LLC and BJs Wholesale Club, Inc. | ||
25 |
3805 Hartzdale Drive Camp Hill, PA 17011 |
Lease dated January 19, 1990 between Cedar Run Development and Waban Inc. | ||
26 |
1000 U.S. Highway One Edison, NJ 08817 |
Lease dated April 19, 1989 between Edison Woods, Inc. and BJs Wholesale Club, Inc. as successor to Mormax Corporation. | ||
27 |
1904 Route 35 Oakhurst, NJ 07755 |
Lease dated November 22, 1989 between Highway 35 Associates and Waban Inc. | ||
29 |
513-515 Warren Avenue Portland, ME 04103 |
Lease dated August 23, 1990 between BJ/Portland LP and Waban Inc. |
2 |
Please note that all leases to which Waban Inc. was a party were assigned to BJs Wholesale Club, Inc. in 1997. |
Schedule 3.15(2)-2
Club # |
Location |
Lease Agreement |
||
30 |
6 Hutchinson Drive Danvers, MA 01923 |
Lease dated November 17, 1989 between Hutchison Realty Trust II and Waban Inc. | ||
32 |
500 State Road 7 (US 441) Royal Palm Beach, FL 33411 |
Lease dated September 4, 1998, between Fairgrounds Associates, LTD and BJs Wholesale Club, Inc. | ||
33 |
13053 Fair Lakes Shopping Center Fairfax, VA 22033 |
Lease dated 9/30/2011 between National Retail Properties, LP and BJs Wholesale Club, Inc. | ||
34 |
901 Technology Center Drive Stoughton, MA 02072 |
Lease dated March 18, 1991 between the 901 TCD Nominee Trust and Waban Inc. | ||
35 |
4408 Milestrip Road Hamburg, NY 14219 |
Lease dated May 14, 1990 between Benderson 85-I Trust and Waban Inc. | ||
36 |
3712 Virginia Beach Blvd. Virginia Beach, VA 23452 |
Lease dated May 11, 1990 between Buffalo Norfolk Associates and Waban Inc. | ||
37 |
344 Reidville Drive Waterbury, CT 06705 |
Lease dated January 30, 2015 between Reidville Drive, LLC and BJs Wholesale Club, Inc. | ||
38 |
777 Washington Street (Route 20) Auburn, MA 01501 |
Lease dated August 20, 1992 between Auburn Commercial Associates LP and Waban Inc. | ||
39 |
8 Sexton Avenue Nashua, NH 03060 |
Lease dated 9/30/2011 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
40 |
4201 Wholesale Club Drive Baltimore, MD 21236 |
Lease dated April 12, 1991 between Belair Road White Marsh Joint Venture and Waban Inc. | ||
41 | 14123 Noblewood Plaza Woodbridge, VA 22193 | Lease dated 9/30/2011 between Realty Income Corporation and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-3
Club # |
Location |
Lease Agreement |
||
44 |
396-420 Luis Munoz Marin Blvd. Jersey City, NJ 07302 |
Lease dated July 15, 1993 between G&S Investors/Jersey City and Waban Inc. | ||
45 |
Two Chevy Drive East Syracuse, NY 13057 |
Lease dated October 30, 1992 between American Real Estate Holdings Limited Partnership and Waban Inc. | ||
46 |
101 South Van Dorn St. (Rte. 401) Alexandria, VA 22304 |
Lease dated September 17, 1991 between Carl M. Freeman Associates, Inc. and Waban Inc. | ||
47 |
26 Whittier Street Framingham, MA 01701 |
Lease dated October 16, 1991 between Laborers Pension/Framingham Investment Corporation and Waban Inc. | ||
48 |
One Howard Boulevard Ledgewood, NJ 07852 |
Lease dated 9/30/2011 between National Retail Properties, LP and BJs Wholesale Club, Inc. | ||
49 |
1000 Old Nichols Road Islandia, NY 11788 |
Lease dated December 31, 1991 between John Joseph Garza and Darcy Lynn Garza and Natick NY Realty Corp. 3 | ||
50 |
85 Cedar Street Stoneham, MA 02180 |
Lease dated November 8, 1991 between IYH Corporation and Waban Inc. | ||
51 |
7007 SW 117th Avenue Kendall, FL 33183 |
Lease dated December 6, 1991 between Muben-Lamar, LP and Waban Inc. | ||
53 |
1404 Route 9 Wappinger Falls, NY 12590 |
Lease dated December 12, 1991 between Alpine Company of Poughkeepsie and Waban Inc. | ||
54 |
13700 Pines Boulevard Pembroke Pines, FL 33027 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. |
3 |
Natick NY Realty Corp. was merged into Natick Realty, Inc. in 2013. |
Schedule 3.15(2)-4
Club # |
Location |
Lease Agreement |
||
55 |
287 Washington Street S. Attleboro, MA 02703 |
Lease dated 9/30/2011 between National Retail Properties, LP and BJs Wholesale Club, Inc. | ||
56 |
1260 Woodland Avenue Springfield, PA 19064 |
Lease dated March 26, 1992 between Commonwealth Real Estate Investors and Waban Inc. | ||
58 |
115 Erdman Way Leominster, MA 01453 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
59 |
8139 Governor Ritchie Highway Pasadena, MD 21122 |
Lease dated April 22, 1992 between Aetna Life Insurance Company and Waban Inc. | ||
60 |
9011 Snowden River Parkway Columbia, MD 21045 |
Lease dated 9/30/2011 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
62 |
1801 Woodbury Avenue Portsmouth, NH 03801 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
63 |
2250 York Crossing Drive York, PA 17408 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
64 |
400 River Road Utica, NY 13502 |
Lease dated July 20, 2001 between the Senpike Mall Company and BJs Wholesale Club, Inc. | ||
66 |
3067 Route 50 Saratoga Springs, NY 12866 |
Lease dated 9/21/12 between Ladder Capital Finance LLC and BJs Wholesale Club, Inc. | ||
68 |
4145 Route 31 Clay, NY 13041 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
69 |
3985 Plank Road Fredericksburg, VA 22407 |
Lease dated October 10, 1994 between FBJ Associates LP and Waban Inc. |
Schedule 3.15(2)-5
Club # |
Location |
Lease Agreement |
||
70 |
2301 Taylor Road Chesapeake, VA 23321 |
Lease dated August 26, 1993 between Crossroads North and Waban Inc. | ||
71 |
413 Constant Friendship Blvd Abingdon, MD 21009 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
72 |
1000 St. Nicholas Drive Waldorf, MD 20603 |
Lease dated 9/21/12 between Ladder Capital Finance LLC and BJs Wholesale Club, Inc. | ||
73 |
1601 US Route 22 West Watchung, NJ 07069 |
Lease dated December 31, 1992 between Watchung Holding Corporation and Waban Inc. | ||
74 |
200 Wrangleboro Consumer Square Mays Landing, NJ 08330 |
Lease dated March 30, 1993 between Benderson Wainberg Associates LP, Corporation and Waban Inc. | ||
75 |
950 Ridge Road Webster, NY 14580 |
Lease dated February 5, 1993 between Hard Road Associates and Waban Inc. | ||
76 |
3303 Crompond Road Yorktown Heights, NY 10598 |
Lease dated 9/30/2011 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
77 |
1050 Palisades Center Drive West Nyack, NY 10994 |
Lease dated May 24, 1996 between EklecCo and Waban Inc. | ||
78 |
507 New Park Avenue West Hartford, CT 06110 |
Lease dated 9/30/2011 between National Retail Properties, LP and BJs Wholesale Club, Inc. | ||
79 |
70 Campbell Road Rotterdam, NY 12306 |
Lease dated June 9, 1994 between BTL Properties and Waban Inc. | ||
84 |
125 Cross Road Waterford, CT 06385 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-6
Club # |
Location |
Lease Agreement |
||
85 |
1910 Deptford Center Road Deptford, NJ 08096 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
86 |
1008 East Lancaster Avenue Downingtown, PA 19335 |
Lease dated May 30, 1995 between Brandywine Square Associates and Waban Inc. | ||
91 |
10425 Martin Road Miami, FL 33157 |
Lease dated October 31, 1995 between CRC Associates, Ltd. and Waban Inc. | ||
92 |
300 Alan Wood Road Conshohocken, PA 19428 |
Lease dated 9/30/2011 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
93 |
555 Universal Drive North Haven, CT 06473 |
Sublease dated February 28, 1997 between The Price Company and Waban Inc. | ||
94 |
110 Route 23 North Riverdale, NJ 07457 |
Lease dated January 29, 1997 between Heller-Riverdale, L.L.C. and Waban Inc. | ||
96 |
36595 Euclid Avenue Willoughby, OH 44094 |
Lease dated April 3, 1997 between First Interstate Willoughby and Waban Inc. | ||
97 |
137-05 20th Avenue College Point, NY 11356 |
Sub-lease dated May 30, 1997 between Whitestone Development Partners and Waban Inc. | ||
100 |
941 Route 37 West Toms River, NJ 08755 |
Lease dated September 30, 1997 between 909 Rt. 37 West Associates, L.L.C. and BJs Wholesale Club, Inc. | ||
101 |
688 Providence Highway Dedham, MA 02026 |
Lease dated April 16, 1998 between Pearl Realty Associates, LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-7
Club # |
Location |
Lease Agreement |
||
102 |
1677 Home Avenue Akron, OH 44310 |
Lease dated November 18, 1997, between Plaza Chapel Hill Akron Co., and BJs Wholesale Club, Inc. | ||
105 |
100 Corporate Drive Franklin, MA 02038 |
Lease, dated March 19, 1998 between NDNE Corporate Drive LLC, and BJs Wholesale Club, Inc. | ||
106 |
5901 Hillsboro Boulevard Parkland, FL 33067 |
Lease dated March 17, 1998 between Parcland Associates, LTD., and BJs Wholesale Club, Inc. | ||
108 |
12200 Atlantic Boulevard Jacksonville, FL 32225 |
Lease dated February 10, 1999 between Property Management Support Inc. and BJs Wholesale Club, Inc. | ||
109 |
4000 Oakwood Boulevard Hollywood, FL 33020 |
Lease dated 4/28/1999 between Oakwood Plaza Limited Partnership and BJs Wholesale Club, Inc. | ||
110 |
2370 Walnut Street Cary, NC 27518 |
Lease dated February 11, 1999 between Caryvest, LLC, and BJs Wholesale Club, Inc. | ||
111 |
8005 NW 95th Street Hialeah Gardens, FL 33016 |
Lease dated 9/30/2011 between National Retail Properties, LP and BJs Wholesale Club, Inc. | ||
112 |
6000 Brush Hollow Road Westbury, NY 11590 |
Lease dated May 21, 1999 between Lerner Sibling Partnership and Briar Ridge Realty LLC and BJs Wholesale Club, Inc. | ||
113 |
105 Shops at 5 Way Plymouth, MA 02360 |
Lease dated May 3, 2004 between Plymouth Exit 5 LLC, and BJs Wholesale Club, Inc. | ||
114 |
11715 Carolina Place Parkway Pineville, NC 28134 |
Lease dated May 7, 1999, between Pineville BJs, LLC and BJs Wholesale Club, Inc. | ||
115 |
38292 Colorado Avenue Avon, OH 44011 |
Lease dated May 13, 1999, between First Interstate 611, Ltd., and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-8
Club # |
Location |
Lease Agreement |
||
116 |
50 Eastview Mall Drive Victor, NY 14564 |
Lease dated May 27, 1999 between Starwood Ceruzzi Victor LLC., and BJs Wholesale Club, Inc. | ||
117 |
S30 Route 17 Paramus, NJ 07652 |
Lease dated June 22, 1999 between Burroughs, L.P.M. and BJs Wholesale Club, Inc. | ||
118 |
141 Gallery Center Drive Mooresville, NC 28117 |
Lease dated 9/21/12 between Ladder Capital Finance LLC and BJs Wholesale Club, Inc. | ||
119 |
790 Centre of New England Boulevard Coventry, RI 02816 |
Lease dated June 16, 1999 between Commerce Park Associates 7 LLC and BJs Wholesale Club, Inc. | ||
120 |
415 East Merritt Avenue Merritt Island, FL 32953 |
Lease dated December 7, 1999 between Pamagrant Associates Inc. and BJs Wholesale Club, Inc. | ||
122 |
4365 Richmond Road Warrensville Heights, OH 44122 |
Lease dated January 14, 2000, between Warrensville Heights Properties, Ltd. and BJs Wholesale Club, Inc. | ||
123 |
8811 Brier Creek Parkway Raleigh, NC 27617 |
Lease dated March 24, 2000 between Brier Creek Commons LP and BJs Wholesale Club, Inc. | ||
124 |
6944 West 130th Street Middleburg Heights, OH 44130 |
Lease dated March 7, 2000 between Southland Stores Co. and BJs Wholesale Club, Inc. | ||
125 |
560 Blanding Boulevard Orange Park, FL 32073 |
Lease dated May 5, 2000, between Blanding Crossings Associates, Ltd. and BJs Wholesale Club, Inc. | ||
127 |
50 Daniel Street Farmingdale, NY 11735 |
Lease dated May 17 2000, between Daniel Land Company, LLC and BJs Wholesale Club, Inc. | ||
128 |
8085 Cooper Creek Boulevard University Park, FL 34201 |
Lease dated July 18, 2000 among RB-3 Associates, Randall Benderson 1993-1 Trust, WR-I Associated, Ltd. and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-9
Club # |
Location |
Lease Agreement |
||
129 |
1540 W. Boynton Beach Blvd. Boynton Beach, FL 33436 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
130 |
4697 Millenia Plaza Way. D112 Orlando, FL 32839 |
Lease dated October 2, 2000 between Millenia Plaza Associates I LP and BJs Wholesale Club, Inc. | ||
131 |
820 Market Street Westminster, MD 21157 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
132 |
16520 Ball Park Road Bowie, MD 20716 |
Lease dated November 15, 2000 between Starwood Ceruzzi Bowie LLC and BJs Wholesale Club, Inc. | ||
133 |
4270 W. State Road 46 Sanford, FL 32771 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
134 |
7905 Lyles Lane NW Concord, NC 28027 |
Lease dated December 14, 2000 between Concord Mills Residual III LP and BJs Wholesale Club, Inc. | ||
135 |
12190 Lake Underhill Road Orlando, FL 32801 |
Lease, dated December 15, 2000 between PTC Land Holdings, LLC and BJs Wholesale Club, Inc. | ||
136 |
100 Mill Road Freeport, NY 11520 |
Lease dated 9/30/2011 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
138 |
339 Gateway Drive Brooklyn, NY 11239 |
Lease dated February 9, 2001 between Gateway Center Properties, LLC and BJs Wholesale Club, Inc. | ||
139 |
7260 Bell Creek Road Mechanicsville, VA 23111 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
141 |
900 Marketplace Blvd. Hamilton, NJ 08650 |
Lease dated 9/30/2011 between National Retail Properties, LP and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-10
Club # |
Location |
Lease Agreement |
||
142 |
5183 Transit Road Williamsville, NY 14221 |
Lease dated June 26, 2001 among Benderson 1985-1 Trust and Transit-Eastgate Associates, LLC and BJs Wholesale Club, Inc. | ||
143 |
66-26 Metropolitan Ave. Middle Village, NY 11379 |
Lease dated June 1, 2001, between Middle Village Associates LLC and BJs Wholesale Club, Inc. | ||
144 |
1725 Market Place Boulevard Cumming, GA 30041 |
Lease dated July 31, 2001 between Sembler Family Partnership #22, Ltd. and BJs Wholesale Club, Inc. | ||
146 |
105 Long Drive Woodstock, GA 30189 |
Lease dated August 17, 2001 between Sembler Family Partnership #22, Ltd. and BJs Wholesale Club, Inc. | ||
147 |
331 Newnan Crossing Bypass Newnan, GA 30265 |
Lease dated September 6, 2001 between Fourth Quarter Properties XXXVI and BJs Wholesale Club, Inc. | ||
148 |
232 Larkin Drive Monroe, NY 10019 |
Lease dated October 10, 2001 between FBG Shop Ctr. LLC and BJs Wholesale Club, Inc. | ||
150 |
1800 Dogwood Drive, S.E. Conyers, GA 30013 |
Lease dated October 5, 2001 between The Rosen Group, Inc. and BJs Wholesale Club, Inc. | ||
151 |
255 Shenstone Boulevard Garner, NC 27529 |
Lease dated October 25, 2001 between Garner Retail, LLC and BJs Wholesale Club, Inc. | ||
152 |
3585 North Commerce Dr. East Point, GA 30344 |
Lease dated May 10, 2002 between NAP Camp Creek Marketplace LLC and BJs Wholesale Club, Inc. | ||
153 |
152 Route 73 Voorhees, NJ 08043 |
Lease dated July 30, 2002 between Renewal Economic Advisors, LLC and BJs Wholesale Club, Inc. | ||
154 |
1100 W. Osceola Parkway Kissimmee, FL 34741 |
Lease dated August 8, 2002 between D&J Land Holdings, LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-11
Club # |
Location |
Lease Agreement |
||
156 |
3849 S. Delsea Drive Suite 2500 Vineland, NJ 08360 |
Lease dated 9/21/12 between Ladder Capital Finance LLC and BJs Wholesale Club, Inc. | ||
159 |
2085 Bay Street Taunton, MA 02780 |
Lease dated April 18, 2003 between Koffler/GID Taunton, LLC and BJs Wholesale Club, Inc. | ||
160 |
3635 Hempstead Turnpike Levittown, NY 11756 |
Leased dated April 30, 2003 between Nassau Mall Plaza Associates and BJs Wholesale Club, Inc. | ||
162 |
2300 A Rear Oregon Ave., Quartermaster Plaza, Philadelphia, PA 19145 |
Lease dated June 30, 2003 among FC Quartermaster Associates, L.P., F.C. Quartermaster Associates II, L.P. and FC Quartermaster Associates III, L.P. and BJs Wholesale Club, Inc. | ||
165 |
125 Green Acres Road Valley Stream, NY 11581 |
Lease dated January 23, 2004, between Green Acres Mall, LLC and BJs Wholesale Club, Inc. | ||
167 |
200 Easton Road Warrington, PA 18976 |
Lease dated April 5, 2004 between Easton Road Retail, LP. and BJs Wholesale Club, Inc. | ||
168 |
400 Jay Scutti Boulevard Rochester, NY 14623 |
Lease dated August 20, 2004 between K&R Henrietta, LLC and BJs Wholesale Club, Inc. | ||
169 |
1929 Pine Island Road, N.E. Cape Coral, FL 33909 |
Lease dated September 1, 2004 between NAP Pine Island LLC and BJs Wholesale Club, Inc. | ||
170 |
650 SE 8th Street Homestead, FL 33034 |
Lease dated December 7, 2004 between HWC Associates, LLC and BJs Wholesale Club, Inc. | ||
171 |
8046 Phillips Highway Jacksonville, FL 32256 |
Lease dated January 13, 2005 between Property Management Support, Inc. and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-12
Club # |
Location |
Lease Agreement |
||
172 |
1007 Highway Route 9N Old Bridge, NJ 08859 |
Lease dated August 29, 1998 between Old Bridge Associates and BJs Wholesale Club, Inc. (as assignee of The Home Depot, Inc.) | ||
173 |
1046 North Colony Road, Wallingford, CT 06492 |
Lease dated March 24, 2005 between L&L Wallingford, LLC and BJs Wholesale Club, Inc. | ||
174 |
17250 NW 57th Avenue Hialeah, FL 33015 |
Lease dated May 13, 2005 between GKK-Red Road, LTD and BJs Wholesale Club, Inc. | ||
175 |
5 Ward Street Revere, MA 02151 |
Ground lease dated November 10, 2006 between OMLC LLC and BJs Wholesale Club, Inc. | ||
176 |
610 Exterior Street Bronx , NY 10451 |
Lease dated June 26, 2006 between BTM Development Partners, LLC and BJs Wholesale Club, Inc. | ||
177 |
6301 Triangle Plantation Drive Raleigh, NC 27616 |
Lease dated May 26, 2005 between Plantation Point Development, LLC and BJs Wholesale Club, Inc. | ||
178 |
100 Pencader Plaza Newark, DE 19713 |
Lease dated June 16, 2005 between Shopping Center Investment, LLC and BJs Wholesale Club, Inc. | ||
179 |
16200 SW 88th Street Miami, FL 33196 |
Lease dated February 24, 2005 between WKC Associates, LLC and BJs Wholesale Club, Inc. | ||
180 |
5820 E. Virginia Beach Blvd. Norfolk, VA 23502 |
Sublease dated October 3, 2005 between HBR Properties Norfolk, LLC and BJs Wholesale Club, Inc. | ||
181 |
5100 NW 9th Avenue Ft. Lauderdale, FL 33309 |
Lease dated October 4, 2005 between The Rosen Group, Inc. and BJs Wholesale Club, Inc. | ||
183 |
6290 Commerce Palms Blvd. New Tampa, FL 33647 |
Lease dated November 23, 2005 between Tampa Palms Shopping Plaza, LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-13
Club # |
Location |
Lease Agreement |
||
184 |
1046 Tolland Turnpike Manchester, CT 06042 |
Lease dated December 5, 2005 between Hayes-Kaufman Partnership and BJs Wholesale Club, Inc. | ||
185 |
300 Bellwood Drive Greece, NY 14606 |
Lease dated April 12, 2006 between 390 Canal Ponds, LLC and BJs Wholesale Club, Inc. | ||
186 |
2000 Power Plant Parkway Hampton, VA 23666 |
Lease dated March 24, 2006 between Hampton Roads Associates, LLC and BJs Wholesale Club, Inc. | ||
188 |
7651 W. Waters Avenue Tampa, FL 33615 |
Lease dated May 9, 2006 between Waters Ventures, Ltd. and BJs Wholesale Club, Inc. | ||
189 |
25 Shelley Road Haverhill, MA 01835 |
Lease dated May 16, 2006 between Coastal Partners, LLC and BJs Wholesale Club, Inc. | ||
190 |
2100 88th Street North Bergen, NJ 07047- 4721 |
Lease dated June 21, 2006 between Vornado North Bergen Tonelle Plaza, LLC and BJs Wholesale Club, Inc. | ||
191 |
9372 Ben C Pratt Six Mile Cypress Parkway Fort Myers, FL 33966 |
Lease dated June 26, 2006 between Walden Avenue Blend All Hotel Development, Inc. and BJs Wholesale Club, Inc. | ||
192 |
321 Martin Truex Jr. Boulevard Manahawkin, NJ 08050 |
Ground lease dated October 20, 2006 between SP 72 Limited Liability Company and BJs Wholesale Club, Inc. | ||
193 |
955 Ferry Boulevard Stratford, CT 06614 |
Lease dated February 7, 2007 between UB Dockside, LLC and BJs Wholesale Club, Inc. | ||
195 |
1752 Shore Parkway Brooklyn, NY 11214 |
Lease dated August 10, 2007 between Thor Shore Parkway Developers, LLC and BJs Wholesale Club, Inc. | ||
197 |
26676 Centerview Drive Millsboro, DE 19966 |
Lease dated January 14, 2008 between Millsboro Towne Center, LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-14
Club # |
Location |
Lease Agreement |
||
200 |
200-C Mill Road Oaks, PA 19456 |
Lease dated August 22, 2008 between 422MP5 LLC and BJs Wholesale Club, Inc. | ||
201 |
820-828 Pelham Parkway Pelham Manor, NY 10803 |
Sublease dated September 12, 2008 between P/A-Acadia Pelham Manor, LLC and BJs Wholesale Club, Inc. | ||
203 |
75 Spring Street Southington, CT 06489 |
Lease dated October 27, 2008 between Twinco Corp. and BJs Wholesale Club, Inc. | ||
204 |
8719 Avenue D Brooklyn (Canarsie), NY 11236 |
Lease dated March 12, 2009 between Canarsie Plaza LLC and BJs Wholesale Club, Inc. | ||
205 |
66 Seyon Street Waltham, MA 02453 |
Lease dated April 14, 2009 between 20 Seyon Street LLC and BJs Wholesale Club, Inc. | ||
206 |
131-07 40th Road - Suite A100 Flushing, NY 11354 |
Amended and Restated Lease, dated March 27, 2009 between Flushing Town Center III, L.P. and BJs Wholesale Club, Inc. | ||
207 |
1781 Ritchie Station Court (Landover) Capitol Heights, MD 20743 |
Lease dated February 23, 2009 between Ritchie Hill, LLC and BJs Wholesale Club, Inc. | ||
208 |
200 Stonehill Drive Johnston, RI 02919 |
Lease dated June 24, 2009 between Stonehill Marketplace, LLC and BJs Wholesale Club, Inc. | ||
209 |
One Highland Commons West Hudson, MA 01749 |
Lease dated January 7, 2010 between Highland Commons Assoc., LLC and BJs Wholesale Club, Inc. | ||
210 |
2451 U.S. Highway 1 South North Brunswick, NJ 08902 |
Lease dated March 29, 2010 between Commerce Center NBI, LLC and BJs Wholesale Club, Inc. | ||
211 |
6102 Shops Way Northborough, MA 01532 |
Lease dated May 24, 2010 between Brendon Properties Two, LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-15
Club # |
Location |
Lease Agreement |
||
212 |
711 Stewart Ave.
Garden City, NY 11530 |
Lease dated October 26, 2010 between AG Metropolitan, 711 Stewart Avenue, L.L.C. and BJs Wholesale Club, Inc. | ||
213 |
3056 Sheridan Dr.
Amherst, NY 14226 |
Lease dated February 1, 2011 between Amherst II VF LLC and BJs Wholesale Club, Inc. | ||
214 |
106 Federal Rd.
Brookfield, CT 06804 |
Lease dated April 15, 2011 between S & A Brookfield, LLC and BJs Wholesale Club, Inc. | ||
215 |
5200 Red Tip Rd.
Fayetteville, NC 28314 |
Ground lease dated November 20, 2011 between Carolyn R. Armstrong and George H. Armstrong and BJs Wholesale Club, Inc. | ||
216 |
175 Highland Ave.
Seekonk, MA 02771 |
Lease dated January 24, 2011 between Seekonk Shopping Center Equities LLC and BJs Wholesale Club, Inc. | ||
218 |
Main Avenue
Norwalk, CT |
Lease dated January 9, 2013 between 272-280 Main Ave, LLC and BJs Wholesale Club, Inc. | ||
301 |
6100 St. Lawrence Center
Massena, NY 13662 |
Lease dated July 7, 1994 between St. Lawrence Plaza Associates and Waban Inc. | ||
302 |
1899 Cinema Drive
Olean, NY 14760 |
Lease dated August 30, 1994 between RB-3 Associates and Stephen B. Goodman and Waban Inc. | ||
306 |
173 East Main Road
Middletown, RI 02842 |
Lease dated May 13, 1998 between L&J, LLC and BJs Wholesale Club, Inc. | ||
307 |
42 Colrain Road
Greenfield, MA 01301 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
309 |
119 Laconia Road
Tilton, NH 03276 |
Lease dated May 9, 2014 between LBW Tilton LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-16
Club # |
Location |
Lease Agreement |
||
310 |
110 Mount Auburn Avenue
Auburn, ME 04210 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
311 |
8330 Lewiston Road
Batavia, NY 14020 |
Lease dated February 10, 1995 between Nathan Benderson, Ronald Benderson and David H. Baldauf, as Trustees under a Trust Agreement dated September 22, 1993 known as Randall Benderson 1993-1 Trust and Waban Inc. | ||
312 |
607 Old Country Road
Riverhead, NY 11901 |
Ground lease dated May 1, 1995 between Wilbur F. Breslin, KCH Riverhead, Inc., Three Eighty Fulton St. Inc. and Richard T. Carr, as tenants-in-common d/b/a East End Commons Associates and Waban Inc. | ||
313 |
3635 Berryfields Road
Geneva, NY 14456 |
Lease dated December 29, 1994 between Geneva Investors LLC and Waban Inc. | ||
314 |
11 Plaza Drive
Auburn, NY 13021 |
Lease dated 9/21/12 between Ladder Capital Finance LLC and BJs Wholesale Club, Inc. | ||
315 |
1280 East Main Street
Torrington, CT 06790 |
Lease dated November 25, 1998 between Torrington Commercial Associates Limited Partnership and Tory, LLC and BJs Wholesale Club, Inc. | ||
316 |
1589 West Main Street
Willimantic, CT 06226 |
Lease dated December 11, 1998 between Willimantic Realty Associates and BJs Wholesale Club, Inc. | ||
317 |
44950 Worth Lane
California, MD 20619 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
318 |
20 Division Street
Derby, CT 06418 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-17
Club # |
Location |
Lease Agreement |
||
319 |
250 Pocono Commons
Stroudsburg, PA 18360 |
Lease dated 9/21/12 between Realty Income Corporation and BJs Wholesale Club, Inc. | ||
320 |
262 Plainfield Road
West Lebanon, NH 03784 |
Lease dated September 8, 2000 between Solidus, LLC and BJs Wholesale Club, Inc. | ||
321 |
420 Attucks Lane
Hyannis, MA 02601 |
Lease dated April 2, 2004 between First Hyannis Realty LLC and BJs Wholesale Club, Inc. | ||
322 |
28410 Marlboro Avenue
Easton, MD 21601 |
Lease dated April 20, 2015 between REMCO Properties, LLC and BJ Wholesale Club, Inc. | ||
350 |
616 NW End Blvd.
Quakertown, PA 18951 |
Lease dated February 10, 2009 between RB Quakertown LP and BJs Wholesale Club, Inc. | ||
351 |
6607 Wilson Boulevard
Falls Church, VA 22044 |
Ground lease, dated December 23, 2008 between 6607 Wilson Retail, LLC and BJs Wholesale Club, Inc. | ||
352 |
40 Graham Road West
Ithaca, NY 14850 |
Lease dated May 13, 2009 between Arrowhead Ventures LLC and BJs Wholesale Club, Inc. | ||
353 |
200 Crown Colony Drive
Quincy, MA 02169 |
Lease dated April 22, 2008 between QBJ Land Development, LLC and BJs Wholesale Club, Inc. | ||
354 |
2131 Kirkwood Highway
Wilmington (Elsmere), DE 19805 |
Lease dated September 30, 2009 between Kimco Realty Corporation and BJs Wholesale Club, Inc. | ||
355 |
495 Hubbard Avenue
Pittsfield, MA 01201 |
Lease dated July 12, 2010 between Pittsfield-Hubbard, LLC and BJs Wholesale Club, Inc. | ||
357 |
1433 Boone Station Road
Burlington, NC 27215 |
Lease dated August 2, 2010 between Alamance Crossing II, LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-18
Club # |
Location |
Lease Agreement |
||
359 |
1900 The Arches Circle
Deer Park, NY 11729 |
Lease dated March 11, 2011 between Deer Park Enterprise, LLC and BJs Wholesale Club, Inc. | ||
360 |
5100 Wellington Road
Gainesville, VA 20155 |
Lease dated May 10, 2011 between Virginia Gateway Associates LP and BJs Wholesale Club, Inc. | ||
361 |
1800 Dunlawton Ave
Port Orange, FL 32127 |
Lease dated August 12, 2011 between Four Lanes, LLC and BJs Wholesale Club, Inc. | ||
363 |
184 West 237th Street
Bronx, NY 10463 |
Lease dated April 29, 2011 between AG-Metropolitan Riverdale Crossing, LLC and BJs Wholesale Club, Inc. | ||
365 |
620 Riverside Drive
Coral Springs, FL 33071 |
Lease dated February 25, 2013 between Woolbright Coral Springs II LLC and BJs Wholesale Club, Inc. | ||
366 |
790 Sunrise Highway
South Service Road Bellport, NY 11713 |
Lease dated December 3, 2010 between Yaphank Enterprise, LLC and BJs Wholesale Club, Inc. | ||
367 |
West Gables Plaza
SW 24th Street (Coral Way) Coral Terrace, FL 33165 |
Lease dated July 15, 2013 between Pan American Coral Terrace, Ltd. and BJs Wholesale Club, Inc. | ||
368 |
540 Gateway Ave
North Chambersburg Center Chambersburg, PA 17201 |
Lease dated September 11, 2013 between North Chambersburg Center LLC and BJs Wholesale Club, Inc. | ||
369 |
640 Cowpath Road
Lansdale, PA 19446 |
Lease dated September 11, 2013 between Somerville Montgomery Limited Partnership and BJs Wholesale Club, Inc. | ||
370 |
180 Passaic Avenue
Kearny, NJ 07032 |
Lease dated January 16, 2014 between DVL Kearny Holdings LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-19
Club # |
Location |
Lease Agreement |
||
371 |
The Grove at Howell
NJ State Route 9 and Lanes Mill Road Howell Township, NJ 07731 |
Lease dated January 16, 2014 between AA Cardin: LLC, AA Martel Howell, LLC, AA Towers, LLC, Howell Partners, LLC, ZS Investor NJ, LLC and ZS Mill, LLC as tenants in common and BJs Wholesale Club, Inc. | ||
372 |
Union Avenue (NYS Route 300)
Newburgh, NY 12550 |
Lease dated April 16, 2014 between Marketplace at Newburgh LLC and BJs Wholesale Club, Inc. | ||
373 |
Morrow Street, Forest Avenue and
Wemple Street (accessible from Dwarf Street and South Avenue), Staten Island, NY |
Lease dated July 26, 2011 between JOSIF A, LLC and BJs Wholesale Club, Inc. | ||
374 |
110 Longview Drive
Bangor, ME 04401 |
Lease dated December 3, 2014 between Longview Plaza, LLC and BJs Wholesale Club, Inc. | ||
375 |
Midtown Crossing Retail
Condominium Unit One 900 Metropolitan Avenue Charlotte, NC 28204 |
Lease dated January 9, 2015 between Metropolitan Avenue Development LLC and BJs Wholesale Club, Inc. | ||
377 |
4701 ODonnell Street
Baltimore, MD 21224 |
Lease dated January 7, 2015 between 4701 ODonnell Street, LLC and BJs Wholesale Club, Inc. | ||
378 |
SWCI-76
and Highway17
Alternate, Summerville, SC 29483 |
Lease dated February 18, 2015 between Summerville Investment Partners, LLC and BJs Wholesale Club, Inc. | ||
379 |
Intersection of Tremont
and Whittier Streets, Boston, MA 02116 |
Lease dated March 30, 2016 between P-3 Partners, LLC and BJs Wholesale Club, Inc. | ||
380 |
Hanover Avenue, Cedar
Knolls, NJ 07927 |
Lease dated October 31, 2016 between RJ PARENT INVESTORS LLC and BJs Wholesale Club, Inc. | ||
800 |
869 Quaker Highway
Uxbridge, MA 01569 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-20
Club # |
Location |
Lease Agreement |
||
820 |
309 Dultys Lane
Burlington, NJ 08016 |
Lease dated 7/30/13 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
840 |
4500 Directors Road
Jacksonville, FL 32220 |
Lease dated 9/30/2011 between Cole BJ Portfolio I LLC and BJs Wholesale Club, Inc. | ||
Home Office |
25 Research Drive
Westborough, MA |
Lease dated February 8, 2010 between Metrowest Realty LLC and BJs Wholesale Club, Inc. |
Schedule 3.15(2)-21
Schedule 3.15(3)
Mortgaged Real Property
Club # |
Owner |
Address/City/State/Zip Code |
County |
|||
31 | Natick Realty, Inc. |
40 Black Rock Turnpike
Fairfield, CT 06825-5507 |
Fairfield | |||
52 | Natick Realty, Inc. |
Court at Oxford Valley
350 Commerce Blvd. Fairless Hills, PA 19030 |
Bucks | |||
57 | Natick Realty, Inc. |
550 Madison Avenue
Reading, PA 19605 |
Berks | |||
61 | Natick Fifth Realty Corp. |
55 Music Fair Road
Owings Mills, MD 21117 |
Baltimore | |||
67 | Natick NJ 1993 Realty Corp. |
1001 East Edgar Road
Linden, NJ 07036 |
Union | |||
149 | Natick NH Hooksett Realty Corp. |
400 Quality Drive
Hooksett, NH 03106 |
Merrimack | |||
308 | Natick NJ Flemington Realty Corp. |
186 Highway 31
Flemington, NJ 08822 |
Hunterdon |
Schedule 3.18
Insurance
Insurer |
Policy Name |
Policy Number |
||
Safety National Casualty Corporation |
Excess Workers Compensation (AOS) | SP4055534 | ||
Safety National Casualty Corporation |
Excess Workers Compensation (FL) | SP4055535 | ||
Arch Insurance Company |
General Liability | 11GPP4961006 | ||
Arch Insurance Company |
Automobile Liability (AOS) | 11CAB4961108 | ||
Arch Insurance Company |
Automobile Liability (MA) | 11CAB4961208 | ||
ACE Property & Casualty Insurance Company |
Lead Umbrella | G28144453001 | ||
The American Insurance Company |
Excess Liability (50M xs 25M) | MHX00015240914 | ||
Federal Insurance Company |
Excess Liability (25M xs 75M) | 79733285 | ||
ACE Property & Casualty Insurance Company |
Pollution Legal Liability | PPIG23882115 002 | ||
AIG - Lexington Insurance Comp ( 50% share ) |
Property - Primary 50% of $25M | 21565732 | ||
Starr Surplus Lines ( 15 % of primary ) |
SLSTPTY10810516 | |||
Chubb Custom Ins Comp ( 15% of primary) |
44734378-01 | |||
Gen Security Ind Comp of Arizona (GSINDA) 15% of primary |
T0234451602487 | |||
Starr Surplus Lines Ins Comp ( 5% of primary) |
SLSTPTY10810516 | |||
Zurich |
[Property - Excess - $50M xs $25M] | XPP4020208-02 |
Schedule 3.20
Intellectual Property
None.
Schedule 5.13
Post-Closing Matters
1. Not later than ninety (90) days after the Closing Date (or such longer period as the Administrative Agent may agree in its sole discretion), each Restricted Subsidiary that is not a Loan Party and is required to deliver a Mortgage under Section 5.10(6) of the Credit Agreement shall deliver to the Administrative Agent, concurrently with the execution and delivery of a Mortgage, a Limited Recourse Guaranty.
2. Not later than sixty (60) days after the Closing Date (or such longer period as the Administrative Agent may agree in its sole discretion), the Borrower shall deliver deposit account control agreements or amendments to, or amendments and restatements of, the existing deposit account control agreements, in each case, in form and substance reasonably satisfactory to the Administrative Agent, with respect to any deposit account required to be subject to a control agreement pursuant to Section 3.03(i) of the Security Agreement.
Schedule 6.01
Indebtedness
1. |
$200,000,000 revolving facility note by BJs Wholesale Club, Inc. in favor of BJME Operating Corp. (as successor in interest to BJs Northeast Business Trust). |
2. |
Indebtedness related to a capital lease, dated May 24, 2010, by and among BJs Wholesale Club, Inc., as Tenant, and Equity One JV Sub Northborough LLC, as Landlord, for certain land and buildings located in Northborough, Massachusetts, in the principal amount of $8,077,688 and with an expiration date of September 17, 2031. |
3. |
Indebtedness related to a capital lease, dated January 23, 2004, by and among BJs Wholesale Club, Inc., as Tenant, and Valley Stream Green Acres LLC, as Landlord, for certain land and buildings located in Valley Stream, New York, in the principal amount of $9,849,095 and with an expiration date of January 31, 2027. |
4. |
Indebtedness related to a financing obligation for a lease dated March 29, 2010, by and among BJs Wholesale Club Inc., as Tenant, and Commerce Center NBI LLC, as Landlord, for certain land and buildings located in North Brunswick, New Jersey, in the principal amount of $6,519,897 and with an expiration date of April 13, 2033. |
5. |
Indebtedness related to a financing obligation for a lease dated March 11, 2011, by and among BJs Wholesale Club Inc., as Tenant, and Tanger Outlets Deer Park LLC, as Landlord, for certain land and buildings located in Deer Park, New York, in the principal amount of $6,039,184 and with an expiration date of January 28, 2032. |
6. |
Indebtedness related to a financing obligation for a lease dated May 10, 2011, by and among BJs Wholesale Club Inc., as Tenant, and DC MSA Retail DST c/o Inland Commercial Property Management Inc., as Landlord, for certain land and buildings located in Gainesville, Virginia, in the principal amount of $5,839,639 and with an expiration date of January 28, 2032. |
7. |
Indebtedness related to lease obligations of $4,646,087 for a closed store in Powder Springs, Georgia. Lease dated October 31, 2002 by and among BJs Wholesale Club Inc., as Tenant, and Austell 1031 DST c/o Inland Real Estate Acquisitions, Inc., as Landlord, with an expiration date of August 31, 2023. |
8. |
Indebtedness related to lease obligations of $3,239,192 for a closed store in Norcross, Georgia. Lease dated June 30, 2003 by and among BJs Wholesale Club Inc., as Tenant, and BJs Norcross Portfolio, LP., as Landlord, with an expiration date of September 5, 2024. |
Schedule 6.02
Liens
Borrower /
|
Filing
|
Secured Party
|
Jurisdiction |
UCC-1
Filing
|
Collateral |
|||||
BJs Wholesale Club, Inc. |
UCC | Hallmark Marketing Company, LLC | Delaware |
Initial Filing Date: 8/12/2009 Initial Filing #: 2009 2594965 |
Inventory greeting cards, stationary, party goods and related Hallmark products | |||||
BJs Wholesale Club, Inc. |
UCC |
Hudson-RPM Distributors, LLC
TNG GP |
Delaware |
Initial Filing Date: 7/26/2016 Initial Filing #: 2016 4511976 |
Inventory and equipment magazines, comic books and other publications; purchase money security interest | |||||
BJs Wholesale Club, Inc. |
UCC Fixture | SOLARCITY CORPORATION | Middlesex County (Southern District), MA |
Initial Filing Date: 1/7/2016
Initial Filing #:
2016 00003169
|
Equipment / Fixtures energy generation systems and associated components provided by SolarCity Corporation | |||||
BJs Wholesale Club, Inc. |
UCC Fixture | SOLARCITY CORPORATION | Worcester County (South/Central District), MA |
Initial Filing Date: 9/26/2014
Initial Filing
#: 2014 00089949
|
Equipment/ Fixtures energy generation systems and associated components provided by SolarCity Corporation |
Schedule 6.04
Investments
1. |
All Equity Interests as set forth on Schedule 3.06. |
Schedule 6.07
Transactions with Affiliates
BJs Wholesale Club, Inc., pays an aggregate of $8,000,000 in annual management fees to its non-management stockholders.
Schedule 10.01
Notice Information
Holdings, the Borrower or any Loan Party:
[c/o] BJs Wholesale Club, Inc.
25 Research Drive
Westborough, MA 01581
Attention: Robert W. Eddy / Chief Financial Officer
Telephone: 774-512-5950
Telecopier: 774-512-6056
Email: rweddy@bjs.com
Website: www.bjs.com
With a copy (which will not constitute notice) to:
Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, NY 10022-4834
Attention: Joshua A. Tinkelman
Telephone: (212) 906-1810
Telecopier: (212) 751-4864
Email: joshua.tinkelman@lw.com
Administrative Agent or Collateral Agent:
Nomura Corporate Funding Americas, LLC
309 W. 49th Street
New York, NY 10019
Attention: BJs Wholesale Club, Inc.
Telecopier: (646) 587-1328
Email: usloansupport@us.nomura.com
With a copy to:
Cortland Capital Market Services LLC
NomuraAgency@cortlandglobal.com
Exhibit 10.2(a)
EXECUTION VERSION
REFINANCING AMENDMENT TO FIRST LIEN TERM LOAN CREDIT AGREEMENT, dated as of August 13, 2018 (this Refinancing Amendment ), by and among BJs Wholesale Club, Inc., as the Borrower (the Borrower ), BJs Wholesale Club Holdings, Inc. (formerly known as Beacon Holding Inc.), as Holdings ( Holdings ), each of the other Loan Parties that are party hereto, Nomura Corporate Funding Americas, LLC ( Nomura ), as Administrative Agent and Collateral Agent (in such capacities, the Administrative Agent ), each Lender party hereto with 2018 Other Term Commitments (as defined below) (the 2018 Other Term Lenders ) and each other Lender party hereto. The joint lead arrangers and joint lead bookrunners for this Refinancing Amendment are Nomura Securities International, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with its designated affiliates), Deutsche Bank Securities Inc., Jefferies Finance LLC and Wells Fargo Securities, LLC (in such capacities, the Refinancing Amendment Arrangers ).
WHEREAS, the Borrower, Holdings, the Lenders party thereto and the Administrative Agent are parties to that certain First Lien Term Loan Credit Agreement, dated as of February 3, 2017 (as amended, restated, amended and restated, supplemented and/or otherwise modified through the date hereof, the Credit Agreement ), pursuant to which such Lenders have extended credit to the Borrower;
WHEREAS, pursuant to Section 2.07 of the Credit Agreement, the Borrower intends to prepay the Term Loans (as defined in the Credit Agreement) on or prior to the First Refinancing Amendment Effective Date (as defined below) (but prior to giving effect to this Refinancing Amendment) in an aggregate amount equal to $350,000,000 (the First Refinancing Amendment Prepayment );
WHEREAS, pursuant to Section 2.19 of the Credit Agreement, the Borrower has requested to refinance and replace all existing Tranche B Term Loans incurred prior to the date hereof and outstanding immediately prior to the First Refinancing Amendment Effective Date and after giving effect to the First Refinancing Amendment Prepayment (such Term Loans, the Existing Term Loans and the Lenders holding such Term Loans, the Existing Term Lenders ) with the proceeds of the 2018 Other Term Loans (as defined below) and certain cash on hand of the Borrower (the Cash on Hand of the Borrower );
WHEREAS, in accordance with the provisions of Section 2.19 of the Credit Agreement and the terms herein and subject only to the conditions set forth in Section 5 below, the Borrower, Holdings, each of the other Loan Parties that are party hereto, the 2018 Other Term Lenders and the Administrative Agent wish to enter into and effect this Refinancing Amendment with respect to the Borrowers request above;
WHEREAS, the Lenders party hereto wish to amend certain provisions of the Credit Agreement as hereinafter provided, on the terms, and subject only to the conditions in Section 5, set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1 Defined Terms . Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement. Sections 1.02 through 1.08 (inclusive) of the Credit Agreement are hereby incorporated by reference, mutatis mutandis .
SECTION 2 Term Loan Refinancing Amendment .
(a) As used herein:
(i) 2018 Other Term Commitment means, with respect to each 2018 Other Term Lender, the commitment of such Lender to make 2018 Other Term Loans as set forth on Schedule 2.01 hereto. On the First Refinancing Amendment Effective Date, the aggregate amount of 2018 Other Term Commitments is $ 1,537,733,909.31.
(ii) 2018 Other Term Lenders has the meaning set forth in the recitals hereof and includes, for the avoidance of doubt, the New 2018 Other Term Lender (as defined below).
(iii) 2018 Other Term Loans means the term loans made to the Borrower on the First Refinancing Amendment Effective Date in accordance with Section 2(c) hereof. On the First Refinancing Amendment Effective Date (after giving effect to this Refinancing Amendment and subject to the funding in full of the 2018 Other Term Loans), the aggregate outstanding principal amount of the 2018 Other Term Loans shall be $ 1,537,733,909.31.
(iv) Amended Credit Agreement means the Credit Agreement as amended hereby and as the same may be further amended, amended and restated, supplemented and/or otherwise modified from time to time in accordance with the terms thereof.
(v) Conversion Amount means as to any Converting Lender, the final amount of such Converting Lenders 2018 Other Term Commitment on the First Refinancing Amendment Effective Date. For the avoidance of doubt, the Conversion Amount of any Converting Lender shall not exceed (but may be less than) the outstanding principal amount of such Converting Lenders Existing Term Loans. The Conversion Amount will be determined by the Administrative Agent in consultation with the Borrower and all such determinations (absent manifest error) shall be final, conclusive and binding on the Administrative Agent, the Borrower, the Lenders and the other Secured Parties, and the Administrative Agent and the Borrower shall have no liability to any Person with respect to any such determination.
(vi) Converting Lenders means each Existing Term Lender that (a) executes this Refinancing Amendment by selecting option A on its signature page hereto and (b) has a 2018 Other Term Commitment.
(vii) Non-Converting Lenders means each Existing Term Lender that is not a Converting Lender.
(viii) Non-Converting Portion means, with respect to any Converting Lender whose Conversion Amount is less than the outstanding principal amount of its Existing Term Loans on the First Refinancing Amendment Effective Date, the excess (if any) of the aggregate principal amount of such Converting Lenders Existing Term Loans over its 2018 Other Term Commitment. For the avoidance of doubt, if there is no such excess, the Non-Converting Portion with respect to such Converting Lender will be zero. The Non-Converting Portion will be determined by the Administrative Agent in consultation with the Borrower and all such determinations (absent manifest error) shall be final, conclusive and binding on the Administrative Agent, the Borrower, the Lenders and the other Secured Parties, and the Administrative Agent and the Borrower shall have no liability to any Person with respect to any such determination.
(b) For the avoidance of doubt, (i) this Refinancing Amendment constitutes a Refinancing Amendment pursuant to which a new Term Facility and Class of Other Term Loans is established pursuant to Section 2.19 of the Credit Agreement and (ii) from and after the First Refinancing Amendment Effective Date (as hereinafter defined) and upon funding by Lender of the 2018 Other Term Loans in full to the Borrower, (A) each reference to Tranche B Term Loan in the Credit Agreement (as amended pursuant to Section 3 hereof) and the other Loan Documents shall be deemed to refer to, and constitute, the 2018 Other Term Loans (or a Borrowing thereof, as appropriate) established pursuant to this Refinancing Amendment, (B) each 2018 Other Term Lender shall constitute a Lender and a Tranche B Term Loan Lender as defined in the Credit Agreement (as amended pursuant to Section 3
2
hereof), (C) each reference to a Tranche B Term Loan Commitment in the Credit Agreement (as amended pursuant to Section 3 hereof) shall be deemed to refer to, and constitute, a 2018 Other Term Commitment, and (D) each reference to Tranche B Term Loan Facility in the Credit Agreement (as amended pursuant to Section 3 hereof) and the other Loan Documents shall be deemed to refer to, and constitute, the Term Facility consisting of 2018 Other Term Loans established pursuant to this Refinancing Amendment.
(c) On the terms, and subject only to the conditions set forth in Section 5, hereof (including the occurrence of the First Refinancing Amendment Effective Date),
(i) Nomura (in such capacity, the New 2018 Other Term Lender ) will make an Other Term Loan to the Borrower (the New 2018 Other Term Loan ) in a principal amount equal to its 2018 Other Term Commitment on the First Refinancing Amendment Effective Date; and
(ii) each 2018 Other Term Lender (other than Nomura) will make Other Term Loans to the Borrower on the First Refinancing Amendment Effective Date in a principal amount equal to its 2018 Other Term Commitment on the First Refinancing Amendment Effective Date.
(d) The Administrative Agent has notified each 2018 Other Term Lender of its 2018 Other Term Commitment and each 2018 Other Term Lender, by providing its executed counterpart to this Refinancing Amendment to the Administrative Agent, (x) agrees to (1) its 2018 Other Term Commitment and/or (2) the Term Loan Conversion (as defined below), as applicable, and (y) consents to the terms of this Refinancing Amendment, the Credit Agreement (after giving effect to this Refinancing Amendment) and the other Loan Documents.
(e) On the First Refinancing Amendment Effective Date, all then outstanding Existing Term Loans shall be repaid in full with the proceeds of the 2018 Other Term Loans and the Cash on Hand of the Borrower, as follows:
(i) the outstanding aggregate principal amount of Existing Term Loans of each Converting Lender (other than any Non-Converting Portion of such Converting Lender, if any) shall automatically be converted (the Term Loan Conversion ) into Other Term Loans (each, a 2018 Converted Other Term Loan ) in a principal amount equal to such Converting Lenders Conversion Amount;
(ii) to the extent the outstanding principal amount of the Existing Term Loans of any Converting Lender exceeds its Conversion Amount, such Existing Term Lender shall be repaid in cash with the proceeds of the 2018 Other Term Loans and the Cash on Hand of the Borrower in an amount equal to its Non-Converting Portion (if any); and
(iii) the outstanding aggregate principal amount of Existing Term Loans of each Non-Converting Lender shall be repaid in full in cash with the proceeds of the 2018 Other Term Loans and the Cash on Hand of the Borrower.
(f) Each 2018 Other Term Lender hereby agrees to fund its 2018 Other Term Loans in an aggregate principal amount equal to such 2018 Other Term Lenders 2018 Other Term Commitment, as follows:
(i) each Converting Lender shall fund its 2018 Converted Other Term Loan to the Borrower by converting all or a portion of its then outstanding principal amount of Existing Term Loans into a 2018 Converted Other Term Loan in a principal amount equal to its Conversion Amount; and
3
(ii) the New 2018 Other Term Lender shall fund in cash an amount equal to its 2018 Other Term Commitment to the Borrower.
(g) On the First Refinancing Amendment Effective Date, the Borrower shall pay in cash (x) all accrued but unpaid interest, fees and premiums (if any) owing with respect to the Existing Term Loans to (but excluding) the First Refinancing Amendment Effective Date and (y) to each Existing Term Lender, any amounts due under Section 2.13 of the Credit Agreement.
(h) Promptly following the First Refinancing Amendment Effective Date (and the funding in full of the applicable 2018 Other Term Loans), all Notes, if any, evidencing the Existing Term Loans shall be cancelled and returned to the Borrower, and any 2018 Other Term Lender may request that its 2018 Other Term Loan be evidenced by a Note pursuant to Section 2.05 of the Credit Agreement (as amended hereby).
(i) Notwithstanding anything to the contrary contained in the Credit Agreement, the proceeds of the 2018 Other Term Loans and the Cash on Hand of the Borrower will be used, in part, to repay the outstanding amount of all Existing Term Loans on the First Refinancing Amendment Effective Date and to pay fees, costs and expenses in connection therewith and this Refinancing Amendment.
(j) The New 2018 Other Term Lender hereby (i) represents and warrants that (A) it has full power and authority, and has taken all action necessary, to become a Lender under this Refinancing Amendment and the Credit Agreement (as amended hereby), (B) from and after the First Refinancing Amendment Effective Date, it shall be bound by the provisions hereof and of the Credit Agreement (as amended hereby) as a Lender hereunder and thereunder and, to the extent of its 2018 Other Term Commitments and New 2018 Other Term Loans, shall have the obligations of a Lender hereunder and thereunder and (C) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.04 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Refinancing Amendment and to provide its 2018 Other Term Commitments and to make the New 2018 Other Term Loans and it has made such analysis and decision independently and without reliance on any Agent or any other Lender, and (ii) agrees that (A) if it is a Foreign Lender, it will promptly (and no later than the First Refinancing Amendment Effective Date) deliver to the Administrative Agent and the Borrower any information that is required to be delivered by it pursuant to Section 2.14(5) of the Amended Credit Agreement, (B) it will, independently and without reliance on any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Amended Credit Agreement and (C) it will perform in accordance with their terms all of the obligations which by the terms of the Amended Credit Agreement are required to be performed by it as a Lender.
(k) The Borrower hereby consents, for purposes of Section 10.04(2)(a)(i) of the Credit Agreement (as amended hereby), to the assignment on or within ninety (90) days of the First Refinancing Amendment Effective Date of any New 2018 Other Term Loans by Nomura, as a 2018 Other Term Lender, to (A) any Person that was an Existing Term Lender on the First Refinancing Amendment Effective Date (immediately prior to giving effect thereto) or (B) any eligible Assignee separately identified, and acceptable, to the Borrower, and in each case of the preceding clauses (A) and (B), with respect to each such Person or eligible Assignee, in an amount separately identified, and acceptable, to the Borrower.
SECTION 3 Amendments to the Credit Agreement . Each of the parties hereto (which, for the avoidance of doubt, after giving effect to the incurrence of the 2018 Other Term Loans, includes the
4
Required Lenders) agrees that, effective on the First Refinancing Amendment Effective Date (immediately after giving effect to incurrence of the 2018 Other Term Loans), the Credit Agreement shall be amended as follows:
(a) The definition of Adjusted LIBO Rate appearing in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Adjusted LIBO Rate means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum equal to the greater of (1) the LIBO Rate in effect for such Interest Period divided by one minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any, and (2) solely in respect of Tranche B Term Loans, 0.00%.
(b) The definition of Applicable Margin appearing in Section 1.01 of the Credit Agreement is hereby amended by amending and restating clause (1) thereof as follows:
(1) with respect to any Tranche B Term Loans made on the First Refinancing Amendment Effective Date, (i) until delivery of financial statements for the first full fiscal quarter ending after the First Refinancing Amendment Effective Date pursuant to Section 5.04(2), (a) for ABR Loans, 2.00% and (b) for Eurocurrency Loans, 3.00%, and (ii) thereafter, the following percentages per annum, based upon the Senior Secured First Lien Net Leverage Ratio as set forth in the most recent officers certificate received by the Administrative Agent pursuant to Section 5.04(3):
Pricing Level |
Senior Secured First Lien Net Leverage Ratio |
For Eurocurrency Loans |
For ABR Loans |
|||
1 |
>3.00:1.00 | 3.00% | 2.00% | |||
2 |
£ 3.00:1.00 | 2.75% | 1.75% |
Any increase or decrease in the Applicable Margin pursuant to clause (ii) above resulting from a change in the Senior Secured First Lien Net Leverage Ratio shall become effective as of the first Business Day immediately following the date an officers certificate is delivered pursuant to Section 5.04(3); provided that if notification is provided to the Borrower that the Administrative Agent or the Required Lenders have so elected, with respect to Tranche B Term Loans, Pricing Level 1 shall apply (x) as of the first Business Day after the date on which an officers certificate was required to have been delivered pursuant to Section 5.04(3) but was not delivered, and shall continue to so apply to and including the date on which such officers certificate is so delivered (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (y) as of the first Business Day after an Event of Default under Section 8.01(3) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply);
(c) The definition of Class set forth in Section 1.01 of the Credit Agreement is hereby amended by adding the following sentence at the end thereof:
As of the First Refinancing Amendment Effective Date, after giving effect to the First Refinancing Amendment and the funding of Term Loans thereunder, there is one Term Facility and one Class of Term Loans, the Tranche B Term Loans (after giving effect to the First Refinancing Amendment).
5
(d) The definition of Commitment set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Commitment means the Tranche B Term Loan Commitments. On the Closing Date, the aggregate amount of Commitments of all Term Loans is $1,925.0 million. On the First Refinancing Amendment Effective Date, the aggregate amount of Commitments of all Term Loans is $1,537,733,909.31 million.
(e) The definition of Interest Period set forth in Section 1.01 of the Credit Agreement is hereby amended by amending and restating clause (4) thereof as follows:
(4) the initial Interest Period, commencing on the First Refinancing Amendment Effective Date, will end on September 13, 2018.
(f) The definition of Maturity Date set forth in Section 1.01 of the Credit Agreement is hereby amended by deleting the text Closing Date appearing in clause (1) thereof and inserting the text First Refinancing Amendment Effective Date in lieu thereof.
(g) The definition of Term Facility set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Term Facility means the facility and commitments utilized in making Term Loans hereunder. On the Closing Date, there is one Term Facility, the Tranche B Term Loan Facility. On the First Refinancing Amendment Effective Date, after giving effect to the First Refinancing Amendment and the funding of Term Loans thereunder, there is one Term Facility, the Tranche B Term Loan Facility (after giving effect to the First Refinancing Amendment). Following the establishment of any Incremental Term Loans (other than an increase to an existing Term Facility), Other Term Loans (other than under the First Refinancing Amendment) or Extended Term Loans, such Incremental Term Loans, Other Term Loans or Extended Term Loans will be considered a separate Term Facility hereunder.
(h) The definition of Term Loans set forth in Section 1.01 of the Credit Agreement is hereby amended by deleting the text Closing Date appearing therein and inserting the text First Refinancing Amendment Effective Date in lieu thereof.
(i) The definition of Tranche B Term Loan Commitment set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Tranche B Term Loan Commitment means as to each Tranche B Term Loan Lender, the commitment of such Lender to make Tranche B Term Loans as set forth on Schedule 2.01 . On the Closing Date, the aggregate amount of Tranche B Term Loan Commitments is $1,925.0 million. On the First Refinancing Amendment Effective Date, the aggregate amount of Tranche B Term Loan Commitments is $1,537,733,909.31 million.
(j) The definition of Tranche B Term Loans set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Tranche B Term Loans means (i) prior to the First Refinancing Amendment Effective Date, the term loans made to the Borrower on the Closing Date pursuant to Section 2.01(1) and (ii) thereafter, the term loans made to the Borrower on the First Refinancing Amendment Effective Date pursuant to the First Refinancing Amendment.
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(k) Section 1.01 of the Credit Agreement is hereby amended by adding the following in the appropriate alphabetical order:
(i) First Refinancing Amendment means that certain Refinancing Amendment to First Lien Term Loan Credit Agreement, date as of the First Refinancing Amendment Effective Date, by and among Holdings, the Borrower, the other Loan Parties that are party thereto, the Lenders party thereto and each Agent.
(ii) First Refinancing Amendment Effective Date means August 13, 2018.
(l) Section 2.01(1) of the Credit Agreement is hereby amended and restated in its entirety as follows:
(1) Subject to, and in accordance with, the terms and conditions set forth in the First Refinancing Amendment, each Tranche B Term Loan Lender severally agrees to make to the Borrower Tranche B Term Loans denominated in Dollars equal to such Tranche B Term Loan Lenders Tranche B Term Loan Commitment on the First Refinancing Amendment Effective Date.
(m) Section 2.06(1) of the Credit Agreement is hereby amended and restated in its entirety as follows:
(1) The Borrower will repay to the Administrative Agent for the ratable account of the applicable Lenders with Tranche B Term Loans on the last Business Day of each fiscal quarter of the Borrower, commencing with the last Business Day of the fiscal quarter of the Borrower ending on or about September 30, 2018, an aggregate principal amount equal to 0.25% of the aggregate principal amount of the Tranche B Term Loans funded on the First Refinancing Amendment Effective Date, which payments will be reduced as a result of the application of prepayments of Tranche B Term Loans in accordance with the order of priority set forth in Section 2.07 or 2.08, as applicable (each such date being referred to as an Original Term Loan Installment Date );
(n) Section 2.06(2) of the Credit Agreement is hereby amended and restated in its entirety as follows:
(2) In the event that any Incremental Term Loans are made, the Borrower will repay Borrowings consisting of Incremental Term Loans on the dates (each an Incremental Term Loan Installment Date ) and in the amounts set forth in the applicable Incremental Facility Amendment, (b) in the event that any Other Term Loans (other than pursuant to the First Refinancing Amendment) are made, the Borrower will repay Borrowings consisting of such Other Term Loans on the dates (each an Other Term Loan Installment Date ) and in the amounts set forth in the applicable Refinancing Amendment and (c) in the event that any Extended Term Loans are made, the Borrower will repay Borrowings consisting of Extended Term Loans on the dates (each an Extended Term Loan Installment Date ) and in the amounts set forth in the applicable Extension Amendment;
(o) Section 2.21 of the Credit Agreement is hereby amended by deleting the text Closing Date appearing therein and inserting the text First Refinancing Amendment Effective Date in lieu thereof. and
(p) Section 4.01 of the Credit Agreement is hereby amended by adding on the Closing Date immediately before the period in the last sentence thereof.
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(q) Schedule 2.01 of the Credit Agreement is hereby amended and restated in its entirety as set forth on Schedule 2.01 attached hereto.
(r) Schedule 3.15(3) of the Credit Agreement is hereby amended and restated in its entirety as set forth on Schedule 3.15(3) attached hereto.
SECTION 4 Representations and Warranties . To induce the other parties hereto to enter into this Refinancing Amendment, each Loan Party that is party hereto represents and warrants to each of the Lenders party hereto and the Administrative Agent that:
(a) the execution, delivery and performance by each such Loan Party of this Refinancing Amendment has been duly authorized by all necessary corporate, limited liability company and/or partnership action, as applicable, of such Loan Party;
(b) this Refinancing Amendment has been duly executed and delivered by such Loan Party;
(c) each of this Refinancing Amendment and the Credit Agreement (as amended hereby) constitutes a legal, valid and binding obligation of such Loan Party, enforceable against it in accordance with its terms, subject to:
(i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors rights generally;
(ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);
(iii) implied covenants of good faith and fair dealing; and
(iv) any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries;
(d) no approval, consent, exemption, authorization or registration or other action by, or notice to, or filing with any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement by Secured Parties against, any such Loan Party under, this Refinancing Amendment or the Credit Agreement, after giving effect to the amendments pursuant to this Refinancing Amendment and the transactions contemplated hereby or for the consummation of the transactions contemplated hereby, except for:
(i) the filing of Uniform Commercial Code financing statements and equivalent filings in foreign jurisdictions;
(ii) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions;
(iii) filings which may be required under Environmental Laws;
(iv) filings as may be required under the Exchange Act and applicable stock exchange rules in connection therewith;
(v) such as have been made or obtained and are in full force and effect;
(vi) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect; or
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(vii) filings or other actions listed on Schedule 3.04 of the Credit Agreement.
(e) the execution, delivery and performance by such Loan Party of its obligations under this Refinancing Amendment and its performance under the Credit Agreement, after giving effect to the amendments pursuant to this Refinancing Amendment, are within such Loan Partys corporate, limited liability company or limited partnership powers, as applicable, and do not and will not (i) contravene the terms of any of such Persons charter or other similar organizational document or (ii) violate any applicable material Law; in the case of this clause (ii), to the extent that such violations would not reasonably be expected to have a Material Adverse Effect; and
(f) immediately before and after giving effect to this Refinancing Amendment and the transactions contemplated hereby (i) the representations and warranties of the Borrower and each of the other Loan Parties set forth in Article III of the Credit Agreement and in the other Loan Documents are true and correct in all material respects on and as of the First Refinancing Amendment Effective Date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they were true and correct in all material respects as of such earlier date; provided that any representation or warranty that is qualified as to materiality , Material Adverse Effect or similar language is true and correct (after giving effect to any qualification therein) in all respects on such respective dates, and (ii) no Default shall have occurred and be continuing as of the First Refinancing Amendment Effective Date, immediately after giving effect to this Refinancing Amendment and the transactions contemplated hereby.
SECTION 5 Effectiveness . This Refinancing Amendment shall become effective as of the date (the First Refinancing Amendment Effective Date , which date was August 13, 2018) on which each of the following conditions shall have been satisfied:
(a) the Administrative Agent (or its counsel) shall have received counterparts of this Refinancing Amendment that, when taken together, bear the signatures of (i) Holdings, (ii) the Borrower, (iii) each other Loan Party that is party hereto, (iv) the Administrative Agent, (v) each 2018 Other Term Lender specified on Schedule 2.01 and (vi) solely with respect to Section 3 hereof, the Lenders constituting Required Lenders (immediately after giving effect to the incurrence of the 2018 Other Term Loans);
(b) the Administrative Agent shall have received a solvency certificate substantially in the form of Exhibit B to the Credit Agreement (with appropriate modifications to reflect the consummation of the transactions contemplated by this Refinancing Amendment on the First Refinancing Amendment Effective Date);
(c) the Administrative Agent shall have received such other documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party and the authorization of this Refinancing Amendment and amendment of the Credit Agreement and the other transactions contemplated hereby, all in form and substance reasonably satisfactory to the Administrative Agent;
(d) the Administrative Agent shall have received a customary legal opinion of Latham & Watkins LLP, special New York counsel to the Loan Parties;
(e) the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower dated as of the First Refinancing Amendment Effective Date (i) as to the accuracy in all material respects of the representations and warranties specified in Section 4 hereof and (ii) certifying that the condition set forth in clause (f) below has been satisfied;
9
(f) no Default exists as of the First Refinancing Amendment Effective Date, both immediately before and immediately after giving effect to this Refinancing Amendment and the transactions contemplated hereby;
(g) the Administrative Agent and the Refinancing Amendment Arrangers, as applicable, shall have received (or will receive substantially simultaneously with the funding of the 2018 Other Term Loans) payment of all fees and other amounts due and payable on or prior to the First Refinancing Amendment Effective Date and, to the extent invoiced at least 2 Business Days prior to the First Refinancing Amendment Effective Date (or such later date as the Borrower may agree), reimbursement or payment of all reasonable and documented out-of-pocket costs and expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document, including the reasonable and reasonably documented out-of-pocket fees, charges and disbursements of counsel for the Administrative Agent;
(h) the Borrower shall have made (or substantially concurrently with the funding of the 2018 Other Term Loans will make) the First Refinancing Amendment Prepayment; and
(i) the Administrative Agent shall have received a Life-of-Loan Federal Emergency Agency Standard Flood Hazard Determination with respect to each Mortgaged Property (together with notice about special flood hazard area status and flood disaster assistance, duly executed by the Borrower, and evidence of flood insurance in compliance with the Flood Program, in the event any Mortgaged Property is located in a special flood hazard area.
The Administrative Agent shall notify the Borrower and the 2018 Other Term Lenders of the First Refinancing Amendment Effective Date, and such notice shall be conclusive and binding.
SECTION 6 Mortgaged Property . Within 90 days of the First Refinancing Amendment Effective Date (or such later date as the Administrative Agent may agree), the Administrative Agent shall have received:
(a) a fully executed counterpart of an amendment to each existing Mortgage listed on Schedule 3.15(3) hereto (individually, a Mortgage Amendment and, collectively, Mortgage Amendments ; together with such existing Mortgages, as amended by the applicable Mortgage Amendments, if any, individually, an Amended Mortgage and, collectively, Amended Mortgages ), each duly executed by the Borrower or applicable Limited Guarantor, as the case may be, together with evidence that such counterparts have been delivered to the title insurance company insuring the Amended Mortgages for recording;
(b) a date down and modification endorsement in connection with each existing lenders title insurance policy insuring each existing Mortgage or to the extent unavailable, a new lenders title insurance policy, insuring that each Amended Mortgage is a valid and enforceable Lien on the applicable Mortgaged Property, free of any other Liens except Permitted Liens; and
(c) such affidavits, certificates, information and instruments of indemnification, as shall be required to induce the title company to issue the endorsements and/or title insurance policies contemplated in subparagraph (ii) above and evidence of payment of all applicable title insurance premiums, search and examination charges, mortgage recording taxes, if applicable, and related charges required for the issuance of such endorsements and/or title insurance policies.
SECTION 7 Reaffirmation of Guaranty and Security .
(a) Each Guarantor party hereto reaffirms its guarantee of the Guaranteed Obligations (as defined in and under the terms and conditions of the Guaranty Agreement) and agrees that such guarantee remains in full force and effect and is hereby ratified, reaffirmed and confirmed. Each
10
such Guarantor hereby confirms that it consents to the terms of this Refinancing Amendment. Each such Guarantor hereby (i) confirms that each Loan Document to which it is a party or is otherwise bound will continue to guarantee to the fullest extent possible in accordance with the Loan Documents, the payment and performance of the Guaranteed Obligations, including without limitation the payment and performance of all such applicable Guaranteed Obligations that are joint and several obligations of each such Guarantor now or hereafter existing; (ii) acknowledges and agrees that its guarantee and each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of the Refinancing Amendment; and (iii) acknowledges, agrees and warrants for the benefit of the Administrative Agent and each Secured Party that there are no rights of set-off or counterclaim, nor any defenses of any kind, whether legal, equitable or otherwise, that would enable such Guarantor to avoid or delay timely performance of its obligations under the Loan Documents (except to the extent such obligations constitute Excluded Swap Obligations with respect to such Guarantor).
(b) Each Loan Party that is party hereto hereby acknowledges that it has reviewed and consents to the terms and conditions of this Refinancing Amendment and the transactions contemplated hereby. In addition, each such Loan Party reaffirms the security interests granted by such Loan Party under the terms and conditions of the Security Agreement to secure the Obligations and agrees that such security interests remain in full force and effect and are hereby ratified, reaffirmed and confirmed. Each such Loan Party hereby confirms that the security interests granted by such Loan Party under the terms and conditions of the Security Agreement secures the 2018 Other Term Loans as part of the Obligations. Each such Loan Party hereby (i) confirms that each Loan Document to which it is a party or is otherwise bound and all Collateral (as defined in the Security Agreement) encumbered thereby will continue to guarantee or secure, as the case may be, to the fullest extent possible in accordance with the Loan Documents, the payment and performance of the Obligations, as the case may be, including without limitation the payment and performance of all such applicable Obligations that are joint and several obligations of each such Loan Party now or hereafter existing, (ii) confirms its respective grant to the Collateral Agent for the benefit of the Secured Parties of the security interest in and continuing Lien on all of such Loan Partys right, title and interest in, to and under all Collateral (as defined in the Security Agreement), whether now owned or existing or hereafter acquired or arising and wherever located, as collateral security for the prompt and complete payment and performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all applicable Obligations (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Refinancing Amendment), subject to the terms contained in the applicable Loan Documents, and (iii) confirms its respective guarantees, pledges, grants of security interests and other obligations, as applicable, under and subject to the terms of each of the Loan Documents to which it is a party.
(c) Each Loan Party that is party hereto acknowledges and agrees that each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Refinancing Amendment.
SECTION 8 Counterparts . This Refinancing Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which constitute an original, but all of which when taken together shall constitute a single contract. Delivery by facsimile transmission or other electronic transmission (i.e. a pdf or tif) of an executed counterpart of a signature page to this Refinancing Amendment is effective as delivery of an original executed counterpart hereof.
SECTION 9 Governing Law; Jurisdiction; Waiver of Jury Trial . THIS REFINANCING AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. The provisions of Sections 10.11 and 10.15 of the Credit Agreement are hereby incorporated by reference herein, mutatis mutandis .
11
SECTION 10 Headings . Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.
SECTION 11 No Novation; Effect of this Refinancing Agreement . This Refinancing Amendment does not extinguish the Obligations for the payment of money outstanding under the Credit Agreement or discharge or release the lien or priority of any Loan Document or any other security therefor or any guarantee thereof, and the liens and security interests existing immediately prior to the First Refinancing Amendment Effective Date in favor of the Collateral Agent for the benefit of the Secured Parties securing payment of the Obligations are in all respects continuing and in full force and effect with respect to all Obligations. Except as expressly provided, nothing herein contained shall be construed as a substitution or novation, or a payment and reborrowing, or a termination, of the Obligations outstanding under the Credit Agreement or instruments guaranteeing or securing the same, which shall remain in full force and effect, except as modified hereby or by instruments executed concurrently herewith. Nothing expressed or implied in this Refinancing Amendment or any other document contemplated hereby shall be construed as a release or other discharge of Holdings or the Borrower under the Credit Agreement or the Borrower or any other Loan Party under any Loan Document from any of its obligations and liabilities thereunder, and except as expressly provided, such obligations are in all respects continuing with only the terms being modified as provided in this Refinancing Amendment. The Credit Agreement and each of the other Loan Documents shall remain in full force and effect, until and except as modified. Except as expressly set forth herein, this Refinancing Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders or the Agents under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Loan Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Refinancing Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. Each Subsidiary Loan Party further agrees that nothing in the Credit Agreement, this First Refinancing Amendment or any other Loan Document shall be deemed to require the consent of such Subsidiary Loan Party to any future amendment to the Credit Agreement. This Refinancing Amendment constitutes a Loan Document for all purposes of the Credit Agreement and the other Loan Documents.
SECTION 12 Severability . In the event any one or more of the provisions contained in this Refinancing Amendment or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 13 No Waiver . Except as expressly set forth herein, this Refinancing Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Agents under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to receive a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Refinancing Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.
BJS WHOLESALE CLUB, INC., | ||||||||
By |
/s/ Kristyn M. Sugrue |
|||||||
Name: | Kristyn M. Sugrue | |||||||
Title: | Senior Vice President and Treasurer | |||||||
BJS WHOLESALE CLUB HOLDINGS, INC., | ||||||||
By |
/s/ Kristyn M. Sugrue |
|||||||
Name: | Kristyn M. Sugrue | |||||||
Title: | Senior Vice President and Treasurer | |||||||
EACH OF THE LOAN PARTIES LISTED BELOW, hereby consents to the entering into of this Refinancing Amendment and agrees to the provisions hereof: | ||||||||
BJME OPERATING CORP., | ||||||||
By |
/s/ Narda Shutt |
|||||||
Name: | Narda E. Shutt | |||||||
Title: | Treasurer | |||||||
BJNH OPERATING CO., LLC, | ||||||||
By |
/s/ Narda Shutt |
|||||||
Name: | Narda E. Shutt | |||||||
Title: | Treasurer | |||||||
NATICK REALTY, INC., | ||||||||
By |
/s/ Kristyn M. Sugrue |
|||||||
Name: | Kristyn M. Sugrue | |||||||
Title: | Vice President |
[Signature Page to Refinancing Amendment (BJs)]
NOMURA CORPORATE FUNDING AMERICAS, LLC , as Administrative Agent | ||||||||
By: |
/s/ Garrett Carpenter |
|||||||
Name: | Garrett Carpenter | |||||||
Title: | Managing Director |
[Signature Page to Refinancing Amendment (BJs)]
NOMURA CORPORATE FUNDING AMERICAS, LLC , as a 2018 Other Term Lender | ||||||||
By: |
/s/ Garrett Carpenter |
|||||||
Name: | Garrett Carpenter | |||||||
Title: | Managing Director |
[Signature Page to Refinancing Amendment (BJs)]
I. Election Form (Check Only One of Boxes A and B below):
A. |
☐ CONSENT AND CASHLESS SETTLEMENT OPTION: |
By checking this box, the undersigned Existing Term Lender hereby (i) consents to the Refinancing Amendment to the First Lien Term Loan Credit Agreement, (ii) agrees to convert (on a cashless basis) 100% of the outstanding principal amount of its Existing Term Loans for 2018 Other Term Loans in an equal principal amount, (iii) acknowledges and agrees that its Conversion Amount may be less than the full principal amount of its Existing Term Loans which it elects to convert hereunder and (iv) constitutes a 2018 Other Term Lender.
B. |
☐ ASSIGNMENT SETTLEMENT OPTION: |
By checking this box, the undersigned Existing Term Lender hereby agrees to have an amount equal to 100% of the outstanding principal amount of its Existing Term Loans repaid in full in cash in accordance with the terms of the Refinancing Amendment to the First Lien Term Loan Credit Agreement and to promptly purchase from Nomura Corporate Funding Americas, LLC by assignment 2018 Other Term Loans in an equal principal amount post-closing (or such lesser amount allocated to such Existing Term Lender by Nomura Securities International, Inc.).
II. Signature:
Name of Institution:
By: |
|
|||
Name: | ||||
Title: | ||||
For any institution requiring a second signature line: | ||||
By: |
|
|||
Name: | ||||
Title: |
[Signature Page to Refinancing Amendment (BJs)]
Schedule 2.01
Commitments
[On file with the Administrative Agent]
Schedule 3.15(3)
Mortgaged Real Property
Club # |
Owner |
Address/City/State/Zip Code |
County | |||
31 | Natick Realty, Inc. |
40 Black Rock Turnpike Fairfield, CT 06825-5507 |
Fairfield | |||
52 | Natick Realty, Inc. |
350 Commerce Blvd. Fairless Hills, PA 19030 |
Bucks | |||
57 | Natick Realty, Inc. |
550 Madison Avenue Reading, PA 19605 |
Berks | |||
67 | Natick NJ 1993 Realty Corp. |
1001 East Edgar Road Linden, NJ 07036 |
Union | |||
308 | Natick NJ Flemington Realty Corp. |
186 State Route 31 Flemington, NJ 08822 |
Hunterdon |
Exhibit 10.3
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Copy
CO-BRAND CREDIT CARD PROGRAM AGREEMENT
BETWEEN
COMENITY CAPITAL BANK
AND
BJS WHOLESALE CLUB, INC.
DATED AS OF JUNE 5, 2014
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
TABLE OF CONTENTS
SECTION 1. PROGRAM SUMMARY AND DEFINITIONS | 1 | |||||
1.1 |
Program Summary | 1 | ||||
1.2 |
Definitions and Other Obligations | 2 | ||||
SECTION 2. ESTABLISHMENT OF THE PROGRAM | 2 | |||||
2.1 |
Establishment of the Program; Applications for Credit | 2 | ||||
2.2 |
Internet Features | 4 | ||||
2.3 |
Operating Procedures | 4 | ||||
2.4 |
Program Documents (Forms and Collateral) | 5 | ||||
2.5 |
Marketing and Promotion of Program | 6 | ||||
2.6 |
Ownership of Accounts and Information | 6 | ||||
2.7 |
Protection Programs and Enhancement Marketing Services | 7 | ||||
2.8 |
Ownership and Licensing of the Partys Marks | 7 | ||||
2.9 |
Cardholder Rewards Program | 8 | ||||
SECTION 3. OPERATION OF THE PROGRAM | 9 | |||||
3.1 |
Processing Purchases | 9 | ||||
3.2 |
Ownership of Accounts; Fees; Accounting | 9 | ||||
3.3 |
Bank Mailings; Insertion of Companys Promotional Materials | 9 | ||||
3.4 |
Payments | 10 | ||||
3.5 |
Non-Competition | 10 | ||||
3.6 |
Reports | 11 | ||||
3.7 |
New Businesses and Existing Credit Program Conversions | 11 | ||||
3.8 |
Direct Settlement Transactions | |||||
3.9 |
Interchange Refund | 11 | ||||
3.10 |
Right of Offset | 11 | ||||
SECTION 4. REPRESENTATIONS AND WARRANTIES | 12 | |||||
4.1 |
Organization, Power and Qualification | 12 | ||||
4.2 |
Authorization, Validity and Non-Contravention | 12 | ||||
4.3 |
Accuracy of Information | 12 | ||||
4.4 |
Compliance with Law | 12 | ||||
4.5 |
Intellectual Property Rights | 13 | ||||
4.6 |
Marks | 13 | ||||
SECTION 5. COVENANTS | 13 | |||||
5.1 |
Notices of Changes | 13 | ||||
5.2 |
Financial Statements | 14 | ||||
5.3 |
Access Rights | 14 | ||||
5.4 |
Each Partys Business | 14 |
i
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
5.5 |
Insurance | 14 | ||||
5.6 |
Sales Information | 14 | ||||
5.7 |
Business Continuation/Disaster Recovery Plan | 14 | ||||
5.8 |
Compliance with Agreement and Operating Procedures | |||||
SECTION 6. INDEMNIFICATION | 14 | |||||
6.1 |
Indemnification Obligations | 14 | ||||
6.2 |
LIMITATION ON LIABILITY | 15 | ||||
6.3 |
NO WARRANTIES | 15 | ||||
6.4 |
Notification of Indemnification; Conduct of Defense | 15 | ||||
SECTION 7. TERM, EXPIRATION AND TERMINATION | 16 | |||||
7.1 |
Term and Expiration | 16 | ||||
7.2 |
Termination with Cause by Bank; Bank Termination Events | 16 | ||||
7.3 |
Termination with Cause by Company; Company Termination Events | 16 | ||||
7.4 |
Purchase of Accounts | 17 | ||||
SECTION 8. MISCELLANEOUS | 17 | |||||
8.1 |
Entire Agreement; Amendment; No Waiver; Severability; Counterparts; | 17 | ||||
Captions and Cross References; Mutual Drafting | ||||||
8.2 |
Coordination of Public Statements | 18 | ||||
8.3 |
Successors and Assigns | 18 | ||||
8.4 |
Notices | 18 | ||||
8.5 |
GOVERNING LAW/WAIVER OF JURY TRIAL | 18 | ||||
8.6 |
Force Majeure | 19 | ||||
8.7 |
Survival | 19 | ||||
8.8 |
Relationship of Parties; Third Parties; Independent Contractor | 19 | ||||
8.9 |
Confidentiality and Security Control | 19 | ||||
8.10 |
Taxes | 20 | ||||
8.11 |
Brokers | 20 |
SCHEDULES
1.2 |
Definitions and Other Obligations |
|
2.1(h) |
Service Standards |
|
2.1(k) |
MasterCard Reporting to be Provided by Bank |
|
2.5(a) |
Marketing Promotions |
|
2.5(b) |
Marketing Funds |
|
2.5(c) |
Prospect Marketing |
|
2.6 |
Monthly Master File Information |
|
2.7 |
Protection Programs and Enhancement Marketing Services |
|
2.9 |
Cardholder Rewards Program |
|
3.2(b) |
Summary of Rates and Fees |
|
3.6 |
Bank Reports |
|
7.1 |
Term and Expiration |
ii
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7.3(l) |
Additional Company Termination Events |
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7.4 |
Purchase of Accounts |
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8.9 |
Data Security |
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8.11 |
Brokers |
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CO-BRAND CREDIT CARD PROGRAM AGREEMENT
THIS CO-BRAND CREDIT CARD PROGRAM AGREEMENT (together with any schedules, exhibits, addenda, and future amendments and supplements hereto, this Agreement) is made by and between BJS WHOLESALE CLUB, INC. with its principal office at 25 Research Drive, Westborough, MA 01581 (hereinafter referred to as Company), and COMENITY CAPITAL BANK, with its principal office at 2795 E. Cottonwood Parkway, Suite #100, Salt Lake City, UT 84121 (hereinafter referred to as Bank). This Agreement shall be effective (the Effective Date) on the later of: (i) the last date of execution of this Agreement by Bank and Company, or (ii) the date of execution and delivery of the purchase and sale agreement by and between Bank and Barclays Bank Delaware (Barclays) pursuant to which Bank will purchase from Barclays certain program assets presently governed by the Co-Branded Credit Card Agreement between Barclays and Company dated May 10, 2007.
WITNESSETH:
WHEREAS , Company owns and operates a chain of wholesale stores known as BJs Wholesale Club which serve individuals that become Members of Company;
WHEREAS , Company has requested Bank to extend credit to qualifying Members in the form of Credit Cards (as such capitalized terms are defined below) and to manage a co-branded credit card program; and
WHEREAS , Bank is a member of various Card Networks and is an issuer of general purpose credit cards throughout the United States; and
WHEREAS , Bank shall own and service all the Accounts as more fully set forth herein; and
NOW THEREFORE , in consideration of the terms and conditions hereof, and for other good and valuable consideration, the receipt of which is hereby mutually acknowledged by the parties, Company and Bank agree as follows.
SECTION 1 PROGRAM SUMMARY AND DEFINITIONS
1.1 Program Summary . For the benefit of both parties hereto, Company and Bank have agreed to collaboratively launch, promote and maintain the Program, to be offered to Members, prospective Members, and employees of the Company as of the Program Commencement Date. The parties intent is that they will work in collaboration (emphasizing communication and good faith efforts) to maximize the value of the Program for their mutual benefit. To that end, the parties agree that, although the provisions of this Section 1.1 do not supersede either partys rights and obligations as set forth elsewhere in this Agreement, it is the intent of each party that its respective performance under this Agreement shall be guided by the following objectives:
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Support an orderly and successful transition from the Companys previous issuer, Barclaycard |
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Retain existing Cardholders (in connection with the conversion of the Existing Accounts) |
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Generate new Accounts |
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Increase Companys sales |
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Develop and cultivate Member relationships and build loyalty |
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Increase Credit Card penetration, Net Sales, and improve overall profitability for Company |
In order to achieve the Program objectives, cooperation and communication between the parties is essential. Accordingly, the parties shall establish a Joint Management Committee as set forth in Section 2.1(i). Through such Joint Management Committee, the parties shall work together in good faith to review, discuss and address any particular concerns that either such party has with regard to the general performance of the overall portfolio, as well as any matters which either party believes to be materiel with respect to the ongoing administration of the Program.
1.2 Definitions and Other Obligations . See Schedule 1.2.
SECTION 2 ESTABLISHMENT OF THE PROGRAM
2.1 Establishment of the Program; Applications for Credit .
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(b) Company and Bank shall use reasonable efforts to have the Program Commencement Date occur on or about October 10, 2014 or such other date as the parties mutually agree upon in writing.
(c) Applicants who wish to apply for an Account under the Program must submit a completed application on a form or in an electronic format approved by Bank, and Bank shall grant or deny the request for credit based upon Banks credit criteria. The parties agree, where possible, to utilize certain Company membership data to help with credit decisioning, subject to the terms of this Agreement. All internet applications for an Account shall be hosted by Company. In addition, the parties shall cooperate in good faith to implement a mobile credit card application solution as soon as practicable. The decision to extend credit to any Applicant under the Program shall be solely Banks decision, but Bank agrees to uniformly apply its credit criteria to all Applicants.
(d) When facilitating any Application Procedure, Company shall follow all applicable Operating Procedures and maintain the confidentiality of all Applicant data pursuant to Section 8.9. Depending on the Application Procedure utilized, the Account application shall be submitted to Bank by the Applicant or submitted by Company on behalf of the Applicant, in each case, in accordance with the Operating Procedures. With the exception of Take-One Account applications and Bank hosted Account applications, Company will supply a validated Member identification number for any existing Member Applicant in the application to Bank. For Bank hosted Account applications and Take-One applications, Company will provide Applicants Member identification numbers to Bank via access to Companys membership database or upon request. Individuals may not apply for an Account unless such individual is a Member or becomes a Member in conjunction with applying for an Account. When Bank capabilities permit, all Program marketing and/or Account solicitation materials for the Program shall be coded by Bank, or in the case where Company performs such marketing and/or Account solicitation, by Company in accordance with Banks Instructions, for the purpose of tracking the source of Account origination. Bank shall not be responsible for accurately tracking the source of Account origination for those marketing and/or solicitation materials not coded by Company in accordance with Banks instructions. Notwithstanding the foregoing, in the event there is no coding or other method to enable the tracking of an Account, it shall be assumed that Company sourced the particular Account.
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(e) Subject to Schedule 2.5(a), the Initial Application Procedures for the Program shall be Instant Credit, Quick Credit, Real-time Prescreen, Batch Prescreen, Take-Ones, and web/internet. Subject to Schedule 2.5(a), the initial Application Procedures for the Small Business Program shall be Instant Credit, and Take-Ones. At any time during the Term the parties may mutually agree to utilize Banks other Application Procedures.
(f) Qualified Applicants, who are also Members, desiring to use the Program shall be granted an Account and issued a Credit Card by Bank with a credit line in an amount to be determined by Bank in its discretion for each individual Applicant. Bank shall determine the terms and conditions of the Account to be contained in a Credit Card Agreement. For clarity, the Rewards Program Terms shall be determined by Company consistent with the terms and conditions of this Agreement that relate to the Rewards Program.
(g) (i) At Banks expense, Bank shall perform all functions necessary to administer and service the Accounts, including but not limited to: converting the Existing Accounts to the Program, establishing and administering the underwriting and credit decisions for the Program; making all necessary credit investigations; notifying Applicants in writing of acceptance or rejection of credit under the Program; issuing Credit Cards, preparing and mailing billing statements; making collections; handling Cardholder inquiries; and processing payments. Bank shall provide for the Program, [*] client sales representatives to manage the Program. As of the Effective Date, the Bank lead Program representative is [*], an employee of Banks servicer. [*] shall continue to be the [*] for so long as he remains in his current role as a [*]. If the [*] changes, Bank will reasonably consult with Company as to what person will be designated as the replacement Bank lead Program representative. To reasonably consult includes, but is not limited to, providing Company the opportunity to meet, speak with, and provide feedback on the person. In addition, Bank shall reasonably consider any concerns expressed by Company regarding the performance of any Bank lead Program representative, including a request that he/she be replaced.
(ii) In addition, Bank shall provide [*] field sales representatives to support the Program. During the first Program Year and at least [*] or as otherwise agreed to by the parties, the field sales representatives will provide Company with in-store training for Company managers with respect to the in-Club application process and the Program in general, including how the Rewards Program relates to the Program, to enable the Companys managers to train employees. On an ongoing basis during the Term, the [*] field sales representatives shall [*] for employees in connection with grand openings of new Company stores. Company shall inform Bank within a [*] time period prior to any such openings of the need for additional on-premises assistance. Lastly, a representative shall be available to Company employees for Program inquiries, Monday Friday from 9:00 AM EST to 5:00 PM EST, and a representative shall be available to Members for Account-level inquiries, and, with Member consent given to Bank, to Company employees for Application-related or Account-level inquiries, Monday Sunday from 8:00 AM EST to 1:00 AM EST. Company store employees will also be able to access service through the IVR unit on a 24x7 basis, 365 days a year. All Bank personnel assigned to the Program shall receive comprehensive training with respect to the Program.
(h) Bank shall perform in accordance with the Service Standards set forth in Schedule 2.1(h). Within fifteen (15) days of the close of the previous month, Bank will provide Company with a monthly summary of Banks performance regarding the Service Standards.
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(i) The parties shall establish a Joint Management Committee to review and discuss among other things, (i) development of the annual marketing plan including acquisition goals for both patties as described below in Section 2.5, general marketing efforts and Marketing Fund usage, all consistent with the requirements of Schedule 2.5(a) and Schedule 2.5(b), respectively; (ii) the general and financial performance and strategic operation of the Program; (iii) regulatory issues and industry competitiveness; (iv) ongoing product development/ modification and (v) any matters which either party believes to be material with respect to the ongoing administration and/or operation of the Program. The Joint Management Committee shall be comprised of an equal number of Bank and Company members, and include at least one member of management with decision-making authority for each party with regard to the Program. The Joint Management Committee shall meet no less than quarterly, unless otherwise agreed to by the parties. Actions taken by the Joint Management Committee shall be by mutual agreement, and in the event of impasse, the decision shall be referred to a key executive for each party for their review and resolution. In the event such key executives are unable to resolve the matter, the decision shall be referred to the President of the Bank (or designee, such as the President of Retail Services) and the President of the Company for review and resolution.
(j) Subject to requirements of Applicable Law, Company may conduct call monitoring of calls with Cardholders at Banks call center with at least five (5) days advance notice. The results thereof shall be reviewed with the Joint Management Committee semi-annually.
(k) MasterCard International, Inc. (MasterCard) shall be the initial selected Card Network for all Accounts issued under the Program during the Term (including all Existing Accounts). [*]. Company shall have the right to designate a different card network for all Accounts issued under the Program, so long as Bank has an existing relationship with the designated card network. In such event, Bank shall provide such card network with comparable information that it is required to provide MasterCard hereunder, although the parties acknowledge that the format and timing of such information may differ. [*].
2.2 Internet Features . Bank will develop as of the Program Commencement Date, and maintain [*], an Account Center website for the Program, which Account Center website shall include, among other things, Rewards Program information, including Rewards Dollars earned, total Rewards Dollars balance and, [*], Rewards Dollars redeemed, which includes Rewards Dollars certificates issued. The Parties acknowledge that Company shall be responsible for providing Bank with the reports as to Rewards Dollars redeemed, and accordingly, [*]. In addition, Account Center shall include certain Cardholder services and Account access. Account Center will be accessible to Companys Cardholders at any time, except for site standard maintenance. Company will develop and maintain on its own website, [*], a link to Account Center. In the event Bank changes or otherwise modifies the website address for its designated website, Company will either update or modify its link thereto, as directed by Bank. Each Party agrees that, in connection with the link, it will only use the others name, or any logo, statements or any other information that is related to the other, as directed by the other, and as approved in advance and in writing by the other. Bank shall provide [*] capabilities to Company when such capabilities are made available to Banks clients generally.
2.3 Operating Procedures . Bank shall observe and comply with all Applicable Laws in connection with its offer, approval and administration of Accounts. Prior to the Effective Date, Company may review Banks existing Operating Procedures. Company shall observe and comply with the Operating Procedures and such other reasonable procedures that
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apply to Companys responsibilities under the Program, as Bank may prescribe on not less than [*] to Company or otherwise required by Applicable Law or applicable Card Network Rules. The Operating Procedures may be amended or modified by Bank from time to time in its reasonable discretion; provided, however, unless such changes are required by Applicable Law, a copy of any such amendment or modification shall be provided to Company [*] before its effective date, and for those changes required by Applicable Law or Card Network Rules, if applicable, notice shall be given [*]. Bank will use [*] not to modify the Operating Procedures in such a manner that would adversely impact the Program unless such modification is required by Applicable Law. In addition, in the event of a conflict between the Operating Procedures and the Program Agreement, the Program Agreement shall govern.
2.4 Program Documents (Forms and Collateral) . (a) Forms General. Subject to (b) and (d) below, Bank shall design, determine the terms and conditions (other than those related to the Rewards Program) of, and generate and deliver to Cardholders, at its expense, the [*], and other documents and forms to be used under the Program which (i) relate to the Program, (ii) relate to Banks and/or the Cardholders obligations, (iii) are used by Bank in maintaining and servicing the Accounts; or (iv) are required by Applicable Law (collectively, Forms). The Forms will follow the same general format that the Bank uses for its other Bank clients. Forms shall be in the English language only and there shall be only one design for each Form. [*]. Furthermore, to the extent that an application for an Account includes, or Company provides Bank with access to its membership database or otherwise timely provides to Bank, the Member identification number, [*].
(b) Forms Conditions. The provisions of subsection 2.4(a) above are subject to the following conditions. Subject to Section 3.3, Applicable Law, and Section 2.8, Bank and Company shall jointly design [*]. Bank will submit all Forms (except letters to Cardholders) utilizing or referencing a Company Mark to Company for its review and written approval (including email approval) of use of Company Marks, which approval shall not be unreasonably withheld, and Company shall provide a response [*], Pursuant to this review and approval process, Bank will make (or have made) all changes that Company reasonably requests in exercising its rights under this Agreement. Notwithstanding the foregoing, administrative legal notices, collection letters, delinquency notices and other adverse action communications (Adverse Communication Letters) shall not bear Company Marks other than Company name and then such name may only be used to identify the Credit Card as a Company Credit Card. Bank shall provide Company with representative samples of the form of Adverse Communication Letters for Companys reference.
(c) Collateral . Subject to Section 3.3, Applicable Law, and Section 2.8, Company may design and produce promotional material, direct mail pieces, catalog, newspaper, radio and electronic advertisements, and other collateral documents (collectively, Collateral) which reference the Program and which may utilize or feature Bank Marks. Company shall submit all Collateral to Bank for its review and written approval (including email approval) of the Program disclosures, as well as references to the Program and use of Bank Marks, which approval shall not be unreasonably withheld and Bank shall provide a response [*]. Pursuant to this review and approval process, Company will make (or have made) all changes that Bank requests to satisfy Applicable Law and/or in exercising its rights under this Agreement. Bank may design and produce collateral in addition to Forms that may utilize or feature Company Marks. Bank shall submit all such collateral to Company for its review and written approval (including email approval) of references to the Program as well as use of Company Marks, which approval shall not be unreasonably withheld and Company shall provide a response [*]. Pursuant to this review and approval process for other collateral, Bank will make (or have made) all changes that Company requests in exercising its rights under this Section 2.4(c).
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(d) Banks Costs. Subject to subsection (e) below, Bank will determine which and how many of the following to provide based on the Annual Marketing Plan requirements, [*]. First, Bank will provide to Company at its central locations not to [*], for distribution to Members and Cardholders, marketing purposes, and mass mailings, as applicable: (i) adequate copies of Credit Card Agreements and applications; and (ii) the template of any appropriate Forms. Second, Bank shall be responsible to provide for the Program, an appropriate number of (or copies of, as applicable) Credit Card Agreements, applications, Credit Cards, billing statements, and card mailers.
(e) Bank Issuance and Re-Issuances. [*]. Bank will use [*] to provide Extra Value Cardholders with an Extra Value Credit Card upon Program Commencement so long as such Cardholders are adequately identified in the conversion files Bank receives from Barclays Bank Delaware. [*].
(f) Companys Costs. (i) Company Re-issuances. [*]. As a point of clarification, none of the following constitutes a Company Re-issuance: Banks replacement (on an Account-by-Account basis) of lost or stolen Credit Cards, expired Credit Cards, or Banks response to some other Cardholder request.
(ii) Variations from Banks Standards. [*]
(iii) Miscellaneous Company Expanses. [*]
2.5 Marketing and Promotion of Program . (a) Throughout the Term of this Agreement, Company and Bank shall each actively and consistently market, promote, participate in and support the Program, including without limitation those marketing promotions set forth in Schedule 2.5(a) and such other methods mutually agreed upon by the Joint Management Committee. Company and Bank will jointly agree upon programs to market the Program, both initially and on a continuing basis, including without limitation, seasonal promotions and annual marketing plans which shall detail the marketing efforts of both parties, as well as lifecycle marketing efforts to be conducted by Bank and/or Company (each an Annual Marketing Plan). The parties shall fulfill their individual and joint marketing related obligations as provided for in this Agreement and Schedule 2.5(a). The parties shall develop a mutually agreed upon Annual Marketing Plan for each Program Year [*] of each Program Year, which Annual Marketing Plan shall include the timing, frequency, and method of each marketing initiative described therein. Bank may conduct marketing initiatives, such as direct mail campaigns, [*], coordinating such efforts with the Annual Marketing Plan and with approval or the Joint Management Committee.
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(c) See Schedule 2.5(c).
2.6 Ownership of Accounts and Information . (a) Company and Bank recognize that Cardholders are Members, and that each party has certain ownership rights in information relating to such individuals in their respective roles as Cardholders and Members. [*] The parties acknowledge that the same or similar information may be contained in the Bank Cardholder Information (defined below) and the Company Member Information (defined below); such common information being referred to herein as Common Information. Each such pool of data shall therefore be considered separate information subject to the specific provisions applicable to that data hereunder.
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(b) [*]; such information and Companys Common Information shall be referred to collectively as Company Member Information. [*]. Bank shall use the most current Company Member List provided by Company for any marketing efforts conducted by Bank. [*].
(c) (i) [*]. Additionally, [*]. Such information and Banks Common Information shall be referred to collectively as Bank Cardholder Information. [*], except as permitted by this subsection or Section 8.9, or to use Bank Cardholder Information (including Applicant Information) for any purpose other than the operation and administration of the Program, and for Banks portfolio-wide analysis. Following the Term of this Agreement, [*]. Furthermore, following the Term of this Agreement, [*].
(ii) During the Term of this Agreement (i) [*], in each case, provided that such contractor, subcontractor, or vendor [*], and so long as such disclosure is in furtherance of the Program and in compliance with Applicable Law. Moreover, the Joint Management Committee will discuss the mail-houses utilized by Bank for the Program.
(iii) Bank shall provide to Company, [*]. To the extent any change by Bank precludes the delivery of any information on Schedule 2.6 such that Company is unable to execute certain of its obligations hereunder, Company shall be excused from such obligations for so long as such information is not made available by Bank. [*].
2.7 Protection Programs and Enhancement Marketing Services . [*] (collectively referred to herein as Protection Programs) as set forth in Schedule 2.7. Bank will have the right but not the obligation to make available to Cardholders, through solicitations made in connection with the Program (but not Account Solicitations) [*] as agreed to by the Joint Management Committee. The fees for Protection Programs and/or Enhancement Marketing Services will be charged to the applicable Cardholders Account. [*].
2.8 Ownership and Licensing of the Party s Marks . (a) Subject to the other provisions of this Agreement, Company hereby grants to Bank [*] (except as to branded credit card accounts per Section 3.5), [*] to use the Company Marks solely in satisfaction of its duties, rights and obligations described in this Agreement, including without limitation, using same in any and all promotional materials, Account documentation, advertising, websites, marketing, and solicitations related to the Program, as well as Banks and its Affiliates product marketing and promotional materials and literature in written and electronic form, as well as their business client lists. Bank shall use the trademark designations ® or TM or such other designation as Company may specify or approve in connection with the Company Marks on the Credit Cards, Account documentation and promotional materials. [*].
(b) Anything in this Agreement to the contrary notwithstanding, Company shall retain all rights in and to Company Marks pertaining to such Accounts, and all goodwill associated with the use of Company Marks (whether under this Agreement or otherwise) shall inure to the benefit of Company. Company shall have the right, in its sole and absolute discretion, to prohibit the use of any Company Marks in any Forms, advertisements or other materials or references proposed to be used by Bank which Company in its reasonable business judgment deems objectionable or improper. Bank shall cease all use of Company Marks upon the termination of this Agreement for any reason pursuant to Section 2.8(c), below.
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(c) Except as otherwise specifically provided in this subsection (c), Bank shall cease all use of Company Marks and the Company name upon termination of this Agreement. Bank may:
(i) [*], if, to the extent, and for as long as such use is required for the performance of Banks obligations under Schedule 7.4 (if any);
(ii) if Bank retains ownership of the Portfolio pursuant to Schedule 7.4, [*]; and continue to use the Company name (without any Company logo or design element) for purposes of avoiding consumer confusion during the transition period provided that all use to the extent permitted under this clause shall cease in accordance with the provisions set forth in Schedule 7.4.
(iii) continue to use the Company name (without any Company logo or design element) in accordance with Schedule 7.4 if and only to the extent necessary in connection with administration of the Accounts that are excluded from a Portfolio purchase under Schedule 7.4 or that Bank retains pursuant to Schedule 7.4 (including the collection of amounts owed on the Accounts by referencing that the Account or Purchase balance due is related to the Credit Card and (if applicable) Companys goods and/or services); and
(iv) continue to use the Company name (without any Company logo or design element) if and to the extent necessary for the performance of Banks obligations under Applicable Law as issuer of the Credit Cards.
(d) Company recognizes that Bank is the sole owner of the Bank Marks, that Company has no rights of ownership or license therein, and that Company is not entitled to (and shall not) use the Bank Marks other than as explicitly and specifically provided in this Agreement. As a point of clarification, Bank has and retains all rights in and to Bank Marks and the use thereof, and all goodwill associated with the use of Bank Marks (whether under this Agreement or otherwise) shall inure to the benefit of Bank. Bank shall have the right, [*], to prohibit the use of any Bank Marks in any Program Documents, advertisements, or other materials or references proposed to be used by Company which Bank in its reasonable business judgment deems objectionable or improper. [*].
2.9 Cardholder Rewards Program .
(a) Company will own, implement and operate the Rewards Program for Cardholders throughout the Term and thereafter as set forth in Schedule 2.9. [*].
(b) Bank will provide Company with certain system functionality and recordkeeping in support of the Rewards Program, which recordkeeping shall be [*] contemplated under this Section 2.9(b) or where a rewards certificate is part of the billing statement. Bank shall reasonably cooperate with Companys efforts to create, [*]. In addition, [*]. The system functionality to be provided by Bank as described herein shall be [*] to Company provided that Companys Rewards Program: (x) is compatible with Banks existing or future functionality offered to other Bank clients, and (y) [*]. Otherwise, such functionality, if available, shall be provided pursuant to terms (including fees to be paid to Bank) mutually agreed to by the parties.
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(c) Notwithstanding anything in this Section 2.9 to the contrary, Company and Bank agree that the Rewards Program will be subject to the terms set forth in Schedule 2.9.
SECTION 3 OPERATION OF THE PROGRAM
3.1 Processing Purchases .
(a) Company shall honor any Credit Card properly issued and currently authorized by Bank pursuant to the Program. The applicable Card Network Rules shall govern settlement, disputes and chargebacks for all Purchases processed through a Card Network. Notwithstanding the foregoing, prior to the Program Commencement Date, the parties may agree in writing to Direct Settlement of Company Purchases made on Accounts under the Program. If the parties agree to such Direct Settlement, then the terms of Section 3.8 below shall apply to all Direct Settlement transactions, if the parties do not agree to Direct Settlement of Company Purchases prior to the Program Commencement Date, then as of the Program Commencement Date, Section 3.9, below, shall apply to Company Purchases made on Accounts under the Program.
(b) Company shall obtain and maintain [*] such Point of Sale terminals, cash registers, network (electronic communication interchange system), telephone or other communication lines, software, hardware, websites and other items of equipment as are necessary for it to request and receive authorizations, transmit charge slip and credit slip information, facilitate the Application Procedures and perform its obligations under this Agreement and applicable Card Network Rules. The computer programs, equipment and telecommunications protocols necessary to facilitate communications and file transfers between Bank and Company (and/or Bank and specific Sales Channels, if applicable) (Systems Technology) shall be determined by Bank from time to time, subject to reasonable prior notice of any change in such Systems Technology, and discussion of potential costs associated with such changes. Excluding costs incurred by Company to upgrade and/or integrate its Systems Technology in anticipation of the launch of the Program in the manner as contemplated under this Agreement, [*].
3.2 Ownership of Accounts; Fees; Accounting . (a) [*] from the time of establishment, and except as otherwise provided herein, [*].
(b) The Credit Card Agreements shall include the Rates and Fees as are set forth in Schedule 3.2 (b). In connection with its servicing of the Accounts, Bank may make changes [*]. Bank may also make changes to an Account to reflect a Cardholders change in Member status with Company (e.g., individual Account changes related to a Cardholders change from a Value Cardholder to an Extra Value Cardholder), if Company has notified Bank of such changes to a Cardholders Company membership. [*]. Notwithstanding the foregoing, with respect to any changes in the Rates and Fees or other changes affecting a significant portion of Accounts Bank will, prior to making any such changes, notify Company of such changes. Notwithstanding anything in this Section 3.2(b) to the contrary, [*] set forth in Schedule 3.2(b) without the approval of the Joint Management Committee.
3.3 Bank Mailings; Insertion of Company s Promotional Materials . Envelope space (including bangtail) for billing statements and Credit Card mailers shall be allocated as follows:
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(a) Priority Materials, defined as: legally required material, privacy notices, disclosures, Cardholder notices, billing statements, new Credit Card mailers, PIN mailers, Credit Card Agreement, and notices sent by Bank;
(b) Banks other inserts (including bangtail) provided, however, that in six (6) of the twelve (12) Billing Statement mailings in any given Program Year, Company shall have the right to include one (1) insert that takes precedence over Banks other inserts (including bangtail).
(c) Companys promotional materials, subject to the following terms:
(i) At Companys request, Bank will include with the billing statements and new Credit Card mailers Company promotional materials provided by Company, so long as the materials: (1) are provided to Bank at least thirty (30) days prior to the scheduled mailing date of such statements or notices and pursuant to an insert schedule that Company provided to Bank at least sixty (60) days in advance; (2) have been approved as to content by Bank (in its reasonable discretion) with respect to any manner of reference to Bank or the Program; (3) meet all size, weight, or other specifications for such inserts as shall be reasonably set by Bank from time to time; (4) would not require the removal (in Banks standard envelope) of Priority Materials and/or Banks other inserts; and (5) are paid for by Company, but the insertion and mailing costs shall be funded by Bank with the exception of additional postage costs caused by Banks insertion of such materials.
(ii) Bank reserves the right to disallow any inserts which are in violation of Applicable Law, conflict with any other provision of this Agreement, or whose subject matter is reasonably deemed by Bank to be inappropriate in nature.
3.4 Cardholder Payments . All payments to be made by Cardholders with respect to any amounts outstanding on the Accounts shall be made in accordance with the instructions of Bank and at the location or address specified by Bank. Company hereby authorizes Bank, or any of its employees or agents, to endorse Comenity Capital Bank upon all or any checks, drafts, money orders or other evidence of payment, made payable to Company and intended as payment on an Account, that may come into Banks possession from Cardholders and to credit said payment against the appropriate Cardholders Account, As to any Cardholder who inquires of Company as to where payments on Accounts shall be made, Company shall inform them that payments should be made to Bank. Bank has the sole right to receive and retain all payments made with respect to all Accounts and to pursue collection of all amounts outstanding, unless a Company Purchase is charged back to Company pursuant to the provisions of Section 3.8 hereof.
3.5 Non-Competition . (a) Except as otherwise provided in this subsection (a) or subsection (b) below, Company agrees that, in consideration of and as an inducement for Bank to make the Program available to Company as provided in this Agreement, [*]. If after [*] the parties have not reached agreement, Company may consider competitive bids from other issuers. Provided, however, Company may at any time develop, conduct a request for proposals, and/or enter into a Letter of Intent or agreement with another credit card provider for a plan or program that will be effective on or after termination of this Agreement.
(b) Notwithstanding the provisions set forth in subsection (a) above or elsewhere in this Agreement, nothing contained in this Agreement will be construed to prohibit or prevent Company from (1) accepting (a) any major general purpose credit card (including without limitation, American Express Card, MasterCard, Visa, or Discover) that is not branded with Company Marks; or [*].
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3.6 Reports . Bank will deliver to Company the reports set forth in Schedule 3.6, as specified therein and to the extent information is available and applicable. Bank may provide any additional reports requested by Company upon such terms and conditions (including cost) as are mutually agreed to by the parties. Company shall provide a report of Excluded Cardholders to Bank each month.
3.7 New Businesses and Existing Credit Program Conversions .
(a) General : If Company internally develops a new business or acquires another pre-existing business that does not fall within the definition of Sales Channels as set forth in Schedule 1.2, [*].
(c) All Transaction Records are subject to review and acceptance by Bank. In accordance with the Section 5.3, Bank shall provide access to Company to research transaction authorizations and settlements. In the event of a computational or similar error of an accounting or record keeping nature with respect to such Transaction Records, after notice to Company, Bank may credit to the Companys Deposit Account or net against the Net Proceeds (as the case may be) the proper amount as corrected. If the Net Proceeds are insufficient, Company shall remit the proper amount to Bank promptly following notification from Bank. Upon any such correction, Bank shall give Company prompt notice of same, including details of fee discrepancy and correction. Company shall be responsible for ensuring that all Promotional Program Purchases are property designated as such on fee Transaction Record in accordance with Banks instructions.
(d) Cardholder Disputes Regarding Accounts, and Goods and/or Services . Company shall promptly notify Bank regarding any Cardholder dispute regarding an Account including the Cardholders Rewards Account and help to resolve any such dispute, including but not limited to any Applicant or Cardholder claim, dispute, or defense which may be asserted under Applicable Law. This includes but is not limited to claims related to outstanding balances, Bank reports to credit bureaus, finance charges, fees, and collection efforts (e.g., notification that the Cardholder has filed bankruptcy or wants collection communications directed to legal counsel, etc.). Additionally, Company shall act promptly to investigate and work to resolve disputes with Cardholders regarding Company Purchases on an Account, and timely process credits or refunds for Cardholders.
(e) Chargebacks . Direct Settlement notwithstanding, the applicable Card Network Rules shall govern chargebacks for all Company Purchases.
(f) Exercise of Chargebacks . [*]
3.9 Interchange Refund.
[*]
3.10 Right of Offset . Notwithstanding anything in this Agreement to the contrary, if Company fails to pay Bank any undisputed amounts due to Bank pursuant to this Agreement for [*], as applicable, the due date or date of demand, Bank may offset such amounts against the Net Proceeds or any other amounts owed by Bank to Company under this Agreement.
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SECTION 4 REPRESENTATIONS AND WARRANTIES
Each party makes the following representations and warranties to the other party as of the date of this Agreement and throughout the Term:
4.1 Organization, Power and Qualification . Such party is duly organized, validly existing and in good standing under the laws of its jurisdiction or organization and has full power and authority to enter into this Agreement and to carry out the provisions of this Agreement. Such party is duly qualified and in good standing to do business in all jurisdictions where located and/or conducting business, except where the failure to be so qualified would not have a material adverse effect on such partys business or such partys or the other partys ability to perform as required under this Agreement or, operate the Program.
4.2 Authorization, Validity and Non-Contravention .
(a) This Agreement has been duly authorized by all necessary corporate proceedings (or analogous governing proceedings) by such party. Further, this Agreement has been duly executed and delivered by such party, and is a valid and legally binding agreement of such party and duly enforceable in accordance with its terms (except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors rights generally and by general equity principles).
(b) No consent, approval, authorization, order, registration or qualification of or with any court or regulatory authority or other governmental body having jurisdiction over such party is required for (nor would the absence of such adversely affect) the legal and valid execution and delivery of this Agreement, and the performance of the transactions contemplated by this Agreement
(c) The execution and delivery of this Agreement by such party, the execution of each partys obligations hereunder and the compliance by such party with all provisions of this Agreement: (i) will not conflict with or violate any Applicable Law; and (ii) will not conflict with or result in a breach of or default under any of the terms or provisions of any indenture, loan agreement, or other contract or agreement to which such party is a party (including but not limited to any under which such party is an obligor or by which its property is bound) where such conflict, breach or default would have a material adverse effect on such party or the Program, nor will such execution, delivery or compliance violate or result in the violation of the Articles of Incorporation or By-Laws (or analogous rules of governance) of such party.
4.3 Accuracy of Information . All factual information furnished by such party to the other party hereto in writing at any time pursuant to any requirement of, or furnished in response to, any written request of such other party under this Agreement or any transaction contemplated hereby has been, and all such factual information hereafter furnished by such party to the other party hereto will be, to such partys best knowledge and belief, true and accurate in every respect material to the transactions contemplated hereby on the date as of which such information was or will be stated or certified.
4.4 Compliance with Law . Any action taken by such party, including without limitation to effect its responsibilities and obligations hereunder, or inaction (where such party has a duty to act) in connection with the Program and/or the other party hereto, shall be in compliance in all material respects with Applicable Law.
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4.5 Intellectual Property Rights .
(a) In the event Company provides any software or hardware to Bank, Company has the legal right to such software or hardware and the right to permit Bank to use such software or hardware, and such use shall not violate any intellectual property rights of any third party. Any software or other technology developed by or for Company or its Affiliates, to facilitate the Program, including but not limited to, software and software modifications developed in response to Banks request or to accommodate Banks special requirements and all derivative works, regardless of the developer thereof, will remain the exclusive property of Company and/or its Affiliates. Nothing in this Agreement shall be deemed to convey a proprietary interest to Bank or any third party in any of the software, hardware, technology or any of the derivative works thereof which are owned or licensed by Company and/or its Affiliates, and Bank shall return to Company all materials containing such intellectual property upon termination of this Agreement.
(b) In the event Bank provides any software or hardware to Company, Bank has the legal right to such software or hardware and the right to permit Company to use such software or hardware, and such use shall not violate any intellectual property rights of any third party. Any software or other technology developed by Bank or its Affiliates or developed for Bank or its Affiliates at Banks direction or expense, to facilitate the Program and/or to fulfill Banks obligations pursuant to Section 2.9, Schedule 2.9, and Exhibits 2.9.1 and 2.9.2, including but not limited to, software and software modifications developed in response to Companys request or to accommodate Companys special requirements and all derivative works, regardless of the developer thereof, will remain the exclusive property of Bank and/or its Affiliates. Nothing in this Agreement shall be deemed to convey a proprietary interest to Company or any third party in any of the software, hardware, technology or any of the derivative works thereof which are owned or licensed by Bank and/or its Affiliates, and Company shall return to Bank all materials containing such intellectual property upon termination of this Agreement.
4.6 Marks . In the case of Company, Company has the legal right to use and to permit Bank to use, to the extent set forth herein, the Company Marks. In the case of Bank, Bank has the legal right to use and to permit Company to use, to the extent set forth herein, the Bank Marks.
SECTION 5 COVENANTS
Each party hereby covenants and agrees as follows:
5.1 Notices of Changes . Each party will [*] notify the other of any: (a) change in the name or form of its business organization, change in the location of its chief executive office or the location of the office where its records concerning the Program are kept; (b) merger or consolidation of such party, the sale of a significant portion of its stock (or other form of ownership) or the sale of a substantial amount of its assets not in the ordinary course of business, or any change in the control of such party; (c) material adverse change in its financial condition or operations; (d) [*]; (e) any change in business practices of such party that would have a material adverse effect on this Agreement or the Program; (f) [*]; or (g) [*]. Each party will furnish such additional information with respect to any of the foregoing as the other party may reasonably request, for the purpose of evaluating the effect of such change on the financial condition and operations of the affected party and on the Program. Failure by either party to comply with these notice provisions shall not constitute a default hereunder.
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5.2 Financial Statements . [*]
5.3 Access Rights .
(a) Subject to (b) below, each party will permit, once per Program Year unless the other party has reasonable cause to do so more than once, authorized representatives designated by the accessing party, at accessing partys expense, to visit its facilities and inspect, to the extent permitted by Applicable Law, any of its books and records (and, in the case of Company, its Sales Channels) pertaining to Applicants, Accounts and any category of payments owed by one party to the other, and to make copies and take extracts there from, and to discuss the same with its officers and independent public accountants, all at reasonable times during normal business hours and with [*]. In addition, Company shall permit regulatory bodies having jurisdiction over Bank to visit its facilities related to the Program during normal business hours with advance notice.
(b) Each partys obligations under (a) shall not be required to the extent that (i) such access is prohibited by Applicable Law, (ii) such records are legally privileged, or (iii) such records are planning documents or those of any of its Affiliates, operating budgets, management reviews or employee records.
5.4 Each Party s Business . Each party shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence (or analogous business form) and to comply with all Applicable Laws in connection with its business (and, in the case of Company, the sale of goods and/or services), including, but not limited to: (i) compliance with all applicable license requirements related to its business, and (ii) fulfilling its obligations under the Program. Company shall provide to Bank, annually, a forecast of the next year in terms of Companys number of stores or other locations (including number and location of openings and/or closings), and expansion or contraction of any Sales Channels.
5.5 Insurance . Each party shall maintain insurance policies with insurers, and in such amounts and against such types of loss and damage, as are customarily maintained by other companies engaged in similar businesses within such partys industry including cyber insurance. [*]. Bank shall name Company as an additional insured under Banks Commercial General Liability and auto liability policies.
5.6 Business Continuation/Disaster Recovery Plan . Each party shall maintain a plan designed to mitigate damages resulting from Force Majeure or other causes that would threaten operation of such partys business and/or loss or exposure of information requiring protection as described in Sections 2.6 and 8.9.
5.7 Compliance with Agreement and Operating Procedures . Each party shall use [*] to ensure that its Affiliates, licensees, franchises, officers, directors, associates and agents comply with the terms of this Agreement and the Operating Procedures.
SECTION 6 INDEMNIFICATION
6.1 Indemnification Obligations . (a) Each party shall be liable to and shall indemnify and hold harmless the other and its Affiliates and their respective officers, directors, employees, subcontractors and their successors and assigns (collectively Indemnified Parties) from any and all Losses (as hereinafter defined) incurred by them by reason of: (i) The indemnifying partys breach of any representation, warranty, covenant or agreement hereunder;
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notwithstanding any materiality or other qualifier set forth in such provision (ii) The indemnifying partys failure to perform its obligations hereunder; (iii) any action or failure to act (where there was a duty to act) by the indemnifying party related to the Program and/or as otherwise provided for in this Agreement; (iv) The indemnifying party having caused Losses to third parties in connection with its obligations under this Agreement, where such third parties have sought recovery from Indemnified Parties; and (v) The indemnified partys defending against claims described in (iv). In any case, the indemnifying partys liability does not extend to Losses proximately arising from an act or failure to act by Indemnified Parties. Additionally, Company shall indemnify Bank and its Indemnified Parties for any Losses caused by or related to goods or services charged to an Account or third parties use of or reliance on Redemption Data.
(b) For purposes of this Section 6, the term Losses shall mean any liability, damage, costs, fees, losses, judgments, penalties, fines, and expenses, including without limitation, any reasonable attorneys fees, disbursements, settlements (which require the other partys consent which shall not be unreasonably withheld), and court costs, reasonably incurred by Bank, Company, or a third-party, as the case may be, without regard to whether or not such Losses would be deemed material under this Agreement; provided however, that Losses shall not include any overhead costs that either party would normally incur in conducting its everyday business.
[*]
6.2
6.3 NO WARRANTIES . EXCEPT AS PROVIDED HEREIN, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RESPECTING THE SERVICES AND/OR OTHER PRODUCTS SOLD OR PROVIDED BY BANK PURSUANT TO THIS AGREEMENT.
6.4 Notification of Indemnification; Conduct of Defense . (a) In no case shall the indemnifying party be liable under Section 6.1 of this Agreement with respect to any claim or claims made against the indemnified party or any other person so indemnified unless it shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof. However, failure to so notify the indemnifying party shall not relieve it from any liability which it may have under other provisions of this Agreement, except to the extent that the indemnifying partys right to defend the matter is materially and irrevocably prejudiced by such failure to give prompt notice.
(b) The indemnifying party shall be entitled to participate, at its own expense, in the defense of any suit brought against the indemnified party which gives rise to a claim against the indemnifying party. Alternatively, the indemnifying party may elect to assume defense of such claim, but must do so within a reasonable time after receiving notice of the claim. However, if the indemnifying party so elects to assume the defense, such defense shall be conducted by counsel chosen by the indemnifying party and approved by the indemnified party (or the person or persons so indemnified, who are the defendant or defendants in any suit so brought), which approval shall not be unreasonably withheld. Once the indemnifying party has retained counsel approved by the indemnified party, the indemnified party (or the person or persons so indemnified who are the defendant or defendants in the suit), [*] of any additional counsel it chooses to retain.
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SECTION 7 TERM, EXPIRATION AND TERMINATION
7.1 Term and Expiration . See Schedule 7.1.
7.2 Termination with Cause by Bank; Bank Termination Events . Any of the following conditions or events shall constitute a Bank Termination Event hereunder, and Bank may terminate this Agreement immediately without further action if such Bank Termination Event occurs except as set forth below:
(a) If Company shall: (i) file, or consent by answer or otherwise to the filing against it, of a petition for relief, reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction; (ii) make an assignment for the benefit of its creditors; (iii) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers of itself or of any substantial part of its property; (iv) be adjudicated insolvent or be liquidated; or (v) receive an adverse opinion by its auditors or accountants and/or (vi) receive an opinion by its auditors that includes a disclosure as to Companys viability as a going concern (however, Bank shall only have the right to terminate the agreement under this section (a)(vi) if Company has not cured the matters included in the going concern disclosures [*]); or
(b) If a court or government authority of competent jurisdiction shall enter an order appointing, without consent by Company, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or if an order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding up or liquidation of Company, or if any petition for any such relief shall be filed against Company [*]; or
(c) If Company shall materially default in the performance of or compliance with any term or violates any of the covenants, representations, warranties or agreements contained in this Agreement, and Company shall not have remedied such default [*]. (Company acknowledges that any breach of its representation in Section 8.11 cannot be cured.); or
(d) If Bank exercises its rights under Section 8.8 [Force Majeure].
7.3 Termination with Cause by Company; Company Termination Events . Any of the following conditions or events shall constitute a Company Termination Event hereunder, and Company may terminate this Agreement immediately without further action if such Company Termination Event occurs;
(a) If Bank shall: (i) file or consent by answer or otherwise to the filing against it, of a petition for relief, reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction; (ii) make an assignment for the benefit of its creditors; (iii) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers for itself or of any substantial part of its property; (iv) be adjudicated insolvent or be liquidated; or (v) be downgraded by a rating agency to [*]; or (vi) receive an adverse opinion by its auditors or accountants as to its viability as a going concern; or (vii) breach or fail to perform or observe any covenant or other term contained in any creditor loan agreement, debt instrument or any other material agreement to which it is bound, which breach or failure, if left uncured could result in a default of such agreement; or
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(b) If a court or government authority of competent jurisdiction shall enter an order appointing, without consent by Bank, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or if an order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding up or liquidation of Bank, or if any petition for any such relief shall be filed against Bank [*]; or
(c) Except with respect to the Service Standards, if Bank shall materially default in the performance of or compliance with any term or violates any of the covenants, representations, warranties or agreements contained in this Agreement, and Bank shall not have remedied such default [*] shall have been received by Bank from Company. (Bank acknowledges that any breach of its representation in Section 8.11 cannot be cured); or
(d) [*]; or
(e) If Company exercises its rights under Section 8.6 [Force Majeure]; or
(f) See Schedule 7.3(f).
7.4 Purchase of Accounts. See Schedule 7.4.
SECTION 8 MISCELLANEOUS
8.1 Entire Agreement; Amendment; No Waiver; Severability; Counterparts; Captions and Cross References; Mutual Drafting . This Agreement constitutes the entire Agreement and supersedes all prior representations, proposals, offers, agreements and understandings, whether oral or written, among the parties hereto with respect to the subject matter hereof and merges all prior discussions between them. Except as otherwise provided for in this Agreement, the provisions herein may be modified only upon the mutual agreement of the parties, however, no such modification shall be effective until reduced to writing and executed by both parties. No waiver of the provisions hereto shall be effective unless in writing and shall not be deemed to be a continuing waiver unless expressly so stated in writing. No failure or delay on the part of either party in exercising any power or right under this Agreement shall be deemed to be a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right. If any of the provisions or parts of the Agreement are determined to be illegal, invalid or unenforceable in any respect, such provisions or parts shall be deemed omitted without affecting any other provisions or parts of the Agreement which shall remain in full force and effect. This Agreement may be signed in one or more counterparts, all of which shall be taken together as one agreement. The table of contents and various captions in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. References in this Agreement to any Section are to such Section of this Agreement. This Agreement is the joint product of Company and Bank and each provision hereof has been subject to mutual consultation, negotiation and agreement of Company and Bank; therefore to the extent any language in this Agreement is determined to be ambiguous, it shall not be construed for or against any party based on the fact that either party controlled the drafting of the document.
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8.2 Coordination of Public Statements . Except as required by Applicable Law, including, without limitation, any SEC filings reasonably deemed by a party to be required (in which case the party making such filing will provide notice thereof to the other, in advance whenever possible, and shall when possible redact any and all exhibits, schedules and such other information as the parties may discuss), neither party will make any public announcement of the Program or provide any information concerning the Program to any representative of any news, trade or other media without the prior approval of the other party, which approval will not be unreasonably withheld. Neither party will respond to any inquiry from any public or governmental authority, except as required by Applicable Law, concerning the Program without prior consultation and coordination with the other party. Upon Banks reasonable request from time to time, Company shall provide references or participate in marketing campaigns or testimonial initiatives for Bank regarding the services provided by Bank in connection with the Program.
8.3 Successors and Assigns . Subject to Schedule 7.3(f), this Agreement and all obligations and rights arising hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors, transferees and permitted assigns. Neither party may assign its rights and obligations under this Agreement without the written consent of the other party, except in the event of an assignment to an Affiliate or in the case of a Change of Control (as defined in Section 7.3(f) which shall not require the other partys consent. Subject to Schedule 7.3(f), in the event that Company sells, transfers or otherwise disposes of all or substantially all of the assets that comprise the line-of-business currently operating under the name BJs Wholesale Club, the purchaser in such transaction is a successor, transferee and/or assignee of Company (the defined party to this Agreement), and the terms of this Agreement shall be binding upon such purchaser (regardless of whether or not such entity is a parent, Affiliate, or party with some other relationship of the kind with Company, and regardless of under what name the business is conducted).
8.4 Notices . All communications and notices pursuant hereto to either party shall be in writing and addressed or delivered to it at its address shown below, or at such other address as may be designated by it by notice to the other party, and shall be deemed given when delivered by hand, or two (2) Business Days after being mailed (with postage prepaid) or when received by receipted courier service:
If to Bank:
Comenity Capital Bank 2795 E. Cottonwood Parkway Suite #100 Salt Lake City, UT 84121 Attn.: President
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If to Company:
BJs Wholesale Club, Inc. 25 Research Drive Westborough, MA 01581 Attn: Senior Vice President Finance |
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With a Copy to: Comenity LLC 3100 Easton Square Place Columbus, OH 43219 Attn: Law Department |
With a Copy to:
BJs Wholesale Club, Inc. 25 Research Drive Westborough, MA 01581 Attn: General Counsel |
8.5 GOVERNING LAW/WAIVER OF JURY TRIAL . [*]
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8.6 Force Majeure . Neither party will be responsible for any failure or delay in performance of its obligations under this Agreement because of circumstances beyond its reasonable control, and not due to the fault or negligence of such party, including but not limited to, acts of God, flood, criminal acts, fire, riot, computer viruses or hackers where such party has utilized commercially reasonable means to prevent the same, accident, embargo, sabotage, terrorism, inability to obtain material, equipment or phone lines, government action (including any laws, ordinances, regulations or the like which restrict or prohibit the providing of the services contemplated by this Agreement), and other causes whether or not of the same class or kind as specifically named above. The foregoing force majeure clause shall have no effect on and shall not diminish either partys obligation to implement its disaster recovery plan.
In the event a party is unable to perform substantially for any of the reasons described in this Section, it will notify the other party promptly of its inability so to perform, and if the inability continues for [*], the party so notified may then terminate this Agreement forthwith. This provision shall not, however, release the party unable to perform from using its [*] to avoid or remove such circumstance and such party unable to perform shall continue performance hereunder with the utmost dispatch whenever such causes are removed.
8.7 Survival . [*]
except for the following Sections and their corresponding schedules: Section 2.8, Section 3.2, Section 3.4, Section 6, Section 7.4, Section 8.4, Section 8.5, Section 8.6, Section 8.9, Section 8.10 and Section 8.11.
8.8 Relationship of Parties; Third Parties; Independent Contractor . This Agreement does not constitute the parties as partners or joint venturers and neither party will so represent itself. The provisions of this Agreement are for the benefit of the parties hereto and not for any other person or entity. The parties hereby declare and agree that Bank is engaged in an independent business, and shall perform its obligations under this Agreement [*], including compliance with workers compensation, unemployment, disability insurance, social security, withholding and all other federal, state and local laws, rules and regulations governing such matters; that [*].
8.9 Confidentiality and Security Control .
(a) Confidential Information and Other Protected Information, Except as specifically provided in this Section 8.9, or as otherwise set forth in this Agreement, [*]. Additionally, the [*].
However, the definition of Confidential Information specifically excludes information which:
(i) is generally known to the trade or to the public at the time of such disclosure; or
(ii) becomes generally known to the trade or the public subsequent to the time of such disclosure; provided, however, that such general knowledge is not the result of a disclosure in violation of this Section 8.9; or
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(iii) is obtained by a party from a source other than the other party, without breach of this Agreement or any other obligation of confidentiality or secrecy owed to such other party or any other person or organization; or
(iv) is independently conceived and developed by the disclosing party and proven by the disclosing party through tangible evidence not to have been developed as a result of a disclosure of information to the disclosing party, or any other person or organization which has entered into a confidential arrangement with the non-disclosing party; or
(v) Bank is required to report to a Card Network by such Card Networks applicable rules and regulations.
(b) Permitted Uses and Disclosures. Nothing in this Section 8.9 shall be interpreted to mean that a party is restricted with respect to the use or disclosure of Confidential Information which it owns. [*]. Notwithstanding anything to the contrary in this Agreement, [*].
(c) Protecting Disclosed Information. [*]. Furthermore, the [*].
(d) Protecting Stored Information. Each party shall establish [*] to ensure the confidentiality of any Consumer Personal Information and the others Confidential Information. Each party shall also ensure that such Information is not disclosed contrary to the provisions of this Agreement or any applicable privacy, security or other laws, rules and regulations. Without limiting the foregoing, [*]. If the parties are unable to reach agreement with regard to such revisions, the matter shall be referred to the Joint Management Committee for resolution. [*].
(e) [*]. This includes but is not limited to any and all records regarding Cardholders whether in paper, electronic, or other form, that is maintained or otherwise possessed by or on behalf of Company, including a compilation of such records. [*].
(f) [*]. This includes but is not limited to any and all records whether in paper, electronic, or other form, that is maintained or otherwise possessed by or on behalf of Bank, including a compilation of such records.
8.10 Taxes . [*]. The parties agree to cooperate with each other to minimize any applicable sales, use, or similar tax and, in connection therewith, the parties shall provide each other with any relevant tax information as reasonably requested (including without limitation, resale or exemption certificates, multi-state exemption certificates, information concerning the use of assets, materials and notices of assessments). All amounts set forth in this Agreement are expressed and shall be paid in lawful U.S. dollars.
8.11 Brokers . Except as set forth on Schedule 8.11, [*].
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in manner and form sufficient to bind them as of the Effective Date.
COMENITY CAPITAL BANK | BJS WHOLESALE CLUB, INC. |
By: |
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By: |
/s/ William C. Werner |
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Title: |
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Title: | SVP, Finance | |||||
Date: |
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Date: | 6/5/14 |
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in manner and form sufficient to bind them as of the Effective Date.
COMENITY CAPITAL BANK | BJS WHOLESALE CLUB, INC. | |||||||
By: |
/s/ Ronald J. Ostler |
By: |
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Title: | President | Title: |
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Date: | 6/5/14 | Date: |
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EXECUTION COPY
SCHEDULE 1.2
Definitions and Other Obligations
A. DEFINITIONS
As used herein and unless otherwise required by the context, the following terms shall have the following respective meanings.
Account shall mean an (i) an Existing Account, and (ii) individual, general purpose open-end revolving line of credit which is established by Bank for a Member pursuant to the terms of a Credit Card Agreement and in accordance with the applicable Card Network rules and regulations, and marketed with a Company Mark and the trade names and/or logos of a Card Network. Unless specifically set forth otherwise, Account shall include small Business Accounts.
Account Center shall mean an electronic customer service system Bank makes available on a Bank website.
Accounts Receivable shall mean, as to any Account at the time of reference, any and all amounts owing on such Account (whether or not posted or billed to an Account), less any payments and credits received by Bank with respect to the Accounts. This definition specifically excludes any amounts that have been written-off by Bank with respect to such Accounts.
Activation Certificate means, as the context may require, a Value Activation Certificate, an Extra Value Activation Certificate, or both a Value Activation Certificate and Extra Value Activation Certificate.
Actual LIBOR Rate shall mean 12 Month LIBOR Rate as published in the Wall Street Journal on the day of reference, at the end of each Program Quarter, beginning at the end of the second Program Quarter.
Acquiring Bank shall mean the bank that provides Credit Card acceptance services to Company.
Adjusted Discount Rates would mean those resulting from LIBOR related adjustments to the Benchmark Discount Rates in the table below.
Affiliate shall mean with respect to a party, any entity that is owned by, owns, or is under common control with such party.
Applicable Law shall mean any applicable federal, state or local law, rule, or [*], order or directive, [*] of any court, arbitrator or governmental authority applicable or binding upon a party or to which that party is subject, or otherwise applicable to the Program or the Accounts, whether federal, state, county, local or otherwise including but not limited to formal or informal direction [*].
Applicant shall mean an individual or small business that is a Member and applies for an Account under the Program.
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Application Procedure(s) shall mean, [*].
Average Accounts Receivable shall mean the sum of month-end Accounts Receivable for a given Program Year divided by twelve (12).
Bank Mark shall mean a trademark, service mark, or name owned by or licensed (and capable of being sublicensed) to Bank and designated by Bank to Company for use in connection with the Program.
Batch Prescreen shall mean a process where Banks offer of credit is made to certain Members after being prequalified by Bank (per its criteria), in a batch mode (often but not exclusively within a direct-to-consumer environment).
[*]
Benchmark Member Level shall mean the number of Members existing on the Program Commencement Date.
Benchmark Net Sales Level shall mean the amount of net sales for all Purchases through all Company Sales Channels in the twelve (12) month period prior to the Program Commencement Date.
Benchmark Store Level shall mean the number of Company stores open on the Program Commencement Date.
Business Day shall mean any day, except Saturday, Sunday, federal holidays, or a day on which banks in Utah are required to be closed.
Cardholder shall mean any natural person or small business to which an Account has been issued by Bank and/or any authorized user of the Account.
Card Network shall mean MasterCard International, Inc., unless otherwise designated by Company.
Card Network Rules shall mean collectively the rules, regulations, releases, interpretations and other requirements (whether contractual or otherwise) imposed or, adopted by a Card Network participating in the Program.
Company Deposit Account shall mean the one (1) deposit account maintained by Company and designated by it in writing to Bank as to which Bank should direct its payments.
Company Mark shall mean a trademark, service mark, or name owned by or licensed (and capable of being sublicensed) to Company and designated by Company to Bank for use in connection with the Program.
Consumer Personal Information shall mean that non-public personal information regarding Applicants, Members, and Cardholders, including but not limited to Account Information consumer reports, and information derived from consumer reports, that is subject to protection from publication under Applicable Law.
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Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
Company Purchase shall mean a purchase (inclusive of applicable taxes and shipping costs) of goods and/or services sold at retail by Company through its Sales Channels for individual, personal, family, household or business use with a specific extension of credit by Bank to a Cardholder using an Account as provided for under this Agreement. A Company Purchase does not include a General Purchase and vice versa. For clarity, a Company Purchase does not include any purchases for goods and/or services made under any Merchant Identification Number that does not identify Company as the merchant of record, even if such good and/or service is sold through a Company Sales Channel.
Credit Card shall mean the credit card issued by Bank to Cardholders on an Account, which is a general purpose credit card bearing a Company Mark, the Member Identification number issued by Company and the trademark or logo of the applicable Card Network, corresponding to a related Account for the purpose of making Purchases pursuant to this Agreement.
Credit Card Agreement shall mean the open-end revolving credit agreement between a Cardholder and Bank governing the Account and Cardholders use of the Credit Card, together with any modifications or amendments which may be made to such agreement.
Credit Sales Day shall mean any day, whether or not a Business Day, on which Company sells goods and/or services through its Sales Channels.
[*]
Discount Fee shall have the meaning set forth in Schedule 1.2.
Discount Rate shall have the meaning set forth in Schedule 1.2.
Electronic Bill Presentment and Payment (or EBPP) shall mean a procedure whereby Cardholders can elect to receive their billing statements electronically and that also allows them an opportunity to remit their Account payments to Bank electronically.
Existing Accounts shall mean [*].
Extra Value shall refer to that certain level of membership offered by Company to its Members and known, as of the Effective Date, as BJs Rewards ® Membership and any successor, substitute or replacement membership level thereof. Extra Value Cardholders shall be those Cardholders who are members at that level.
Extra Value Activation Certificate shall have the meaning set forth in Schedule 2.9, Section 2(b)(vi).
Financial Products shall mean Company branded credit card, [*].
Forms shall have the meaning set forth in Section 2.4.
General Purchase shall mean any purchase of goods and/or services for individual, personal, family, household or business use (inclusive of applicable taxes and shipping costs), with a specific extension of credit by Bank to a Cardholder using an Account as provided for under this Agreement. A General Purchase does not include a Company Purchase and vice versa. [*].
Initial Term shall have the meaning set forth in Schedule 7.1.
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
Instant Credit shall mean [*].
Interchange Fee shall mean [*].
Interchange Information shall have the meaning set forth In Section 3.9(a).
Interchange Rate shall mean [*].
Member shall mean, as of any date, an individual or small business holding a membership in Company.
Member Agreement shall mean the agreement with respect to the Rewards Program establishing the terms and conditions of the Rewards Program, as such agreement may be amended by Company from time to time.
Merchant Discount Rate shall mean the per card transaction rate that Company pays to the Acquiring Bank in consideration for card acceptance services.
Merchant Identification Number shall mean a unique number assigned to a merchant account to identify it during the course of processing credit activities.
Net Proceeds shall mean Company Purchases: (i) less credits to Accounts for the return or exchange of goods, or a credit on an Account as an adjustment by Company for goodwill or for services rendered or not rendered by Company to a Cardholder, all as shown in the Transaction Records (as corrected by Bank in the event of any computational error), calculated each Business Day; (ii) less payments from Cardholders received by Company from Cardholders on Banks behalf; (iii) minus, as applicable, any Discount Fees in effect on the date of calculation; and (iv) plus or minus, as applicable, any other amounts owed to or by Bank pursuant to this Agreement.
Net Sales shall mean [*].
Operating Procedures shall mean Banks instructions and procedures regarding the Program as written by Bank and provided to Company in writing to be followed by Company.
Point of Sale (or POS) shall mean the physical or electronic location at which transactions (sales, credits, and returns) take place. This includes but is not limited to a cash register, point of order entry, website (as applicable), or membership service desk (as applicable).
Program shall mean the co-brand credit card program established and administered by Bank for Cardholders, and whereby Credit Cards are offered to Members by virtue of this Agreement. Program includes the Small Business Program and all references to Program in the Agreement shall be interpreted to include the Small Business Program except as specifically set forth otherwise.
Program Commencement Date shall mean the earlier of the date on which Bank begins to issue new Accounts or the date on which Bank notifies Company in writing that Bank has commenced operation of the Program.
Program Month means each calendar month commencing on the Program Commencement Date or the first day of the first full calendar month following the Program Commencement Date if the Program Commencement Date is not the first day of a calendar month.
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
Program Quarter means each consecutive three (3) month period commencing on Program Commencement Date or the first day of the first full calendar month following the Program Commencement Date if the Program Commencement Date is not the first day of a calendar month.
Program Year shall mean each consecutive twelve (12) month period commencing on the Program Commencement Date or the first day of the first full calendar month following the Program Commencement Date if the Program Commencement Date is not the first day of a calendar month and each anniversary thereof.
Promotional Program shall mean any special Cardholder payment terms requested by Company and approved by Bank for certain Company Purchases, including without limitation any Company Purchases not made pursuant to regular revolving credit terms. The initial Promotional Programs, if any, are set forth in Schedule 1.2.
Promotional Program Purchase means a Company Purchase subject to a Promotional Program.
Purchase means a Company Purchase and/or a General Purchase.
Quick Credit shall mean an in-store Application Procedure designed to open Accounts as expeditiously as possible at POS, whereby an application for an Account might be processed without a paper application being completed by an Applicant. An Applicants credit card (Visa, MasterCard, American Express, Discover or other Bank approved private label card) is electronically read by a terminal to identify certain information to facilitate a credit analysis. Other data shall be entered into that same terminal by Companys employee or the Applicant as specified in the Operating Procedures.
Rates and Fees shall mean those Cardholder terms and conditions regarding rates and fees as are initially set forth in Schedule 3.2 (b) , as amended from time to time pursuant to Section 3.2 (b).
Regular Revolving Purchases shall mean Purchases excluding Promotional Program Purchases.
Renewal Term shall have the meaning set forth in Schedule 7.1.
Real-Time Prescreen shall mean a process where Banks offer of credit is made to certain Members pre-qualified by Bank (per its criteria), in a real-time pre-approved manner, at the POS at the time of a transaction.
Reward Funding means the amounts as calculated pursuant to Sections 5 and 6 of Schedule 2.9.
Rewards Dollars shall mean a unit of currency accrued under the Rewards Program by a Member.
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Rewards Program shall mean the loyalty reward program owned and/or operated by or on behalf of Company and offered exclusively to Cardholders under which Cardholders may earn Rewards Dollars for eligible Purchases on Credit Cards to be redeemed In-Club or on BJs.com toward the purchase of eligible goods and/or services, and which provides other benefits to Cardholders, all as governed by the Rewards Program Terms, and any successor, substitute or replacement loyalty reward program. [*].
Rewards Program Records shall have the meaning set forth in Section 2.9(b).
Rewards Program Terms shall mean the terms and conditions of the Rewards Program, as such terms and conditions may be amended by Company from time to time in accordance with this Agreement.
Sales Channels shall mean those certain sales channels through which Company sells its goods and/or services during the Term, regardless of what name the Company uses for such sales channels, including (as applicable) but not limited to: (i) retail locations which are owned and operated by Company or Companys Affiliates or Companys licensees or franchisees, (ii) Companys website, and (iii) Company gas stations.
Service Standards shall have the meaning set forth in Schedule 2.1 (h).
Solicitation Channels shall mean the methods of acquiring Accounts as set forth in Schedule 2.6(a).
Small Business Account shall mean an Account that is part of the Small Business Program including Existing Accounts that are small business accounts.
Small Business Program shall mean the co-brand credit card program established and administered by Bank for small business Cardholders, and whereby Credit Cards are offered to Members by virtue of this Agreement.
Statemented Account shall mean each Account for which a billing statement is generated (whether or not actually sent to the Cardholder) within a particular billing cycle.
Take-One Application shall mean a paper application made available at or through Sales Channels (or otherwise). An Applicant can complete and submit the Take-One Application directly to Bank, or he or she may submit it to Companys employee for submission to Bank (such as through the Instant Credit Application procedure).
Term shall mean the Initial Term plus any Renewal Terms, as defined in Schedule 7.1.
[*]
Value shall refer to that certain level of membership offered by Company to Members and known, as of the Effective Date, as BJs Inner Circle ® Membership and any successor, substitute or replacement membership level thereof. Value Cardholders shall be those Cardholders who are members at that level.
Value Activation Certificate shall have the meaning set forth in Schedule 2.9, Section 2(a)(vi).
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
B. Other Definitions . As used herein, terms defined in the introductory paragraph hereof and in other sections of this Agreement shall have such respective defined meanings. Defined terms stated in the singular shall include reference to the plural and vice versa. The terms shall and will have the identical meaning (i.e., that something is compulsory and certain), and the use of one versus the other is not to be interpreted as implying less certainty or a sense of possibility or choice.
C. OTHER OBLIGATIONS
Discount Rates and other key terms related to Regular Revolving Purchases and Promotional Program Purchases are as set forth in the table and notes below
I. DISCOUNT FEES/OTHER TERMS FOR REGULAR REVOLVING PURCHASES
[*]
II. DISCOUNT FEES/OTHER TERMS FOR PROMOTIONAL PROGRAM PURCHASES
The key terms (including Discount Rate and any adjustments thereto) for each Promotional Program are as indicated in the table below. For any specific Promotional Program, Company shall pay to Bank Discount Fees in an amount equal to (i) Net Sales on Company Purchases under such Promotional Program, multiplied by (ii) the applicable Discount Rate (after making any appropriate adjustments as set forth below). [*].
[*], so long as the cessation of the Promotional Program is effected in compliance with Applicable Law and the Operating Procedures.
At the end of the second Program Quarter, and each Program Quarter thereafter, Bank shall calculate the Adjusted Discount Rate for the next Program Quarter. [*].
D. NEW ACCOUNT AWARDS
[*]
Bank shall not pay New Account Awards with regard to Accounts for Cardholders that had previously been Cardholders of this Program [*].
E. [*]
F. MINIMUM CONTRIBUTION
So long as Company fulfills its material obligations pursuant to this Agreement Bank, including but not limited to making the Company Solicitation Channels described in Schedule 2.5(a) available within the timeframes also described in Schedule 2.5(a) and thereafter for the duration of the Term unless the Parties agree otherwise, [*].
G. ONLINE INTEGRATION FUNDS
[*]
H. PROGRAM LAUNCH FUND
[*]
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I. PORTFOLIO MANAGEMENT FEE
[*]
J. IN-STORE POS FUNDING
[*]
K. ADDITIONAL APPLICATION SUPPORT
[*]
L. SIGNAGE FUNDS
[*]
M. INTERCHANGE CHANGE
[*]. If the Joint Management Committee cannot agree that such modifications are appropriate, or cannot agree upon modifications to such terms, in either case, [*].
N. CARD NETWORK CORE BENEFITS
Bank shall provide through the selected Card Network, [*] benefits for Cardholders. The initial set of benefits may include the following options. Bank may change the Card Network benefits that it makes available to Cardholders from time to time.
[*]
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
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EXECUTION COPY
Schedule 2.1(h)
[*]
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION COPY
Schedule 2.1(k)
MasterCard Reporting to be provided by Bank
[*], provided that MasterCard is the Card Network for Accounts issued under the Program, Bank shall provide MasterCard with the information set forth in the table below with regard to Accounts under the Program, including all Direct Settlement transactions [*].
Quarter ending
|
Quarter ending
|
Quarter ending
|
Quarter ending
|
|||||
Total Monthly MasterCard Volume |
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION COPY
Schedule 2.5 (a)
Marketing Promotions
The parties shall, respectively, promote and advertise the Program as generally set forth below but as more specifically provided in each Annual Marketing Plan, in addition to other obligations related to the Joint Management Committee:
I. Company will promote and advertise the Program as set forth below:
Acquisition :
1. | Store Operations Executive Sponsorship of Program-C level participation in quarterly meetings | |
2. | Application and credit sales goals in place for stores and field leaders; include goals and key performance metrics in performance evaluations and weekly reporting for store, district and regional managers | |
3. | Periodically test and/or implement in store/on site contests for determined time periods based on incentive funded by Marketing Funds | |
4. | Strategies in place for low performing stores | |
5. | Provide new Cardholder incentive for all new Account originations (as described as of the Effective Date in Schedule 2.9, items 2(a)(vi) and b(vi)), which incentives are to be funded by Bank as of the Program Commencement Date | |
6. | Ensure field management & associates complete credit training with Bank dedicated field sales support; assigns credit captains in stores | |
7. |
Implement marketing programs targeted towards acquisition |
[*]
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EXECUTION COPY
Schedule 2.9
Cardholder Rewards Program
[*]
2. Company and Bank hereby agree that as of the Effective Date the benefits under the Rewards Program shall include at a minimum:
(a) For Value Cardholders:
[*]
(b) For Extra Value Cardholders:
[*]
9. Based on membership status communicated by Company to Bank, Bank shall provide a Member with the appropriate corresponding Account (e.g., either Value or Extra Value Credit Card) at initial launch and throughout the Program. In the event that Company notifies Bank that a Cardholder has changed his or her membership status, Bank may move the Cardholder from Value to Extra Value or vice versa.
10. Notwithstanding anything in the Agreement or this Schedule 2.9 to the contrary, the parties hereby agree that only Accounts in good standing, [*], may participate in, accrue Rewards Dollars under and/or derive benefits from the Rewards Program. Furthermore, Banks obligations pursuant to Paragraphs 5, 6, and 8 above shall apply solely to Accounts in good standing.
11. Bank reserves the right to debit Reward Dollars accrued on Accounts in error.
[*]
13. To the extent that Bank agrees to fund any promotional Rewards Dollars for any spend and get promotions or other Rewards Dollar earning opportunities approved by the Joint Management Committee independent of the Marketing Fund, the cost to Bank for such promotional Rewards Dollars shall be [*].
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
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EXECUTION COPY
Schedule 3.2(b)
Summary of Rates and Fees
[*]
**as published in the Money Rates section of the Wall Street Journal on the date of reference.
[*]
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EXECUTION COPY
Schedule 3.6
Bank Reports
[*]
36
Schedule 7.1
Term and Expiration
Upon execution by authorized representatives of both parties, and unless terminated as provided herein, this Agreement shall become effective as of the Effective Date, remain in effect for seven (7) years and ten (10) months from the Program Commencement Date (the Initial Term), and automatically renew for successive one (1) year terms (each a Renewal Term) thereafter, unless (i) either party provides the other with at least nine (9) months written notice of its intention not to renew this Agreement beyond the expiration of the initial or then current Renewal Term. If Bank does not purchase the Barclaycard Consumer Portfolio on or before February 28, 2015 despite [*], either party shall have the right to terminate this Agreement by providing a written notice to the other party.
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[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION COPY
Schedule 7.4
Purchase of Accounts
[*]. As used in this Schedule 7.4, Accounts Receivable shall mean, as to any Account at the time of purchase, any and all amounts owing on such Account (whether or not posted or billed to an Account), but shall not include amounts owing on Accounts that are [*]. The Portfolio purchase price shall be [*] (or its designee), and [*].
If the parties are unable to agree on the fair market value of the Portfolio, [*] (entity or individual) with recognized standing and experience in valuing retail credit card portfolios (the Company Appraiser and Bank Appraiser respectively). The Company Appraiser and Bank Appraiser shall jointly select a third appraiser who shall also have recognized standing and experience in valuing retail credit card portfolios (collectively Appraisers). Each of Bank and Company (and/or its designee) shall provide such information to the Appraiser as is necessary to permit the Appraiser to provide a valuation as of a common date, which shall be within a reasonable time of the date the Appraiser was retained. The parties shall ensure that the Appraisers perform in a manner and with appropriate exigency so as to ensure compliance with any time frames described elsewhere in this Schedule 7.4. To determine the fair market value of the Portfolio, the Appraisers shall [*]. Fair market value shall then be [*] as determined by the Appraisers. The parties may agree to additional appraisal instructions.
Company must provide Bank with notice of its intent to exercise its purchase right [*] to expiration or [*] of earlier termination is given by either party, as applicable. If Company elects to purchase the Portfolio, Company (or its designee) shall, [*], notify all Cardholders that Bank is no longer the owner of their Accounts. Bank shall provide all notices to Cardholders required by it as issuer under Applicable Law Company and Bank shall cooperate in facilitating the transition to Company or its designee, and Company shall ensure appropriate cooperation on the part of its designee.
Bank shall make available the following key performance indicators (the KPIs) to bidding issuers who have executed a non-disclosure agreement (NDA) reasonably acceptable to Bank. For clarity purposes, Company need not have provided the above notice to release the KPIs; however, any recipient must have executed the above referenced NDA prior to receiving the KPIs:
[*]
Any purchase pursuant to this Schedule 7.4 shall take effect [*] the Program expiration date or, in the event of an earlier termination, [*] following the effective Program termination date. All parties shall [*] to achieve such deadlines. Notwithstanding anything to the contrary provided elsewhere in this Schedule 7.4, Bank shall not be required to sell or deconvert the Portfolio [*]. If Company or its designee [*]. Upon payment of the purchase price to Bank, Bank shall assign to Company (or its designee), without recourse, all of Banks right, title and interest in and to the Portfolio. Following the conversion, [*] which is required by Applicable Law, which information shall be held in accordance with Section 8.9 hereof.
[*]
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EXECUTION COPY
Schedule 8.9
Data Security
1. Security Policy . Bank will establish and maintain a formal, documented, mandated, Bank-wide information security program, including security policies, standards and procedures (collectively information security policy). The information security policy will be communicated to all Bank personnel, employees, agents, and contractors in a relevant, accessible, and understandable form and will be regularly reviewed and evaluated (but no less frequently than as may be required by applicable law) to ensure its operational effectiveness, compliance with all applicable laws and regulations, and to address new threats and risks. On request, Bank will provide Company the then current version of the information security policy. Among other things, the information security policy and Banks overarching security program must address the following:
a. Identifying and assessing reasonably foreseeable internal and external risks to the security, confidentiality, and/or integrity of any electronic, paper or other records containing Company confidential information and evaluating and improving, where necessary, the effectiveness of the current safeguards for limiting such risks, including but not limited to: (i) ongoing employee (including temporary and contract employee) training; (ii) employee compliance with policies and procedures; and (iii) means for detecting and preventing security system failures;
b. Address whether and how employees should be allowed to keep, access and transport records containing confidential information outside of business premises;
c. Imposing disciplinary measures for violations of the information security policy;
d. Preventing terminated employees from accessing records containing Company confidential information by immediately terminating their physical and electronic access to those records, including deactivating their passwords and user names;
e. Limiting the amount of confidential information, including personal information, collected to that which is reasonably necessary to accomplish the legitimate purpose for which it is collected; limiting the time such information is retained to that which is reasonably necessary to accomplish such purpose; and limiting access to those persons who are reasonably required to know such information in order to accomplish such purpose or to comply with state or federal record retention requirements;
f. Identifying paper, electronic and other records, computing systems, and removable media (as defined below) used to store confidential information, to determine which records contain confidential information, except where the information security policy provides for the handling of all records as if they all contained confidential information;
g. Reasonable restrictions upon physical access to records containing confidential information, including a written procedure that sets forth the manner in which physical access to the records is restricted, and storage of the records and data in locked facilities, storage areas or containers;
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h. Regular monitoring to ensure compliance with the information security policy is operating in a manner reasonably calculated to prevent unauthorized access to or unauthorized use of confidential information, and upgrading information safeguards as necessary to limit risks;
i. Reviewing the scope of the security measures [*] or whenever there is a material change in business practices that may reasonably implicate the security or integrity of records containing confidential information; and
j. Documenting responsive actions taken in connection with any incident involving a breach of security, and mandatory post-incident review of events and actions taken, if any, to make changes in business practices relating to protection of confidential information.
2. Personnel Bank Protections . Prior to commencement of services, Bank shall have performed a criminal background check [*] on all associates assigned to perform services under this agreement. In the event an associate assigned to perform services under the Program Agreement has been convicted of a crime that is honesty related or would present safety or security risks, including without limitation individuals with a conviction(s) or indictment(s) for any of the following crimes: crimes against persons; crimes involving weapons; crimes involving the use/misuse of a computer/network; crimes involving trade secret/proprietary information theft, burglary, theft, embezzlement, corruption, bribery, forgery, fraud, receiving stolen property; crimes involving the possession, manufacture, transportation or sale of illegal drugs and controlled substances or any other crime that qualifies as a misdemeanor or felony in the jurisdiction involved, Bank shall first consult with Company prior to assigning such associate or if the associate is already assigned to Company, then the Bank will consult with Company regarding the associates continued assignment to Company account. Prior to associates assignment to the Program, Bank shall certify that the background checks have not revealed any incidents which would require consultation with Company prior to assigning such individual to the Program. Bank shall supply each of its associates and contractors with appropriate, ongoing training regarding information security procedures, risks, and threats. Bank will have an established set of procedures to ensure associates and contractors promptly report actual and/or suspected breaches of security.
3. Removable media . Except in the context of Banks routine back-ups or as otherwise specifically authorized by Company in writing, Bank will institute strict physical and logical security controls to monitor transfer of personal information to any form of removable media. For purposes of this exhibit, removable media means portable or removable hard disks, floppy disks, usb memory drives, zip disks, optical disks, cds, dvds, digital film, memory cards (e.g., secure digital (sd), memory sticks (ms), compactflash (cf), smartmedia (sm), multimediacard (mmc), and xd-picture card (xd)), magnetic tape, and all other removable data storage media.
4. Data control: media disposal and servicing . Company confidential information (i) may only be made available and accessible pursuant to the Program Agreement; (ii) if transferred across the internet, any wireless network (e.g., cellular, 802.11x, or similar technology), or other public or shared networks, must be protected using appropriate cryptography consistent with industry best practices or as designated or approved by Company in writing; and (iii) if transferred using removable media (as defined above) must be sent via a bonded courier or protected using cryptography consistent with industry best practices or as designated or approved by Company in writing. The foregoing requirements apply to back-up data stored by Bank at off-site facilities. In the event any hardware, storage media, or removable media must be disposed of or sent off-site for servicing, Bank will ensure all Company confidential information, including personal information, has been scrubbed from such hardware and/or media using industry best practices (e.g., dod 5220-22-m standard) and in accordance with the privacy and security requirements.
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Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
5. Physical and environmental security . Bank facilities that process Company confidential information will be housed in secure areas and protected by perimeter security such as barrier access controls (e.g., the use of guards and entry badges) that provide a physically secure environment from unauthorized access, damage, and interference.
6. Communications and operational management . Bank shall (i) monitor and manage all of its information processing facilities, including, without limitation, implementing operational procedures, change management and incident response procedures; and (ii) deploy adequate anti-viral software and adequate back-up facilities to ensure essential business information can be promptly recovered in the event of a disaster or media failure; and (iii) ensure its operating procedures will be adequately documented and designed to protect information, computer media, and data from theft and unauthorized access.
7. Access control . Bank will implement formal procedures to control access to its systems, services, and data, including, but not limited to, user account management procedures and the following controls:
a. |
Network access to both internal and external networked services shall be controlled, including, but not limited to, the use of properly configured and patched firewalls; |
b. |
Operating systems will be properly patched and used to enforce access controls to computer resources including, but not limited to, authentication, authorization, and event logging; |
c. |
Applications will include access control to limit user access to information and application system functions; |
d. |
All systems will be monitored to detect deviation from access control policies and identify suspicious activity. Bank shall record, review and act upon all events in accordance with incident response policies set forth in incident Notification, below; |
e. |
Bank will change Company confidential information access passwords on a regular basis in accordance with Bank policy, but at least as frequently as [*]; |
f. |
Remote access to Banks network must be controlled with a virtual private network or other device (VPN) or private lines, consistent with [*]. Two factor authentication should be used for all remote access: |
g. |
Wireless networks will have controlled deployment, secure configuration, and monitoring processes in place that provide for the effective authorization and management of wireless devices; |
h. |
Bank will maintain a network environment that prevents all external ingress and egress points with firewalls. Intrusion detection/prevention systems will be strategically placed to prevent or detect potential breaches. Firewalls will be configured appropriately to prevent intrusions due to common protocol exposure; |
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i. |
Company personal information electronically stored or maintained by Bank will be encrypted consistent with [*] and the privacy and security requirements; |
j. |
Bank will ensure Bank personnel do not use any VPN to simultaneously connect machines on any Company system to any machines on any Bank or third party systems, without (i) using only a remote access method consistent with industry best practices; |
k. |
Operating systems and network devices must be adequately hardened to the most appropriate secure configuration for Banks applications. Configuration management will include a monitoring process to ensure that configurations remain secure; |
l. |
[*] |
m. |
[*] |
n. |
All access to Company confidential information will be on a password protected basis, with unique identifications plus passwords, which are not vendor-supplied default passwords, that are reasonably designed to maintain the integrity of the security of the access controls, and implement secure user authentication protocols, including: |
I) |
control of user ids and other identifiers; |
II) |
a reasonably secure method of assigning and selecting passwords, or use of unique identifier technologies, [*]; |
III) |
control of data security passwords to ensure that such passwords are kept in a location and/or format that does not compromise the security of the data they protect; |
IV) |
restricting access to active users and active user accounts only; and |
V) |
blocking access to user identification after multiple unsuccessful attempts to gain access or the limitation placed on access for the particular system. |
o. |
For files containing personal information in a system that is connected to the internet, there must be reasonably up-to-date firewall protection and operating system security patches, reasonably designed to maintain the integrity of the personal information. |
8. Back-up/Retention . Bank will regularly back-up systems used to provide services to Company to ensure adequate recovery capabilities. Back-ups will be appropriately protected to ensure only authorized individuals are able to access the Company confidential information, including but not limited to encryption of data stored off-site in electronic media and appropriate classification and protection of hard-copy records. If not separately backed up, Bank will secure any files containing Company confidential information against unauthorized access in accordance with the terms of this Agreement until the back-up tapes are recycled or properly destroyed so that information on them cannot practicably be read or reconstructed.
42
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
9. Patch Management . Bank will subscribe to and monitor notifications to the United States computer emergency readiness team (US-CERT) or similar service, vendor notifications, and other recognized sources of information for critical patches. Bank will implement a process to fix or patch identified security problems in an adequate and timely manner. Unless otherwise expressly agreed in writing, timely means that Bank will introduce a fix or patch as soon as commercially reasonable after Bank becomes aware of the security problem or availability of a fix or patch in accordance with Bank policy.
10. Change Management . Bank will use a documented change control process to ensure that access to its systems is controlled and recorded. Bank will promptly notify Company of any planned system configuration changes or other changes that would adversely affect the confidentiality, integrity, or availability of Company confidential information.
11. SSAE 16 . Unless otherwise agreed to in writing by the parties, Bank will provide Company annually with a copy of latest Banks SSAE 16 or equivalent report. In the event the accounting firm performing the audit issues a qualified opinion due to a material weakness or significant deficiency, Bank will promptly advise Company of its plan for remedying such material weakness or significant deficiency and use [*] to mitigate any potential damages or adverse consequences resulting from such material weakness or significant deficiency.
12. PCI Compliance: Audits . To verify ongoing compliance with the PCI DSS Bank will engage (i) a . qualified security assessor (QSA) to conduct, [*], an onsite compliance review; and (ii) an approved scanning Bank (ASV), [*], to conduct a network security scan. On written request from Company, Bank will provide Company with copies of the foregoing reviews. Unless otherwise agreed to in writing the Bank will provide to Company annually a copy of Banks Attestation of Compliance Letter (AOCL), or provide onsite access to the Banks Report of Compliance (ROC). In the event the Bank does not have a, AOCL or ROC marked as compliant due to some requirements in the AOCL or ROC marked not in place and therefore Bank has not demonstrated full compliance with the PCI DSS, Bank will promptly advise Company of its plan for remediation of such deficiencies and use [*] to mitigate any potential damages or adverse consequences resulting from such deficiencies. In any case, Bank will be in full compliance with the PCI DSS [*] from the receipt of the AOCL or ROC in which non-compliance was noted.
13. Incident notification . Bank will immediately notify ([*]) the designated Company security contact by telephone and subsequently via written letter of any actual security attacks or incidents related to Company confidential information. The notice shall include the approximate date and time of the occurrence and a summary of the relevant facts, including a description of measures being taken to address the occurrence, and a monthly update noting the actions taken to address the security incident.
14. Annual Certification . On an annual basis, or on Company request, Bank will certify in writing to Company that Bank is in compliance with its obligations under this Schedule 8.9. The certification will be made on a form provided by Company.
43
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION COPY
Schedule 8.11
Brokers
44
Exhibit 10.3(a)
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
AMENDMENT NO. 2
TO
CO-BRAND CREDIT CARD PROGRAM AGREEMENT BETWEEN COMENITY
CAPITAL BANK AND BJS WHOLESALE CLUB, INC.
THIS AMENDMENT NO. 2 TO CO-BRAND CREDIT CARD PROGRAM AGREEMENT BETWEEN COMENITY CAPITAL BANK AND BJS WHOLESALE CLUB, INC. (Amendment No. 2), is dated January 16, 2015, by and between BJS WHOLESALE CLUB, INC, a Delaware corporation having its principal office at 25 Research Drive, Westborough, MA 01581 (BJs or Company), and COMENITY CAPITAL BANK, having its principal offices at 2795 E. Cottonwood Parkway, Suite #100, Salt Lake City, Utah (Bank). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.
WHEREAS, Company and Bank are parties to the Co-Brand Credit Card Program Agreement dated June 5, 2014 (the Agreement);
WHEREAS, the Agreement provides that BJs may elect, in its sole and absolute discretion, to have Bank conduct in-club events at mutually agreed upon BJs Wholesale Club, Inc. retail club locations to obtain Credit Card applications;
WHEREAS, Bank wishes to conduct a series of such in-club events in January and February 2015 as well as throughout the calendar year, primarily during new club openings (Club Events);
WHEREAS, Company approval of the Club Events and any other Bank in-club events is subject to the implementation by Bank of security measures set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree the following shall apply with regard to Banks participation at Club Events:
1. Bank shall, [*] and using its own equipment, conduct Club Events at the Company clubs designated on Appendix A attached hereto and as may be amended from time to time by the mutual agreement of the parties. At such events, Bank shall provide consumers with information about the Credit Card and the opportunity to apply for the Credit Card at various dates between from January 1, 2015 through December 31, 2015 in Company clubs designated in Appendix A, which may be amended from time to time upon the mutual agreement of the parties. All of the other features of the Program and Rewards Program will remain as otherwise provided in the Agreement.
2. Section 5.5 of the Agreement, Insurance, shall apply to Bank during each Club Event, and Bank or its subcontractor, (if subcontractor is conducting Club Event), shall provide and maintain minimum insurance coverage as follows:
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
(a) |
Workers Compensation at statutory limits; |
[*]
In addition Bank shall provide Company with a certificate of insurance completed by its insurance carrier prior to the Club Events certifying that minimum insurance coverage as required above is in effect and, with the exception of workers compensation coverage, listing Company as an additional insured as its interests apply.
3. With respect to each Club Event, [*]. For the avoidance of doubt, Schedule 8.9 constitutes a set of data security requirements that in addition to applying generally for the handling of Confidential Information and Consumer Personal Information, shall apply to the Consumer Personal Information collected by Bank during Club Events. In addition, Bank agrees that for purposes of the Club Events specifically, [*]. Bank agrees to take all [*] precautions and measures to ensure the security and integrity of the Confidential Information, including Consumer Personal Information, in their control, and that it is maintained in a safe and secure manner. Bank agrees to cause any of its subcontractors who provide services in connection with the Club Events to comply with the requirements of this Section 3 as well as all of the terms of the Agreement.
4. With regard to Club Events, the following indemnification obligations shall apply:
[*]
5. Effect. Except as set forth in this Amendment No. 2, the Agreement shall remain in full force and effect and each party hereby restates and affirms all of the terms and provisions of the Agreement. If any conflict exists between the terms and provisions of the Agreement and this Amendment No. 2, the terms and provisions of this Amendment No. 2 will govern and control.
6. Entire Agreement. The Agreement, as amended, including as amended by this Amendment No. 2, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
7. Counterparts. This Amendment No. 2 may be executed in any number of counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same instrument. Delivery of an executed counterpart signature page by facsimile shall be effective as a manually executed signature page.
8. Governing Law. The governing law provisions of this Amendment No. 2 shall be the same as the governing law of the Program Agreement.
IN WITNESS WHEREOF, Bank and Company have executed and delivered this Amendment No. 2 as of the date first written above.
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
COMENITY CAPITAL BANK
By: /s/ Ronald J. Ostler
Name: Ronald J. Ostler
Title: President
Date: 1/16/15
BJS WHOLESALE CLUB, INC.
By: /s/ Robert W. Eddy
Name: Robert W. Eddy
Title: EVP, CFO
Date: 1/16/15
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
Appendix A
Company Club Event List Calendar 2015
(Please complete Appendix A with Date of Club Event, Club # and City where Club is located
Date | # Club Number | Club City |
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
Schedule 8.9
Data Security
1. Security Policy. Bank will establish and maintain a formal, documented, mandated, Bank-wide information security program, including security policies, standards and procedures (collectively information security policy). The information security policy will be communicated to all Bank personnel, employees, agents, and contractors in a relevant, accessible, and understandable form and will be regularly reviewed and evaluated (but no less frequently than as may be required by applicable law) to ensure its operational effectiveness, compliance with all applicable laws and regulations, and to address new threats and risks. On request, Bank will provide Company the then current version of the information security policy. Among other things, the information security policy and Banks overarching security program must address the following:
a. Identifying and assessing reasonably foreseeable internal and external risks to the security, confidentiality, and/or integrity of any electronic, paper or other records containing Company confidential information and evaluating and improving, where necessary, the effectiveness of the current safeguards for limiting such risks, including but not limited to: (i) ongoing employee (including temporary and contract employee) training; (ii) employee compliance with policies and procedures; and (iii) means for detecting and preventing security system failures;
b. Address whether and how employees should be allowed to keep, access and transport records containing confidential information outside of business premises;
c. Imposing disciplinary measures for violations of the information security policy;
d. Preventing terminated employees from accessing records containing Company confidential information by immediately terminating their physical and electronic access to those records, including deactivating their passwords and user names;
e. Limiting the amount of confidential information, including personal information, collected to that which is reasonably necessary to accomplish the legitimate purpose for which it is collected; limiting the time such information is retained to that which is reasonably necessary to accomplish such purpose; and limiting access to those persons who are reasonably required to know such information in order to accomplish such purpose or to comply with state or federal record retention requirements;
f. Identifying paper, electronic and other records, computing systems, and removable media (as defined below) used to store confidential information, to determine which records contain confidential information, except where the information security policy provides for the handling of all records as if they all contained confidential information;
g. Reasonable restrictions upon physical access to records containing confidential information, including a written procedure that sets forth the manner in which physical access to the records is restricted, and storage of the records and data in locked facilities, storage areas or containers;
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
h. Regular monitoring to ensure compliance with the information security policy is operating in a manner reasonably calculated to prevent unauthorized access to or unauthorized use of confidential information, and upgrading information safeguards as necessary to limit risks;
i. Reviewing the scope of the security measures [*] or whenever there is a material change in business practices that may reasonably implicate the security or integrity of records containing confidential information; and
j. Documenting responsive actions taken in connection with any incident involving a breach of security, and mandatory post-incident review of events and actions taken, if any, to make changes in business practices relating to protection of confidential information.
2. Personnel and Bank Protections. Prior to commencement of services, Bank shall have performed a criminal background check [*] on all associates assigned to perform services under this agreement. In the event an associate assigned to perform services under the Program Agreement has been convicted of a crime that is honesty related or would present safety or security risks, including without limitation individuals with a conviction(s) or indictment(s) for any of the following crimes: crimes against persons; crimes involving weapons; crimes involving the use/misuse of a computer/network; crimes involving trade secret/proprietary information theft, burglary, theft, embezzlement, corruption, bribery, forgery, fraud, receiving stolen property; crimes involving the possession, manufacture, transportation or sale of illegal drugs and controlled substances or any other crime that qualifies as a misdemeanor or felony in the jurisdiction involved, Bank shall first consult with Company prior to assigning such associate or if the associate is already assigned to Company, then the Bank will consult with Company regarding the associates continued assignment to Company account. Prior to associates assignment to the Program, Bank shall certify that the background checks have not revealed any incidents which would require consultation with Company prior to assigning such individual to the Program. Bank shall supply each of its associates and contractors with appropriate, ongoing training regarding information security procedures, risks, and threats. Bank will have an established set of procedures to ensure associates and contractors promptly report actual and/or suspected breaches of security.
3. Removable media. Except in the context of Banks routine back-ups or as otherwise specifically authorized by Company in writing, Bank will institute strict physical and logical security controls to monitor transfer of personal information to any form of removable media. For purposes of this exhibit, removable media means portable or removable hard disks, floppy disks, usb memory drives, zip disks, optical disks, cds, dvds, digital film, memory cards (e.g., secure digital (sd), memory sticks (ms), compactflash (cf), smartmedia (sm), multimediacard (mmc), and xd-picture card (xd)), magnetic tape, and all other removable data storage media.
4. Data control; media disposal and servicing. Company confidential information (i) may only be made available and accessible pursuant to the Program Agreement; (ii) if transferred across the internet, any wireless network (e.g., cellular, 802.11x, or similar technology), or other public or shared networks, must be protected using appropriate cryptography consistent with industry best practices or as designated or approved by Company in writing; and (iii) if transferred using removable media (as defined above) must be sent via a bonded courier or protected using cryptography consistent with industry best practices or as designated or approved by Company in writing. The foregoing requirements apply to back-up data stored by Bank at off-site facilities. In
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
the event any hardware, storage media, or removable media must be disposed of or sent off-site for servicing, Bank will ensure all Company confidential information, including personal information, has been scrubbed from such hardware and/or media using industry best practices (e.g., dod 5220-22-m standard) and in accordance with the privacy and security requirements.
5. Physical and environmental security. Bank facilities that process Company confidential information will be housed in secure areas and protected by perimeter security such as barrier access controls (e.g., the use of guards and entry badges) that provide a physically secure environment from unauthorized access, damage, and interference.
6. Communications and operational management. Bank shall (i) monitor and manage all of its information processing facilities, including, without limitation, implementing operational procedures, change management and incident response procedures; and (ii) deploy adequate anti-viral software and adequate back-up facilities to ensure essential business information can be promptly recovered in the event of a disaster or media failure; and (iii) ensure its operating procedures will be adequately documented and designed to protect information, computer media, and data from theft and unauthorized access.
7. Access Control. Bank will implement formal procedures to control access to its systems, services, and data, including, but not limited to, user account management procedures and the following controls:
a. |
Network access to both internal and external networked services shall be controlled, including, but not limited to, the use of properly configured and patched firewalls; |
b. |
Operating systems will be properly patched and used to enforce access controls to computer resources including, but not limited to, authentication, authorization, and event logging; |
c. |
Applications will include access control to limit user access to information and application system functions; |
d. |
All systems will be monitored to detect deviation from access control policies and identify suspicious activity. Bank shall record, review and act upon all events in accordance with incident response policies set forth in Incident Notification, below; |
e. |
Bank will change Company confidential information access passwords on a regular basis in accordance with Bank policy, but at least as frequently as [*]; |
f. |
Remote access to Banks network must be controlled with a virtual private network or other device (VPN) or private lines, consistent with [*]. Two factor authentication should be used for all remote access; |
g. |
Wireless networks will have controlled deployment, secure configuration, and monitoring processes in place that provide for the effective authorization and management of wireless devices; |
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
h. |
Bank will maintain a network environment that prevents all external ingress and egress points with firewalls. Intrusion detection/prevention systems will be strategically placed to prevent or detect potential breaches. Firewalls will be configured appropriately to prevent intrusions due to common protocol exposure; |
i. |
Company personal information electronically stored or maintained by Bank will be encrypted consistent with [*] and the privacy and security requirements; |
j. |
Bank will ensure Bank personnel do not use any VPN to simultaneously connect machines on any Company system to any machines on any Bank or third party systems, without (i) using only a remote access method consistent with industry best practices; |
k. |
Operating systems and network devices must be adequately hardened to the most appropriate secure configuration for Banks applications. Configuration management will include a monitoring process to ensure that configurations remain secure; |
l. |
[*]; |
m. |
[*]; and |
n. |
All access to Company confidential information will be on a password protected basis, with unique identifications plus passwords, which are not vendor-supplied default passwords, that are reasonably designed to maintain the integrity of the security of the access controls, and implement secure user authentication protocols, including: |
i) |
control of user ids and other identifiers; |
ii) |
a reasonably secure method of assigning and selecting passwords, or use of unique identifier technologies, [*]; |
iii) |
control of data security passwords to ensure that such passwords are kept in a location and/or format that does not compromise the security of the data they protect; |
iv) |
restricting access to active users and active user accounts only; and |
v) |
blocking access to user identification after multiple unsuccessful attempts to gain access or the limitation placed on access for the particular system. |
o. |
[*]. |
8. Back-up/Retention. Bank will regularly back-up systems used to provide services to Company to ensure adequate recovery capabilities. Back-ups will be appropriately protected to ensure only authorized individuals are able to access the Company confidential information, including but not limited to encryption of data stored off-site in electronic media and appropriate
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
classification and protection of hard-copy records. If not separately backed up, Bank will secure any files containing Company confidential information against unauthorized access in accordance with the terms of this Agreement until the back-up tapes are recycled or properly destroyed so that information on them cannot practicably be read or reconstructed.
9. Patch Management. Bank will subscribe to and monitor notifications to the United States computer emergency readiness team (US-CERT) or similar service, vendor notifications, and other recognized sources of information for critical patches. Bank will implement a process to fix or patch identified security problems in an adequate and timely manner. Unless otherwise expressly agreed in writing, timely means that Bank will introduce a fix or patch as soon as commercially reasonable after Bank becomes aware of the security problem or availability of a fix or patch in accordance with Bank policy.
10. Change Management. Bank will use a documented change control process to ensure that access to its systems is controlled and recorded. Bank will promptly notify company of any planned system configuration changes or other changes that would adversely affect the confidentiality, integrity, or availability of Company confidential information.
11. SSAE 16. Unless otherwise agreed to in writing by the parties, Bank will provide Company annually with a copy of latest Banks SSAE 16 or equivalent report. In the event the accounting firm performing the audit issues a qualified opinion due to a material weakness or significant deficiency, Bank will promptly advise Company of its plan for remedying such material weakness or significant deficiency and use [*] to mitigate any potential damages or adverse consequences resulting from such material weakness or significant deficiency.
12. PCI Compliance; Audits. To verify ongoing compliance with the PCI DSS Bank will engage (i) a qualified security assessor (QSA) to conduct, [*], an onsite compliance review; and (ii) an approved scanning Bank (ASV), [*], to conduct a network security scan. On written request from Company, Bank will provide Company with copies of the foregoing reviews. Unless otherwise agreed to in writing the Bank will provide to Company annually a copy of Banks Attestation of Compliance Letter (AOCL), or provide onsite access to the Banks Report of Compliance (ROC). In the event the Bank does not have a, AOCL or ROC marked as compliant due to some requirements in the AOCL or ROC marked not in place and therefore Bank has not demonstrated full compliance with the PCI DSS, Bank will promptly advise Company of its plan for remediation of such deficiencies and use [*] to mitigate any potential damages or adverse consequences resulting from such deficiencies. In any case, Bank will be in full compliance with the PCI DSS [*] from the receipt of the AOCL or ROC in which non-compliance was noted.
13. Incident notification. Bank will immediately notify ([*]) the designated Company security contact by telephone and subsequently via written letter of any actual security attacks or incidents related to Company confidential information. The notice shall include the approximate date and time of the occurrence and a summary of the relevant facts, including a description of measures being taken to address the occurrence, and a monthly update noting the actions taken to address the security incident.
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
14. Annual Certification. On an annual basis, or on Company request, Bank will certify in writing to Company that Bank is in compliance with its obligations under this Schedule 8.9. The certification will be made on a form provided by Company.
Exhibit 10.3(b)
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
AMENDMENT NO. 3
TO
CO-BRAND CREDIT CARD PROGRAM AGREEMENT BETWEEN
COMENITY CAPITAL BANK AND BJS WHOLESALE CLUB, INC.
THIS AMENDMENT NO. 3 TO CO-BRAND CREDIT CARD PROGRAM AGREEMENT BETWEEN COMENITY CAPITAL BANK AND BJS WHOLESALE CLUB, INC. (Amendment No. 3), is effective June , 2016 (Amendment No. 3 Effective Date), by and between BJS WHOLESALE CLUB, INC, a Delaware corporation having its principal office at 25 Research Drive, Westborough, MA 01581 (BJs or Company), and COMENITY CAPITAL BANK , having its principal offices at 2795 E. Cottonwood Parkway, Suite #100, Salt Lake City, Utah (Bank).
WHEREAS, Company and Bank are parties to the Co-Brand Credit Card Program Agreement dated June 5, 2014 (the Agreement), amended;
WHEREAS Company and Bank desire to amend various terms and conditions of the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:
1. Definitions: References . Each capitalized term used herein which is not defined herein shall have the meaning assigned to such term in the Agreement. Each reference to hereof, hereunder, herein, and hereby and each other similar reference and each reference to this Agreement and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as previously amended and amended hereby.
2. Schedule 1.2(A), Definitions and Other Obligations . All references to the term Extra Value level of membership shall be deleted and replaced with the term Elite. Corresponding terms shall be modified consistent with this change.
3. Schedule 1.2(A), Definitions and Other Obligations . All references to the term Value level of membership shall be deleted and replaced with the term Plus. Corresponding terms shall be modified consistent with this change.
4. Schedule 1.2(A), Definitions and Other Obligations . The following definitions shall be deleted in their entirety: Extra Value Activation Certificate and Value Activation Certificate.
5. Schedule 1.2(A), Definitions and Other Obligations . The definition of Activation Certificate shall be deleted in its entirety and replaced with the following: Activation Certification shall mean the extra value and value activation certificates issued by the Company for Accounts opened prior to May 1, 2016.
1
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
6. Schedule 1.2(D), (E), and (F), Definitions and Other Obligations . Paragraphs D, E and F of Schedule 1.2, Definitions and Other Obligations are hereby deleted in their entirety and replaced with new Paragraphs D, E and F, which are attached hereto as Attachment 1.
7. Schedule 2.1(h), Service Standards . Schedule 2.1(h), Service Standards is hereby deleted in its entirety and replaced with a new Schedule 2.1(h), which is attached hereto as Attachment 2.
8. Schedule 2.5(a), Marketing Promotions . Schedule 2.5(a), Marketing Promotions is hereby deleted in its entirety and replaced with a new Schedule 2.5(a), which is attached hereto as Attachment 3.
9. Schedule 2.5(b), Marketing Funds . Schedule 2.5(b), Marketing Funds is hereby deleted in its entirety and replaced with a new Schedule 2.5(b), which is attached hereto as Attachment 4.
10. Schedule 2.9, Cardholder Rewards Program . Schedule 2.9, Cardholder Rewards Program is hereby deleted in its entirety and replaced with a new Schedule 2.9, which is attached hereto as Attachment 5.
11. Schedule 3.2(b), Summary of Rates and Fees . Schedule 3.2(b), Summary of Rates and Fees is hereby deleted in its entirety and replaced with a new Schedule 3.2(b) which is attached hereto as Attachment 6.
12. Effect . Except as set forth in this Amendment No. 3, the Agreement shall remain in full force and effect and each party hereby restates and affirms all of the terms and provisions of the Agreement. If any conflict exists between the terms and provisions of the Agreement and this Amendment No. 3, the terms and provisions of this Amendment No. 3 will govern and control.
13. Entire Agreement . The Agreement, as amended, including as amended by this Amendment No. 3, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
14. Counterparts . This Amendment No. 3 may be executed in any number of counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same instrument. Delivery of an executed counterpart signature page by facsimile shall be effective as a manually executed signature page.
15. Governing Law . The governing law provisions of this Amendment No. 3 shall be the same as the governing law of the Program Agreement.
IN WITNESS WHEREOF, Bank and Company have executed this Amendment No. 3 in a manner and form sufficient to bind them as of the date first written above.
2
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
COMENITY CAPITAL BANK
By: /s/ Andrea J. Moss
Name: Andrea J. Moss
Title: President
Date: June 28, 2016
BJS WHOLESALE CLUB, INC.
By: /s/ William C. Werner
Name: William C. Werner
Title: SVP, Finance
Date: June 28, 2016
3
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
ATTACHMENT 1
SCHEDULE 1.2
Definitions and Other Obligations
D. NEW ACCOUNT AWARDS
[*].
Bank shall not pay New Account Awards with regard to Accounts for Cardholders that had previously been Cardholders of this Program [*].
E. |
[*] |
F. MINIMUM CONTRIBUTION
So long as Company fulfills its material obligations pursuant to this Agreement Bank, including but not limited to making the Company Solicitation Channels described in Schedule 2.5(a) available within the timeframes also described in Schedule 2.5(a) and thereafter for the duration of the Term unless the Parties agree otherwise, [*]
4
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
ATTACHMENT 2
SCHEDULE 2.1(h)
[*]
5
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
ATTACHMENT 3
Schedule 2.5 (a)
Marketing Promotions
The parties shall, respectively, promote and advertise the Program as generally set forth below but as more specifically provided in each Annual Marketing Plan, in addition to other obligations related to the Joint Management Committee:
I. Company will promote and advertise the Program as set forth below:
Acquisition :
1.
|
Store Operations Executive Sponsorship of Program C level participation in quarterly meetings
|
|
2.
|
Application and credit sales goals in place for stores and field leaders; include goals and key performance metrics in performance evaluations and weekly reporting for store, district and regional managers
|
|
3.
|
Periodically test and/or implement in store/on site contests for determined time periods based on incentive funded by Marketing Funds
|
|
4.
|
Strategies in place for low performing stores
|
|
5.
|
Provide new Cardholder incentive for all new Account originations (as described as of the Effective Date in Schedule 2.9, items 2(a)(vi) and b(vi)), which incentives are to be funded by Bank as of the Program Commencement Date
|
|
6.
|
Ensure field management & associates complete credit training with Bank dedicated field sales support; assigns credit captains in stores.
|
|
7.
|
Implement marketing programs targeted towards acquisition
|
[*]
6
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
ATTACHMENT 4
SCHEDULE 2.5(B)
[*]
7
Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
ATTACHMENT 5
SCHEDULE 2.9
Cardholder Rewards Program
1. [*]
2. Company and Bank hereby agree that as of the Effective Date the benefits under the Rewards Program shall include at a minimum:
(a) |
For Plus Cardholders: |
[*]
(b) |
For Elite Cardholders: |
[*]
3. Based on membership status communicated by Company to Bank, Bank shall provide a Member with the appropriate corresponding Account (e.g., either Plus or Elite Credit Card) at initial launch and throughout the Program. In the event that Company notifies Bank that a Cardholder has changed his or her membership status, Bank may move the Cardholder from Plus to Elite or vice versa.
4. Notwithstanding anything in the Agreement or this Schedule 2.9 to the contrary, the parties hereby agree that only Accounts in good standing, [*], may participate in, accrue Rewards Dollars under and/or derive benefits from the Rewards Program. Furthermore, Banks obligations pursuant to Paragraphs 5 and 6 above shall apply solely to Accounts in good standing.
5. Bank reserves the right to debit Reward Dollars accrued on Accounts in error.
6. [*].
7. To the extent that Bank agrees to fund any promotional Rewards Dollars for any spend and get promotions or other Rewards Dollar earning opportunities approved by the Joint Management Committee independent of the Marketing Fund, the cost to Bank for such promotional Rewards Dollars shall be equal to the rate that covers the face value of the promotional Rewards Dollars awarded to qualifying Cardholders.
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Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
[*] Text Omitted and Filed Separately with the Securities and Exchange Commission Confidential Treatment
Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
ATTACHMENT 6
SCHEDULE 3.2 (b)
Summary of Rates and Fees
[*].
*as published in the Money Rates section of the Wall Street Journal on the date of reference.
[*].
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Amendment No. 3 to Co-Brand Credit Card Program
Agreement BJs Wholesale Club, Inc./Comenity Capital Bank
Exhibit 10.4
EXECUTION VERSION
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of September 1, 2015, and effective as of the Effective Date (as defined below), is entered into between Christopher J. Baldwin (the Executive), BJs Wholesale Club, Inc., a Delaware corporation (the Company), and Beacon Holding Inc., a Delaware corporation (Beacon).
W I T N E S S E T H
WHEREAS, the Company is a wholly-owned subsidiary of Beacon; and
WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company, Beacon and the Executive agree as follows:
1. Employment and Duties .
1.1 Employment . Commencing on September 8, 2015 (or such other date as determined by the parties) (the Effective Date), the Company agrees to employ the Executive and the Executive agrees to be employed by the Company. The Executive shall remain employed by the Company pursuant to the terms of this Agreement subject to the termination provisions of Section 3 below. The term of the Executives employment hereunder is referred to herein as the Term.
1.2 Duties . As of the Effective Date, the Executive shall serve the Company as its President and Chief Operating Officer to serve in such capacity or other capacities consistent therewith as designated by the Board of Directors of the Company (the Company Board) and the Board of Directors of Beacon (the Beacon Board and, together with the Company Board, the Boards) or the Chief Executive Officer (CEO) and shall have responsibility for, among other things, the Companys merchandising and membership/marketing functions and store operations. During the Term, the Executive shall serve the Company faithfully, diligently and to the best of his ability and shall devote substantially all of his business time, energy and skill to the affairs of the Company as necessary to perform the duties of his position, and he shall not assume a position in any other business without the express written permission of the Beacon Board; provided that the Executive may upon disclosure to the Beacon Board (i) serve as a member of not more than one for-profit board of directors so long as the Executive receives prior written permission from the Beacon Board (such permission not to be unreasonably withheld); (ii) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executives duties to the Company and (iii) make passive investments where the Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit the Executives participation in any of the foregoing endeavors if the Beacon Board believes, in its sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executives ability to perform the duties under this Agreement. On the date hereof, the Executive serves as chairman of the board of directors of Morristown Medical Center and as a
member of the board of directors of Harlem Lacrosse and Leadership, both non-profit organizations, which continued service the Beacon Board hereby approves so long as there is no material interference with the Executives duties to the Company. In addition, as of the Effective Date, the Executive will be appointed or elected to the Boards and, during the Term, shall serve as a member of each of the Boards.
2. Compensation and Benefits .
2.1 Base Salary . The Executive shall receive a base salary at the rate of $825,000 per year. Such base salary shall be subject to periodic increase (but no decrease) from time to time as determined by the Beacon Board in its sole discretion (as may increase from time to time, Base Salary). Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated executive employees.
2.2 Annual Cash Bonus . With respect to each fiscal year that commences during the Term, the Executive shall be eligible to receive an annual performance-based cash bonus (the Annual Cash Bonus), with a target bonus opportunity equal to 100% of Base Salary for the applicable year, which shall be payable based upon the attainment of individual and/or Company performance goals established by the Beacon Board in its sole discretion in consultation with the Executive. Notwithstanding the foregoing, with respect to the fiscal year ending on January 31, 2016, the Executive shall be eligible to receive a prorated Annual Cash Bonus based on the number of days in which he is employed during such fiscal year; provided that the Annual Cash Bonus for such fiscal year shall not be less than 50% of the aggregate amount of Base Salary accrued in respect of service for such fiscal year. Each such Annual Cash Bonus shall be payable on such date as is determined by the Beacon Board within 120 days following the end of the fiscal year with respect to which it relates. Notwithstanding any other provision of this Section 2.2, no bonus shall be payable with respect to any fiscal year unless the Executive remains continuously employed with the Company during the period beginning on the first day of the applicable fiscal year and ending on the last day of such applicable fiscal year.
2.3 Policies and Fringe Benefits . The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. During the Term, the Executive shall be eligible to participate in all benefit programs that the Company establishes and makes available to all of its executives on such terms as the Company shall determine (provided that, for the avoidance of doubt, such eligibility to participate shall be substantially comparable to the eligibility of the CEO, excluding any rights to reimbursement of automobile expenses or provision of a company automobile), to the extent that the Executive meets the eligibility requirements to participate as set forth in the applicable plan or policy. Nothing herein limits the Companys right to modify, change, limit eligibility or discontinue any plan or policy at any time, with or without prior notice.
2.4 Reimbursement of Expenses . The Company shall reimburse the Executive for all reasonable and appropriate travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his responsibilities or services under this Agreement, in accordance with policies and procedures, and subject to limitations, adopted by the Company from time to time.
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2.5 Withholding . All salary and other compensation payable to the Executive pursuant to this Agreement shall be subject to applicable taxes and withholdings.
2.6 Equity Awards . As of the Effective Date, Beacon shall grant the Executive an option (the Option) to purchase shares of common stock of Beacon, par value $0.01 (Common Stock), under the Second Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc., as it may be amended from time to time (the Option Plan), and an award agreement thereunder, substantially in the form of Exhibit A hereto. All shares of Common Stock received upon exercise of the Option shall be subject to the terms of the Management Stockholders Agreement of Beacon, dated as of September 30, 2011, by and among the stockholders of Beacon and certain other parties named therein, as amended from time to time (the Management Stockholders Agreement).
2.7 Equity Investment . The Executive may, upon written notice to the Company, not more than thirty (30) days following the Effective Date, elect to purchase shares of Common Stock from Beacon with a total value between $1,000,000 and $1,500,000, at a per share price equal to $41.00. Such purchase shall be subject to the terms of a subscription agreement in the form of Exhibit B hereto and the Management Stockholders Agreement.
2.8 Relocation and Commuting Expenses . During the Term, the Company will reimburse the Executive for reasonable, documented, out-of-pocket relocation expenses of up to $150,000 (plus any tax gross-up, below) incurred by the Executive in connection the Executives relocation from the New York metropolitan area to the Boston metropolitan area. In addition to any reimbursement of relocation expenses, from the Effective Date until the date the Executive relocates to the Boston metropolitan area, the Company shall reimburse all reasonable, documented commuting expenses to and from the Executives principal residence in the New York metropolitan area (Commuting Expenses). The parties agree to cooperate and use commercially reasonable efforts to cause, to the extent permitted by the Internal Revenue Code of 1986, as amended (the Code), any reimbursements under this Section 2.8 to be structured in a tax-efficient manner. Notwithstanding the foregoing, the Executive shall be solely liable for all income and employee-paid payroll taxes, if any, related to reimbursements of Commuting Expenses (to the extent not otherwise constituting nontaxable business expense reimbursements) and he shall be grossed up for all income taxes incurred with respect to the reimbursement of other relocation expenses incurred under this Section 2.8.
2.9 Attorneys Fees . The Company shall pay the Executives reasonable and documented attorneys fees and expenses incurred by him in connection with the review and negotiation of the terms and conditions of his employment, this Agreement and the documentation with respect to the equity award and investment described in Sections 2.6 and 2.7, up to an aggregate maximum of $30,000.
2.10 Indemnification . With respect to the Executives acts or failures to act during the Term in the Executives capacity as a director, officer, employee or agent of the Company or Beacon, the Executive shall be entitled to indemnification and to liability insurance coverage provided at the Companys cost, to the maximum extent permitted under the charter, by-laws and applicable laws, and the Executive shall be insured under any contract of directors and officers liability insurance on the same basis as other directors and officers of the Company; provided ,
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however , that, for the avoidance of doubt, such indemnification will not be provided with respect to any dispute arising under or relating to this Agreement, other than a dispute under this Section 2.10. Such indemnification and insurance coverage shall survive and continue to apply following any termination of employment or the Executive ceasing to be a member of either of the Boards with respect to such acts and omissions that occurred during the Executives employment and Board service to the same extent (and over the same post-termination period) as other then-serving officers and directors.
3. Termination of Employment and Benefits Upon Termination .
3.1 General . The Executives employment pursuant to this Agreement shall terminate upon the earliest to occur of (i) the Executives death, (ii) a termination by reason of disability, (iii) a termination by the Company with or without Cause, or (iv) a termination by the Executive for or without Good Reason. Whenever the Executives employment shall terminate, and regardless of the reason for such termination, effective that same date he shall resign all offices, appointments and/or other positions the Executive may hold with the Company including, but not limited to, any parent corporation, subsidiaries or divisions of the Company or any such parent.
3.2 Termination Due to Death . The Executives employment shall automatically terminate upon the date of the Executives death. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) (i) all amounts earned but unpaid hereunder through the date of termination with respect to Base Salary and accrued but unused vacation;
(ii) to the extent not already paid, any Annual Cash Bonus to which the Executive is entitled for the fiscal year ended immediately prior to the date of termination;
(iii) the Executives vested account balance under the BJs Wholesale Club, Inc. 401(k) Savings Plan for Salaried Employees (or successor plan); and
(iv) any unreimbursed expenses incurred in accordance with Company policy (all amounts under paragraphs (i) through (iv) being, collectively, Earned Obligations); and
(b) any amounts the Executive would have been entitled to receive as Annual Cash Bonus had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as the Annual Cash Bonus would have been paid for the year in which the termination occurs pursuant to Section 2.2; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits upon or following the Executives death.
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3.3 Termination Due to Disability . The Executives employment may be terminated by reason of the Executives disability, upon notice to the Executive, in the event of the inability of the Executive to perform his duties hereunder by reason of disability, whether by reason of injury (physical or mental), illness (physical or mental) or otherwise. For purposes of this Agreement, a disability is defined as the occurrence when the Executive is incapacitated for a continuous period exceeding one hundred twenty (120) days, as certified by a physician selected by the Executive and the Company in good faith. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) all Earned Obligations; and
(b) any amounts the Executive would have been entitled to receive as Annual Cash Bonus had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as the Annual Cash Bonus would have been paid for the year in which the termination occurs pursuant to Section 2.2; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following a termination of employment due to disability.
3.4 Termination by the Company for Cause or by the Executive without Good Reason. The Company may terminate the Executives employment at any time for Cause by providing the Executive notice of such termination. For the purpose of this Agreement, termination by the Company for Cause shall refer to the Companys termination of the Executives employment because it has determined, in its sole and exclusive discretion, that he has: (i) refused or willfully failed to devote his full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or he has failed to fulfill directives of either of the Boards; (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or material policy of the Company or breach of fiduciary duty; (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Companys funds or property; (iv) been convicted of any crime which reasonably could affect in an adverse manner the reputation of the Company or the Executives ability to perform his duties hereunder; (v) been grossly negligent in the performance of his duties; or (vi) materially breached this Agreement including, but not limited to, his obligations set forth in Sections 4 and 5 below. For purposes of this Agreement, no act or omission to act by the Executive shall be willful if conducted in good faith or with a reasonable belief that such act or omission was in the best interests of the Company. If the Executives employment terminates pursuant to this Section 3.4 by the Company for Cause or by reason of the Executives resignation without Good Reason at any time, the Executive shall only receive the Earned Obligations, if any, through his termination date. Nothing herein waives any rights the Company may have for damages or equitable relief in connection with events or circumstances proximately caused by or otherwise arising as a result of conduct constituting Cause or due to the Executives breach of a fiduciary duty.
3.5 Termination by the Company Without Cause; by the Executive for Good Reason . The Company may terminate the Executives employment without Cause at any time effective
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upon the Executives receipt of notice of such termination and the Executive may his terminate employment for Good Reason effective as provided below. No compensation or other benefits shall be payable to or accrue to the Executive in the event of his termination without Cause or for Good Reason except as follows:
(a) all Earned Obligations;
(b) Subject to the Executive entering into a binding and irrevocable release of claims and separation agreement prepared by the Company and the expiration on or before the 60th day after the Executives separation from service of any period during which the Executive is entitled to revoke the release, the Executive shall be eligible to receive:
(1) an amount equal to the sum of (A) Base Salary for a period of twelve (12) months after termination (the Severance Period) and (B) target Annual Cash Bonus, payable in substantially equal installments over the Severance Period in such manner and at such times as the Executives Base Salary was being paid immediately prior to such termination; provided , that such amount shall be paid in a lump sum, on such date on which the first such installment otherwise would have been payable, respecting any such termination occurring upon or following the occurrence of a Change in Control (as defined in the Option Plan; and further provided that such Change in Control also satisfies Treasury Regulation Section 1.409A-3(i)(5));
(2) an amount equal to the difference between the Executives actual COBRA premium costs and the amount the Executive would have paid had the Executive continued coverage as an employee under the Companys applicable health plans without regard to the pre-tax benefits the Executive would have received under the BJs Wholesale Club, Inc. Flexible Benefits Plan provided that the Executive elects to continue to participate in the Companys medical and/or dental plans for team members pursuant to a valid COBRA election (and if and only if such participation is legally and contractually permissible) and provided , however , that the Companys obligations under this clause 3.5(b)(2) shall (A) not extend beyond the Severance Period, (B) be eliminated if the Executive discontinues COBRA benefits or (C) be reduced or eliminated to the extent that the Executive receives similar coverage and benefits under the plans and programs of a subsequent employer or entity or becomes eligible for similar coverage under a spouses employer;
(3) if and only if such termination of employment occurs on or after July 1 of a fiscal year, any amounts the Executive would have been entitled to receive as Annual Cash Bonus had the Executive remained employed by the Company until the end of such fiscal year (prorated based on the number of days employed during such fiscal year). All such amounts, if any, will be paid at the same time as the Annual Cash Bonus would have been paid for the year in which the termination occurs pursuant to Section 2.2; and
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(4) any payments or benefits under other plans of the Company to the extent that the plans provide for benefits following a termination of employment.
Notwithstanding the foregoing, the payments and benefits described in Section 3.5(b) above shall immediately terminate, and the Company shall have no further obligations to the Executive with respect thereto, in the event that the Executive (i) becomes employed by Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof); or (ii) breaches any provision of Sections 4 or 5 of this Agreement.
For purposes hereof, Good Reason shall mean the occurrence, without the Executives prior written consent, of any of: (A) any material adverse change by the Company or Beacon in the Executives title, duties, responsibilities (including reporting responsibilities) or authority; (B) the Executive being required to relocate to a principal place of employment more than fifty (50) miles from the Executives principal place of employment with the Company on the Effective Date (other than any relocation to the Boston metropolitan area); (C) the failure by the Company or of Beacon to reelect the Executive as a member of the Board or the removal of the Executive therefrom; (D) the failure of the Company or of Beacon to obtain a satisfactory agreement from any successor to all or substantially all of the assets or business of the Company to assume and agree to perform this Agreement; or (E) a material breach by the Company or Beacon of this Agreement or any other agreement between the Executive and either of the Company or Beacon entered into in connection with this Agreement; provided , that, within thirty (30) days after the occurrence of a Good Reason event and prior to the effectiveness of any such termination by the Executive, the Executive shall provide the Company notice of his intent to resign for Good Reason and the basis therefor and allow the Company or Beacon, as applies, thirty (30) days within which to cure the circumstances constituting such Good Reason (if curable), and he shall terminate his employment within sixty (60) days following expiration of such cure period in which such circumstances are not so cured.
3.6 Section 409A of the Code and Special Rules Applicable to Deferred Compensation.
(a) General . The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code and the regulations issued thereunder (collectively, the Section 409A). Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be immediately taxable to the Executive under Section 409A, the Company reserves the right (without any obligation to do so or to indemnify the Executive for failure to do so) to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Company determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company and/or (ii) take such other actions as the Company determines to be necessary or appropriate to exempt the amounts payable hereunder from
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Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or Beacon or any of their subsidiaries, affiliates, employees or agents.
(b) Separation from Service under Section 409A . Notwithstanding any provision to the contrary in this Agreement: (i) no amount that constitutes nonqualified deferred compensation for purposes of Section 409A shall be payable pursuant to Section 3.2, 3.3, 3.4 or 3.5 unless the termination of the Executives employment constitutes a separation from service within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) for purposes of Section 409A, the Executives right to receive installment payments pursuant to this Agreement (including, without limitation, Section 3.5(b)(1)) shall be treated as a right to receive a series of separate and distinct payments; and (iii) to the extent that any reimbursement of expenses or in-kind benefits constitutes nonqualified deferred compensation for purposes of Section 409A, such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year.
(c) Delayed Payment for Specified Employees . Notwithstanding any other provision of this Agreement, if on the date of his separation from service, the Executive is a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code, no payments that constitute nonqualified deferred compensation for purposes of Section 409A (including any payments pursuant to Section 3.5(b)(1) or a portion thereof) and would otherwise be paid solely as a result of such separation from service shall be paid to the Executive during the six-month period beginning on the date of such separation from service, provided that (i) such delay shall not be required to the extent that the sum of such payments during the six-month period does not exceed two times the lesser of (A) the Executives Base Salary for the calendar year preceding the separation from service (adjusted for permanent increases taking effect during such year) or (B) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year of the Executives separation from service, (ii) the originally scheduled payment, together with each installment (if any) that would otherwise have been paid to the Executive during the six-month period, shall be paid on the first day of the seventh month following such termination, and (iii) if the Executive dies during the period in which no payment may be made, such period shall immediately end and all installments then due to the Executive shall be paid in accordance with the Executives beneficiary designation or, if no such designation has been made or applies, to his estate.
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4. Non-Competition and Non-Solicitation .
4.1 Restricted Activities . While the Executive is employed by the Company and for a period of twelve (12) months after the termination or cessation of such employment for any reason, the Executive will not directly or indirectly:
(a) Engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company with respect to any business or activity of the Company entered into by the Company after the Effective Date; or
(b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Executive to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Executive to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Executives employment with the Company; provided that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
4.2 Extension of Restrictions . If the Executive violates the provisions of Section 4.1, the twelve (12) month period referred to in Section 4.1 shall recommence and the Executive shall continue to be bound by the restrictions set forth in Section 4.1 until a period of twelve (12) months has expired without any violation of such provisions.
4.3 Interpretation . If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
4.4 Equitable Remedies . The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 4 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction (without any requirement to post a bond or other security) from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 4, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
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5. Proprietary Information .
5.1 Proprietary Information .
(a) The Executive agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Proprietary Information) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Executive will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his duties as an employee of the Company) without written approval by the Beacon Board, either during or after his employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by the Executive only in the performance of his duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Executive shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his employment. After such delivery, the Executive shall not retain any such materials or copies thereof or any such tangible property.
(c) The Executive agrees that his obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive.
5.2 Equitable Remedies . The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 5 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction (without any requirement to post a bond or other security) from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 5, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
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6 . Other Agreements . The Executive represents that his performance of all the terms of this Agreement and the performance of his duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Executive is a party (including without limitation any nondisclosure or non-competition agreement). Any agreement to which the Executive is a party relating to nondisclosure, non-competition or non-solicitation of employees or customers is listed on Exhibit C attached hereto.
7. Miscellaneous .
7.1 Notices . Any notice delivered under this Agreement shall be deemed duly delivered four (4) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set forth below:
If to the Company or Beacon:
25 Research Drive
Westborough, Massachusetts 01581
Attn: | General Counsel |
with copies to:
CVC Beacon LP
c/o CVC Capital Partners Advisory (U.S.), Inc.
712 Fifth Avenue, 43rd Floor
New York, NY 10019
Attn: | Cameron Breitner | |
Kenneth Hammond |
and
Leonard Green & Partners
11111 Santa Monica Boulevard, #2000
Los Angeles, CA 90025
Attn: | Jonathan A. Seiffer | |
J. Kristofer Galashan |
If to the Executive, the most recent personal address set forth in the records of the Company.
Any party may change the address to which notices are to be delivered by giving notice of such change to the parties in the manner set forth in this Section 7.1.
7.2 Pronouns; Interpretation . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the
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singular forms of nouns and pronouns shall include the plural, and vice versa. Any use of the words including, include or includes shall mean without limitation.
7.3 Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement entered into by the Company and the Executive.
7.4 Amendment . This Agreement may be amended or modified only by a written instrument executed by Beacon, the Company and the Executive.
7.5 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof), except as may be preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §1001 et seq. Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Executive each consents to the jurisdiction of such a court. The Company and the Executive each hereby irrevocably waives any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.
7.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Companys assets or business; provided , however , that the obligations of the Executive are personal and shall not be assigned by him.
7.7 Waivers . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. Notwithstanding the foregoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a third party engaged in multiple lines of business succeeds to the Companys assets or business, then for purposes of Section 4.1(a), the term Company shall mean and refer to the business of the Company as it existed immediately prior to such event and as it subsequently develops and not to the third partys other businesses.
7.8 Captions . The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
7.9 Severability . In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
7.10 Inconsistency . In the event of any inconsistency between this Agreement and any other plan, program, practice or agreement in which the Executive is are a participant or a party, whether applicable on the date of this Agreement or at any time thereafter, this Agreement will
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control unless, with the Executives prior written consent, such other plan, program, practice or agreement specifically refers to this Agreement as not so controlling.
* * * * *
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THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC. |
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THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC. |
/s/ Laura Sen |
Laura Sen |
Chief Executive Officer |
Acknowledged and agreed as of the first date set forth above:
BEACON HOLDING INC. |
/s/ Graham N. Luce |
Graham N. Luce |
Secretary |
Acknowledged and agreed as of the first date set forth above:
CHRISTOPHER J. BALDWIN | ||
/s/ Christopher J. Baldwin |
9/1/15 |
EXHIBIT A
Option Agreement
[ see attached ]
Exhibit A
NON-QUALIFIED STOCK OPTION AGREEMENT
OF
BEACON HOLDING INC.
THIS AGREEMENT (the Agreement ) is effective as of [ ● ], 2015 (the Grant Date ) by and between Beacon Holding Inc., a Delaware corporation (the Company ) and Christopher J. Baldwin, an employee, consultant or director of the Company or one of its Subsidiaries (hereinafter referred to as the Optionee ).
WHEREAS, the Board has approved the Second Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. (as it may be amended from time to time, the Plan ), the terms of which are hereby incorporated by reference and made a part of this Agreement;
WHEREAS, the Board has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or one of its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; and
WHEREAS, the Optionee has entered into a Management Stockholders Agreement with the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms used in this Agreement and not defined below shall have the meaning given such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.
Section 1.1 Base Option shall have the meaning set forth in Section 2.3.
Section 1.2 Cause shall have the meaning set forth in the Employment Agreement, and shall apply for all purposes under this Agreement and the Management Stockholders Agreement (the Management Stockholders Agreement to the contrary notwithstanding).
Section 1.3 Company shall have the meaning set forth in the preamble hereto.
Section 1.4 Confidential Information shall have the meaning set forth in Section 4.l(a).
Section 1.5 Disability shall mean disability as defined in the Employment Agreement.
Section 1.6 Employment Agreement shall mean that certain Employment Agreement between the Optionee, the Company and BJs Wholesale Club, Inc., dated as of September 1, 2015, as may be amended from time to time.
Section 1.7 Fair Market Value shall have the meaning set forth in the Plan; provided that, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, Fair Market Value shall be determined in accordance with (and is subject to disagreement procedures set forth in) the Management Stockholders Agreement.
Section 1.8 Good Reason shall have the meaning set forth in the Employment Agreement, and shall apply for all purposes under this Agreement and the Management Stockholders Agreement (the Management Stockholders Agreement to the contrary notwithstanding).
Section 1.9 Grant Date shall have the meaning set forth in the preamble hereto.
Section 1.10 Option shall mean the non-qualified stock option to purchase Common Stock granted under this Agreement.
Section 1.11 Optionee shall have the meaning set forth in the preamble hereto.
Section 1.12 Outperformance Option shall have the meaning set forth in Section 2.3.
Section 1.13 Plan shall have the meaning set forth in the Recitals hereto.
Section 1.14 Third Party Information shall have the meaning set forth in Section 4.3.
Section 1.15 Work Product shall have the meaning set forth in Section 4.2.
ARTICLE II.
GRANT OF OPTION
Section 2.1 Grant of Option . In consideration of the Optionees agreement to enter into or remain in the employ of, consultancy to or other service relationship with the Company or one of its Subsidiaries, and for other good and valuable consideration, as of the Grant Date, the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of 150,000 shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement. The Board shall not exercise its discretion under Section 5.6 of the Plan to impose any restriction that is not explicitly set forth in this Agreement, the Plan or the Management Stockholders Agreement.
Section 2.2 Option Subject to Plan . The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.
Section 2.3 Option Price . The purchase price of the first 75,000 shares of Common Stock covered by the Option (such portion of the Option, the Base Option ) shall be $50.00 per share (without commission or other charge), which is not less than 100% of Fair Market Value as of the Grant Date. The purchase price of the remaining 75,000. shares of Common Stock covered by the Option (such portion of the Option, the Outperformance Option ) shall be $75.00 per share (without commission or other charge), which is more than 100% of Fair Market Value as of the Grant Date.
ARTICLE III.
EXERCISABILITY
Section 3.1 Commencement of Exercisability .
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(a) Subject to Sections 3.1(c), 3.l(d) and 3.3, the Base Option shall vest and become exercisable in four cumulative installments provided that the Optionee remains continuously employed or engaged in active service by the Company or any of its Subsidiaries (and no Termination of Services occurs) from the Grant Date through such date as follows, except as otherwise provided herein:
(i) The first installment shall consist of 10% of the shares covered by the Base Option and shall vest and become exercisable on December 31, 2015;
(ii) The second installment shall consist of 30% of the shares covered by the Base Option and shall vest and become exercisable on December 31, 2016;
(iii) The third installment shall consist of 30% of the shares covered by the Base Option and shall vest and become exercisable on December 31, 2017; and
(iv) The fourth installment shall consist of 30% of the shares covered by the Base Option and shall vest and become exercisable on December 31, 2018.
(b) The Outperformance Option shall vest and become exercisable upon a Change in Control occurring as a result of a definitive transaction document entered into by the Company on or prior to June 30, 2016, provided that the Optionee remains continuously employed or engaged in active service by the Company or any of its Subsidiaries (and no Termination of Services occurs) from the Grant Date through the occurrence of such Change in Control. Except as set forth in this Section 3.1(b) or as otherwise determined by the Committee, no portion of the Outperformance Option which is unexercisable as of July 1, 2016 shall thereafter become exercisable.
(c) Notwithstanding the foregoing provisions of this Section 3.1 but subject to Section 3.3, upon a Change in Control, provided that the Optionee remains continuously employed or engaged in active service by the Company or any of its Subsidiaries (and no Termination of Services occurs) from the Grant Date through the consummation of such Change in Control, 100% of the Base Option shall become fully vested and exercisable immediately prior to the occurrence of such Change in Control.
(d) Upon Termination of Services (i) by the Company without Cause, (ii) by the Optionee for Good Reason, or (iii) due to death or Disability, in each case, during the three-month period immediately prior to any December 31st on which an installment is eligible to vest pursuant to Section 3.1(a), a Prorated Percentage of the shares covered by the Base Option shall become exercisable. Prorated Percentage shall mean the product of (A) the percentage of the shares covered by the Base Option that would have vested had the Optionee remained employed through December 31 of the year in which Termination of Service occurs, and (B) a fraction, the numerator of which is the number of full months of employment or service of the Optionee during the period beginning on the December 31st immediately prior to the Termination of Services and ending on the date of Termination of Services and the denominator of which is twelve (12). Except as set forth in this Section 3.1(d) or as otherwise determined by the Committee, no portion of the Option which is unexercisable at Termination of Services for any reason shall thereafter become exercisable.
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Section 3.2 Duration of Exercisability . The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable.
Section 3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after, and shall expire on, the first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) Except for such longer period as the Committee may otherwise approve, upon the Optionees Termination of Services for any reason other than (i) termination by the Company for Cause or (ii) due to the Optionees death or Disability, immediately following the 90th day following the date of such Termination of Services; or
(c) Notwithstanding the provisions of Section 3.1, in the event of the Optionees Termination of Services by the Company for Cause, the Optionee shall, immediately prior to such Termination of Services (and subject to such Termination of Services), forfeit the Option, whether vested or unvested; or
(d) In the case of a Termination of Services due to the Optionees death or Disability, the expiration of one year from the date of the Optionees Termination of Services; or
(e) The date the Optionee first violates any of the restrictive covenants set forth in Article IV.
Section 3.4 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than 10 shares of Common Stock and shall be for whole shares of Common Stock only.
Section 3.5 Exercise of Option . The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including, without limitation, the provisions of Article V of the Plan; provided that, with respect to the Option covered by this Agreement: (a) payment for the shares with respect to which the Option is exercised may be made in the form of shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised and (b) payment of withholding tax obligations arising in connection with the exercise of the Option may be made by the Optionee electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined.
ARTICLE IV.
RESTRICTIVE COVENANTS
Section 4.1 Obligation to Maintain Confidentiality .
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(a) The Optionee agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Confidential Information ) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Confidential Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Optionee will not disclose any Confidential Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his duties as an employee of the Company) without written approval by the Board, either during or after his employment with the Company, unless and until such Confidential Information has become public knowledge without fault by the Optionee.
(b) The Optionee agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Confidential Information, whether created by the Optionee or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by the Optionee only in the performance of his duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Optionee shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his employment. After such delivery, the Optionee shall not retain any such materials or copies thereof or any such tangible property.
(c) The Optionee agrees that his obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Optionee.
Section 4.2 Ownership of Property . Optionee acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Companys or any of its Subsidiaries or Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Optionee (either solely or jointly with others) while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) ( Work Product ) belong to the Company or such Subsidiary or Affiliate and Optionee hereby assigns, and agrees to assign, all of the above Work Product to the Company or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by Optionee in the course of Optionees work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is
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not a work made for hire, Optionee hereby assigns and agrees to assign to the Company or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Optionee shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Optionees employment with or service to the Company and its Subsidiaries and Affiliates) to establish and confirm the Companys or such Subsidiarys or Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
Section 4.3 Third Party Information . Optionee understands that the Company and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Companys and its Subsidiaries and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Optionees employment with or service to the Company or its Subsidiaries or Affiliates and thereafter, and without in any way limiting the provisions of Section 4.1 above, Optionee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company or its Subsidiaries and Affiliates who need to know such information in connection with their work for the Company or its Subsidiaries and Affiliates) or use, except in connection with Optionees work for the Company or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees employment with or service to the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
Section 4.4 Use of Information of Prior Employers . During Optionees employment and/or services, Optionee will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Optionee has an obligation of confidentiality, and will not bring onto the premises of the Company, its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Optionee has an obligation of confidentiality unless consented to in writing by the former employer or person. Optionee will use in the performance of Optionees duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company, its Subsidiaries or Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Optionee has an obligation of confidentiality, approved for such use in writing by such former employer or person.
Section 4.5 Noncompetition; Nonsolicitation . Optionee acknowledges that, in the course of Optionees employment and/or services, Optionee will become familiar with the Companys and its Subsidiaries and Affiliates trade secrets and with other confidential information concerning the Company and its Subsidiaries and Affiliates and that Optionees services will be of special, unique and extraordinary value to the Company and its Subsidiaries and Affiliates. Therefore, Optionee agrees that:
(a) Restriction . While employed or engaged by the Company or any of its Subsidiaries or Affiliates, and for a period beginning on the date of Optionees Termination of Services for any reason and ending on the first anniversary of such date of Termination of Services, Optionee shall not (i) directly or indirectly through another entity induce or attempt to induce any
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customer, supplier, licensee or other business relation of the Company or its Subsidiaries or Affiliates to cease doing business with the Company or its Subsidiaries or Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its Subsidiaries or Affiliates, (ii) engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company with respect to any business or activity of the Company entered into by the Company after the Grant Date, or (iii) either alone or in association with others (A) solicit, or permit any organization directly or indirectly controlled by the Optionee to solicit, any employee of the Company to leave the employ of the Company, or (B) solicit for employment, hire or engage a an independent contractor, or permit any organization directly or indirectly controlled by the Optionee to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Optionees employment with the Company; provided that this clause (B) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
(b) Enforcement . If, at the time of enforcement of Section 4.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Optionee agrees that because his or her services are unique and Optionee has access to confidential information, money damages would be an inadequate remedy for any breach of this Article IV. Optionee agrees that the Company, its Subsidiaries and Affiliates, in the event of a breach or threatened breach of this Article IV, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
(c) Non-disparagement . Optionee agrees that at no time during his employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall he make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company or any of its Subsidiaries or Affiliates or any of their respective directors, officers or employees. The Company agrees that at no time during Optionees employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall the Company (through any public statement) or any of the then-current officers or directors of the Company or any Subsidiary of the Company (each such person a Company Party ) make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of Optionee; provided, that neither Optionee nor any Company Party shall be required to make any untruthful statement or to violate any law.
Section 4.6 Acknowledgments . Optionee acknowledges that the provisions of this Article IV are (a) in addition to, and not in limitation of, any obligation of Optionees under the terms of any employment agreement with the Company or any of its Subsidiaries or Affiliates, (b) in consideration
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of (i) employment with or engagement by the Company or any of its Subsidiaries or Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Optionee agrees and acknowledges that the restrictions contained in Article IV do not preclude Optionee from earning a livelihood, nor do they unreasonably impose limitations on Optionees ability to earn a living. Optionee agrees and acknowledges that the potential harm to the Company or its Subsidiaries or Affiliates of the non-enforcement of this Article IV outweighs any potential harm to Optionee of its enforcement by injunction or otherwise. Optionee acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Optionee by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company, and its Subsidiaries and Affiliates now existing or to be developed in the future. Optionee expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
Section 4.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Optionee violates any of the restrictive covenants set forth in Section 4.5(a), then Optionee shall pay to the Company in cash any financial gain Optionee realizes from exercising all or a portion of this Option. For purposes of this Section 4.7, financial gain shall equal any excess of the Fair Market Value of the Common Stock on the date of exercise over the purchase price set forth in Section 2.3, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered). By accepting this Option, Optionee consents to and authorizes the Company to deduct from any amounts payable by the Company to Optionee any amounts Optionee owes to the Company under this Section 4.7. This right of set-off is in addition to any other remedies the Company may have against Optionee for Optionees breach of this Agreement. Optionees obligations under this Section 4.7 shall be cumulative (but not duplicative) of any similar obligations Optionee has pursuant to this Agreement or any other agreement with the Company.
ARTICLE V.
OTHER PROVISIONS
Section 5.1 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of, or providing services to, the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without Cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Optionee.
Section 5.2 Shares Subject to Plan and Management Stockholders Agreement; Entire Agreement . The Optionee acknowledges that any shares acquired upon exercise of the Option are subject to the terms of the Plan and the Management Stockholders Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement (together with the Plan and the Management Stockholders Agreement) shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
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Section 5.3 Construction . This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 5.4 Conformity to Securities Laws . The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.5 Amendment, Suspension and Termination . The Option may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided that, except as provided by Section 7.1 of the Plan, none of the amendment, suspension or termination of this Agreement shall, without the consent of the Optionee, alter or impair any rights or obligations under the Option.
Section 5.6 Section 409A . To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that the Committee determines that this Option may be subject to Section 409A of the Code, the Committee may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A of the Code; provided that the Committee shall notify the Optionee in writing of any amendment, policy or procedure so adopted that adversely alters or impairs the Optionees rights and the Optionee may reject the application of such amendment, policy or procedure by written notice to the Company, it being understood that the Optionee will thereby accept any risk of adverse tax treatment and indemnify the Company for any taxes, interest and penalties incurred by the Company in relation to such adverse tax treatment. Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from the Optionee or other Person to the Company or any of its Affiliates, employees or agents.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto, effective as of the date first above written.
BEACON HOLDING INC. |
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Christopher J. Baldwin | ||
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EXHIBIT B
Subscription Agreement
[ See attached ]
Exhibit B
THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED THEREUNDER OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. TRANSFER OF SUCH SECURITIES IS ALSO RESTRICTED BY THE TERMS OF THIS AGREEMENT AND BY THE TERMS OF THE MANAGEMENT STOCKHOLDERS AGREEMENT WITH BEACON HOLDING INC.
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (the Agreement ), effective as of [ ] (the Purchase Date ), is entered into by and among Beacon Holding Inc., a Delaware corporation (the Company ), and [ ] (the Participant ).
WHEREAS, subject to the terms and conditions of this Agreement, the Participant desires to subscribe for and purchase from the Company, and the Company desires to issue and sell the Participant, for cash in the amount set forth in Section 1.1 hereof, shares of the Companys common stock, par value $0.01 per share ( Shares ) (such purchase and sale of Shares is referred to herein as the Subscription ); and
WHEREAS, in connection with the consummation of the transactions contemplated by this Agreement, the Company, the Participant, and certain stockholders of the Company will enter into a Management Stockholders Agreement attached hereto as Annex A (the Management Stockholders Agreement ).
NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows.
1. Purchase and Sale of Shares .
1.1 Purchase and Sale of Shares . On the terms and conditions set forth herein, the Participant hereby subscribes for and agrees to purchase, [ ] Shares (the Purchased Shares ) for $[ ] per Share (with an aggregate purchase price of [ ] (the Purchase Price )), and the Company, in reliance upon the representations, warranties and agreements of the Participant contained herein, hereby agrees to issue and sell to the Participant, the Purchased Shares. The purchase shall take place on the Purchase Date.
1.2 Issuance of Shares . On the Purchase Date, (a) the Company will issue the Purchased Shares to Participant [and shall deliver to Participant share certificates representing the Purchased Shares] free and clear of all liens (other than such liens arising under applicable securities laws and the Management Stockholders Agreement) and such other documents and instruments necessary to vest in Participant good and marketable title to the Purchased Shares and (b) in consideration of the issuance of the Purchased Shares to the Participant[, and against delivery to the Participant of one or more share certificates representing Shares underlying the Purchased Shares,] the Participant shall pay to the Company the Purchase Price for the Purchased Shares.
2. Representations and Warranties of the Company . The Company hereby represents and warrants to the Participant as follows.
2.1 The Company represents and warrants that the authorized capital stock of the Company includes Shares. Upon issuance of the Purchased Shares to the Participant in exchange for the Purchase Price, the Purchased Shares will be validly issued, fully paid and non assessable and free and clear of all taxes, liens and restrictions on transfer, other than such liens and restrictions on transfer arising under applicable securities laws and the Management Stockholders Agreement.
2.2 The Company represents and warrants that (a) it is duly organized and incorporated and validly existing and in good standing under the laws of Delaware, having full power and authority to own its properties and to carry on its business as conducted as contemplated to be conducted immediately following the date hereof and (b) the Company has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and consummate the transactions contemplated hereby.
2.3 The Company represents and warrants that this Agreement has been duly executed and delivered by the Company and the Company has obtained the necessary authorization to execute and deliver this Agreement and to perform its obligations contained herein and to consummate the transactions contemplated hereby and constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms.
2.4 The Company represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not (a) conflict with the organizational documents of the Company, or (b) conflict with or cause a material default under any material agreement to which the Company is a party.
3. Representations and Warranties of the Participant . The Participant hereby represents and warrants to the Company as follows.
3.1 Organization . The Participant, if an entity, is duly organized, validly existing and in good standing under the laws of the state of its incorporation or organization, having full power and authority to own its properties and to carry on its business as conducted. The Participant, if a natural person, is of legal age, competent to enter into a contractual obligation, and a citizen of the United States of America. The principal place of business or principal residence of the Participant is as shown on the Signature Page of this Agreement.
3.2 Authority . The Participant has the requisite power and authority to deliver this Agreement, perform the Participants obligations herein, and consummate the transactions contemplated hereby. The Participant has duly executed and delivered this Agreement and has obtained the necessary authorization to execute and deliver this Agreement and to perform the Participants obligations contained herein and to consummate the transactions contemplated hereby. This Agreement is a valid, legal and binding obligation of the Participant, enforceable against the Participant in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of
2
creditors rights generally and subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or at equity).
3.3 Participant Intent . The Participant is acquiring the Purchased Shares for the Participants own account as principal, for investment purposes only, not for any other person or entity and not for the purpose of resale or distribution. The Participant is not subscribing for the Purchased Shares from the Company in a fiduciary capacity.
3.4 Financial Status . (a) The Participant is either:
(i) |
an Accredited Investor (as defined in Rule 501(a)(3), (5), (6), (7) or (8) of Regulation D promulgated under the Securities Act of 1933, as amended, and the rules and regulations in effect thereunder (the Securities Act )) and, if a natural person, (A) the Participants individual net worth or joint net worth with the Participants spouse at the time of the execution of this Agreement is in excess of $1,000,000 or (B) the Participant had an individual income in excess of $200,000 in each of the two (2) most recent years or joint income with the Participants spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. For purposes of the foregoing clause (A), net worth means total assets (including personal property and other assets, but excluding the value of the Participants primary residence) in excess of total liabilities (including only the indebtedness secured by the Participants primary residence in excess of the value of such residence); or |
(ii) |
a sophisticated investor and has knowledge and experience in financial and business matters such that the Participant is capable of evaluating the merits and risks of purchasing the Purchased Shares. |
(b) The Participant is able to bear the economic risk of an investment in the Purchased Shares for an indefinite period of time, has adequate means of providing for his or her current financial needs and personal contingencies, has no need for liquidity in the investment in the Purchased Shares, understands that the Participant may not be able to liquidate his or her investment in the Company in an emergency, if at all, and can afford a complete loss of the investment.
(c) The Participant has delivered to the Company an executed Investment Qualification Questionnaire in the form attached hereto as Annex B. The information contained therein is true, accurate and complete in all material respects.
3.5 No General Solicitation . The Participant has received no general solicitation or general advertisement in connection with the Subscription or an investment in the Company. The Participant has received no other representations or warranties from the Company or any other person acting on behalf of the Company, other than those contained in this Agreement.
3.6 No Reliance . The Participant did not look to, or rely in any manner upon, the Company or any of their respective affiliates, directors, officers, employees or representatives for
3
advice about tax, financial or legal consequences of a purchase of or investment in the Purchased Shares, and none of the Company or any of their respective affiliates, directors, officers, employees or representatives has made or is making any representations to the Participant about, or guaranties of, tax, financial or legal outcomes of a purchase of or an investment in the Purchased Shares.
3.7 Accuracy of Information . As of the Purchase Date, the representations and warranties of the Participant contained herein and all information provided by the Participant to the Company concerning the Participant, its financial position and its knowledge of financial and business matters set forth in the Investment Qualification Questionnaire, are correct and complete.
4. Agreements and Acknowledgements of the Participant . The Participant hereby agrees and acknowledges to the Company as follows:
4.1 No Registration . The Participant understands and agrees that the Purchased Shares are being acquired by the Participant in a transaction not involving any public offering within the meaning of the Securities Act, in reliance on an exemption therefrom. The Participant understands that the Purchased Shares have not been, and will not be, approved or disapproved by the Securities and Exchange Commission or by any other federal or state agency, and that no such agency has passed on the accuracy or adequacy of disclosures made to the Participant by the Company. No federal or state governmental agency has passed on or made any recommendation or endorsement of the Purchased Shares or an investment in the Company.
4.2 Limitations on Disposition and Resale . The Participant understands and acknowledges that the Shares have not been and will not (unless pursuant to the Management Stockholders Agreement) be registered under the Securities Act or the securities laws of any state and, unless the Shares are so registered, they may not be offered, sold, transferred or otherwise disposed of except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any applicable securities laws of any state or foreign jurisdiction. The Participant understands that it may not be possible for the Participant to liquidate his or her investment in the Company, and agrees not to sell, transfer or otherwise dispose of the Shares unless the Shares have been so registered or an exemption from the requirement of registration is available under the Securities Act and any applicable state securities laws. The Participant further acknowledges and agrees that his or her ability to dispose of the Shares will be subject to restrictions contained in the Management Stockholders Agreement. The Participant recognizes that there will not be any public trading market for the Shares and, as a result, the Participant may be unable to sell or dispose of its interest in the Company. The Participant further acknowledges and agrees that, except as may be set forth in the Management Stockholders Agreement, the Company shall have no obligation to register the Shares.
4.3 Legends . The Participant acknowledges and agrees that the certificates representing the Shares (if certificated) will bear the following legends (or such other legends as may be determined by the Company):
4
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 30, 2011, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND THE STOCKHOLDERS PARTY THERETO, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND ANY TRANSFER IN VIOLATION OF SUCH MANAGEMENT STOCKHOLDERS AGREEMENT SHALL BE NULL AND VOID.
4.4 Information Regarding the Company . The Participant acknowledges that (a) the Company has made available to the Participant, a reasonable time prior to the date of this Agreement, information concerning the Company sufficient for the Participant to make an informed decision regarding an investment in Shares and an opportunity to ask questions and receive answers concerning Shares; (b) the Company has made available to the Participant, a reasonable time prior to the date of this Agreement, the opportunity to obtain any additional information that the Company possesses or can acquire without unreasonable effort or expense deemed necessary by the Participant to verify the accuracy of the information provided, and the Participant believes that it has received all such additional information requested; and (c) the Participant has not relied on the Company or any of their respective affiliates, officers, employees or representatives in connection with the Participants investigation or the accuracy of the information provided or in making any investment decision.
4.5 Irrevocable Subscription . Each of the Participant and the Company understands that this Subscription is irrevocable, except as expressly provided herein or otherwise provided in any applicable federal or state law governing this Agreement and the transactions contemplated herein.
5. Governing Law; Severability . This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to the conflicts of laws principles thereof. If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances shall not be affected thereby, and that provision shall be enforced to the greater extent permitted by law.
5
6. Assignment . This Agreement shall not be assignable or otherwise transferable by the Purchaser without the prior written consent of the Company (which may be withheld in the Companys sole discretion). Except as provided in the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties respective successors, assigns, executors and administrators.
7. Counterparts . This Agreement may be executed in separate counterparts, each of which shall be deemed an original and both of which shall constitute one and the same document.
8. Entire Agreement . This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only in a writing executed by the party to be bound thereby.
9. Amendment . Except as expressly set forth herein, this Agreement may be amended, modified or supplemented only by a written instrument executed by the Participant and the Company.
10. Management Stockholders Agreement; Further Assurances . As a condition to purchasing the Purchased Shares pursuant to this Agreement, the Participant shall enter into the Management Stockholders Agreement. In addition, the Participant agrees to execute any and all further documents reasonably necessary to become a stockholder of the Company and to execute and deliver any and all further documents and writings, and to perform such other actions, as may be or become reasonably necessary or expedient to effect and carry out the terms of this Agreement; provided that no such documents or writings shall impose any additional restrictions or requirements on Participant.
[The remainder of this page is blank]
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IN WITNESS WHEREOF, the parties have hereby executed this Subscription Agreement as of the date set forth above.
BEACON HOLDING INC. | ||
By: |
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Name: |
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Title: |
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PARTICIPANT |
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Signature |
Signature of Spouse |
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(Street Address) |
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(City and State) (Zip Code) |
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Telephone Number |
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Social Security Number or |
Taxpayer Identification Number
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Annex A
Management Stockholders Agreement
of
Beacon Holding Inc.
Annex B
CONFIDENTIAL INVESTMENT QUALIFICATION QUESTIONNAIRE
BEACON HOLDING INC.
A Delaware Corporation (the Company )
SPECIAL INSTRUCTIONS
In order to establish the availability under federal and state securities laws of an exemption from registration or qualification requirements for the proposed Subscription, you are required to represent and warrant, and by executing and delivering this questionnaire will be deemed to have represented and warranted, that the information stated herein is, as of the date executed, true, accurate and complete to the best of your knowledge and belief, and may be relied on by the Company. Further, by executing and delivering this questionnaire you agree to notify the Company and supply corrective information promptly if, prior to the consummation of your purchase and sale of Shares, any such information becomes inaccurate or incomplete. Your execution of this questionnaire does not constitute any indication of your intent to subscribe for the Shares.
1. |
General Information . |
a. Name(s) of prospective participant(s): |
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b. Address: |
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c. Telephone Number: |
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d. State where registered to vote: |
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e. Social Security Number: |
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f. Please state the Participants education and degrees earned: |
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Degree |
School |
Year | ||||
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g. Current occupation (if retired, describe last occupation): |
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Employer: |
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Nature of Business: |
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Position: |
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Business Address: |
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Telephone Number: |
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2. |
Accreditation . Does the Participant satisfy one or more of the following accredited investor requirements? Contact the Company if none of the following is applicable. |
The Participant is:
☐ |
A natural person whose net worth (or joint net worth with my spouse) is in excess of $1,000,000 as of the date hereof. For purposes of the foregoing, net worth means total assets (including personal property and other assets, but excluding the value of the Participants primary residence) in excess of total liabilities (including only the indebtedness secured by the Participants primary residence in excess of the value of such residence). |
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A natural person whose income in the prior two years was, and whose income in the current year is reasonably expected to be, in excess of $200,000 or whose joint income with his or her spouse in the prior two years was, and is reasonably expected to be in the current year, in excess of $300,000. |
☐ |
A director or executive officer of the Company. |
[The remainder of this page is blank]
PARTICIPANT |
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(Signature) |
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(Print Name) |
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(Address) |
Social Security Number: |
Spouse of Participant: |
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(Signature) |
EXHIBIT C
Agreements containing Restrictive Covenants
None.
Exhibit C
Executives initials
Exhibit 10.4(a)
AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the Amendment) dated as of February 1, 2016 is entered into between Christopher J. Baldwin (the Executive), BJs Wholesale Club, Inc., a Delaware corporation (the Company), and Beacon Holding Inc., a Delaware corporation (Beacon).
W I T N E S S E T H
WHEREAS, the parties desire to make certain amendments to that certain Employment Agreement by and among the parties, dated as of September 1, 2015 (the Agreement); and
WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company, Beacon and the Executive agree that, effective as of the date hereof, the Agreement is hereby amended as follows:
A. Amendment
i. |
Section 1.2 of the Agreement is deleted in its entirety and replaced with the following: |
1.2 Duties . The Executive shall serve the Company as its President and Chief Executive Officer to serve in such capacity or other capacities consistent therewith as designated by the Board of Directors of the Company (the Company Board) and the Board of Directors of Beacon (the Beacon Board and, together with the Company Board, the Boards) and shall have such duties, authorities and responsibilities as the most senior executive officer of the Company and Beacon, commensurate with the duties, authorities and responsibilities of persons in similar capacities of similarly sized companies. During the Term, the Executive shall serve the Company faithfully, diligently and to the best of his ability and shall devote substantially all of his business time, energy and skill to the affairs of the Company as necessary to perform the duties of his position, and he shall not assume a position in any other business without the express written permission of the Beacon Board; provided that the Executive may upon disclosure to the Beacon Board (i) serve as a member of not more than one for-profit board of directors so long as the Executive receives prior written permission from the Beacon Board (such permission not to be unreasonably withheld); (ii) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executives duties to the Company and (iii) make passive investments where the Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit the Executives participation in any of the foregoing endeavors if the Beacon Board believes, in its sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executives ability to perform the duties under this Agreement. On the date
hereof, the Executive serves as chairman of the board of directors of Morristown Medical Center and as a member of the board of directors of Harlem Lacrosse and Leadership, both non-profit organizations, which continued service the Beacon Board hereby approves so long as there is no material interference with the Executives duties to the Company. In addition, during the Term, the Executive will continue to serve as a member of each of the Boards.
ii. |
Section 2.1 of the Agreement is deleted in its entirety and replaced with the following: |
2.1. Base Salary . The Executive shall receive a base salary at the rate of $1,000,000 per year. Such base salary shall be subject to periodic increase (but no decrease) from time to time as determined by the Beacon Board in its sole discretion (as may be increased from time to time, Base Salary). Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated executive employees.
iii. |
The following sentence is added to Section 2.6 of the Agreement, immediately following the first sentence thereof: |
On February 1, 2016 or as soon as is practicable thereafter, Beacon shall grant the Executive an option (the Supplemental Option) to purchase 100,000 shares of Common Stock, on such terms as are agreed between Executive and Beacon (including commencement of the vesting period as of February 1, 2016), and which shares shall be subject to the terms of the Management Stockholders Agreement (defined below).
iv. |
The first two sentences of Section 2.8 of the Agreement are deleted in their entirety and replaced with the following: |
In connection with the Executives relocation from the New York metropolitan area to the Boston metropolitan area, the Company shall (i) pay the Executive a relocation stipend equal to $125,000 net to Executive after applicable taxes, and (ii) will reimburse Executive up to $25,000 for all reasonable expenses associated with the packing, moving, and unpacking of Executives household goods. From the Effective Date until the earlier of (i) the date the Executive relocates to the Boston metropolitan area, or (ii) April 30, 2016, the Company shall reimburse all reasonable, documented commuting expenses to and from the Executives principal residence in the New York metropolitan area (Commuting Expenses).
B. |
Incorporation . This Amendment is hereby incorporated into and made a part of the Agreement, which is affirmed, ratified and continued as amended hereby. |
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AMENDMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to Employment Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC.
By: |
/s/ Robert W. Eddy
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Name: | ROBERT W. EDDY | |
Title: | EVP & CHIEF FINANCIAL OFFICER |
BEACON HOLDING INC.
By: |
/s/ Graham N. Luce
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Name: | GRAHAM N. LUCE | |
Title: | SECRETARY |
CHRISTOPHER J. BALDWIN
/s/ Christopher J. Baldwin
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Exhibit 10.5
EXECUTION VERSION
BJs Wholesale Club Holdings, Inc.
25 Research Drive
Westborough, MA 01581
March 27, 2018
Christopher Baldwin
c/o BJs Wholesale Club Holdings, Inc.
25 Research Drive
Westborough, MA 01581
Re: Restricted Stock Award
Dear Chris:
In connection with the initial public offering (the IPO ) of BJs Wholesale Club Holdings, Inc. (the Company ), the Company has determined to grant you an award (the Award ) of [202,350] 1 restricted shares of common stock of the Company, par value $0.01 per share ( Common Stock ). The grant of the Award is subject to the consummation of the IPO and to the extent such IPO is not consummated prior to the first anniversary of the date hereof, the Award and this letter agreement shall be void ab initio. The award shall be subject to the terms and conditions of an equity plan that the Company intends to adopt upon the consummation of the IPO in substantially the form described in the Companys Form S-1 Registration Statement (the 2018 Plan ) and an award agreement, substantially in the form attached hereto as Exhibit A (the Award Agreement ).
The terms of the Award Agreement provide that the Company has the authority to deduct or withhold, or require you to remit to the Company, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes required by applicable law to be withheld with respect to any taxable event arising pursuant to the Award Agreement.
However, in accordance with the second sentence of Section 4.1(a) of the Award, the Company waives such requirement and agrees that such tax withholding may be satisfied at your election (made at the time such tax is due), for purposes of the Award, by having the Company withhold a net number of shares subject to the Award having a then current fair market value not exceeding the amount necessary to satisfy the withholding obligation of the Company based on the maximum statutory withholding rates in your applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income. Notwithstanding the forgoing, if the board of directors of the Company (the Board) determines in its good faith discretion that allowing for such share withholding would cause a liquidity event for the Company, as described in the Award Agreement, the Board may require that your tax withholding obligations be satisfied by another method which will be set forth in the 2018 Plan, including without limitation (i) cash or check made payable to the Company with respect to which the withholding obligation arises; (ii) the deduction of such amount from other
1 |
Calculation of the number of shares to be pursuant to a spreadsheet that was circulated. |
compensation payable to you; or (iii) through the delivery of a notice that you have placed a market sell order with a broker acceptable to the Company, with respect to the portion of the Award for which the restrictions are then subject to lapse, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the Company at such time as may be required by the Board, but in any event not later than the settlement of such sale.
Notwithstanding anything to the contrary in the forgoing or in the Award Agreement, in the event of certain transactions and events affecting our Common Stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations and other corporate transactions, the Company shall equitably adjust the number and type of shares of stock subject to the award in order to preserve the intended benefits, avoid dilution, and facilitate necessary or desirable changes to the Award.
The Company will pay your reasonable professional fees incurred to negotiate and prepare this letter agreement and the Award Agreement.
Please indicate your acceptance of the terms and provisions of this letter agreement by signing below. By signing below, you acknowledge and agree that you have had an opportunity to consult with your own independent legal counsel regarding your rights and obligations under this letter agreement; have carefully read this letter agreement in its entirety; fully understand and agree to its terms and provisions; and intend and agree that it be final and legally binding on you and the Company. This letter agreement may not be modified, amended, or terminated except by an instrument in writing, signed by each of you and a duly authorized officer of the Company. This letter agreement may be executed in several counterparts.
Agreed and Accepted as of the first date set forth above:
BJs Wholesale Club Holdings, Inc. | ||
By: |
/s/ Graham Luce |
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Name: Graham Luce | ||
Title: | Secretary | |
Accepted and agreed to as of the first date set forth above: | ||
Christopher Baldwin | ||
/s/ Christopher Baldwin |
[Signature Page to the Letter Agreement Re: Baldwin Restricted Stock Agreement]
EXHIBIT A
Form of Award Agreement
[ see attached ]
BJS W HOLESALE C LUB H OLDINGS , I NC .
2018 INCENTIVE AWARD PLAN
RESTRICTED STOCK AWARD GRANT NOTICE AND
RESTRICTED STOCK AWARD AGREEMENT
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) the number of shares of Restricted Stock set forth below (the Restricted Shares ). The Restricted Shares are subject to the terms and conditions set forth in this Restricted Stock Award Grant Notice (the Grant Notice ), the Plan and the Restricted Stock Award Agreement attached hereto as Exhibit A (the Agreement ), each of which is incorporated into this Grant Notice by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
Participant: | Christopher Baldwin | |
Grant Date: | [ ] 1 | |
Total Number of Shares of | ||
Restricted Stock: | [ ] Shares | |
Purchase Price: | $0.00 | |
Vesting Schedule: | The Restricted Shares shall vest in equal installments on the last day of each calendar month ending during the period commencing on the Grant Date and ending on September 30, 2020, subject to Participants continued employment with or service to a Company Group Member on each applicable vesting date for such respective installment to so vest, except as provided otherwise in the Agreement. |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Agreement, the Plan and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Grant Notice, the Agreement and the Plan.
BJS WHOLESALE CLUB HOLDINGS, INC. | PARTICIPANT | |||||||
By: |
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By: |
/s/ Christopher Baldwin |
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Print Name: | [ ] | Print Name: | Christopher Baldwin | |||||
Title: | [ ] |
1 |
To be granted on or shortly following the IPO. Calculation of the number of shares to be pursuant to a spreadsheet that was circulated. |
EXHIBIT A
TO RESTRICTED STOCK AWARD GRANT NOTICE
RESTRICTED STOCK AWARD AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant the number of Restricted Shares set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice. For purposes of this Agreement,
(a) Cause shall have the meaning set forth in the Employment Agreement.
(b) Cessation Date shall mean the date of Participants Termination of Service (regardless of the reason for such termination).
(c) Corporate Transaction shall mean (a) the sale of all or substantially all of the assets of the Company to any other Person (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), or (b) a change in beneficial ownership or control of the effected through a transaction or series of transactions (other than an offering of Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby (i) any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of such entitys securities outstanding immediately after such acquisition, or (ii) following an initial public offering, the Principal Stockholders and their respective Affiliates directly or indirectly hold beneficial ownership of securities of the Company possessing less than 10% of the total combined voting power of such entitys voting securities outstanding immediately after such transaction or series of transactions.
(d) Company Group shall mean the Company and its Subsidiaries.
(e) Company Group Member shall mean each member of the Company Group.
(f) Disability shall have the meaning set forth in the Employment Agreement.
(g) Employment Agreement shall mean the Employment Agreement between the Participant, the Company and BJs Wholesale Club, Inc., dated as of September 1, 2015, as may be amended from time to time.
(h) Good Reason shall have the meaning set forth in the Employment Agreement.
(i) Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC, and CVC Beacon LP (f/k/a CVC Beacon LLC).
A-1
1.2 Incorporation of Terms of Plan . The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, each of which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. 2
ARTICLE II.
AWARD OF RESTRICTED SHARES
2.1 Award of Restricted Shares .
(a) Award . In consideration of Participants past and/or continued employment with or service to any Company Group Member, and for other good and valuable consideration that the Administrator has determined exceeds the aggregate par value of the Shares subject to the Award, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has issued to Participant the number of Restricted Shares set forth in the Grant Notice upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustments as provided in Article 12 of the Plan.
(b) Purchase Price; Book Entry Form . The purchase price of the Restricted Shares is set forth on the Grant Notice. At the sole discretion of the Administrator, the Restricted Shares (and any securities that constitute Retained Distributions (as defined below)) will be issued in either (i) uncertificated form, with the Restricted Shares (and securities that constitute Retained Distributions) recorded in the name of Participant in the books and records of the Companys transfer agent with appropriate notations regarding the Restrictions (as defined below) imposed pursuant to this Agreement, and upon vesting and the satisfaction of all conditions set forth in Section 2.2 , the Company shall cause the book entries evidencing the Restricted Shares (and any securities that constitute Retained Distributions) to indicate that the Restrictions have lapsed; or (ii) certificate form pursuant to the terms of Section 2.1 (c) and Section 2.1 (d).
(c) Legend. Any certificates representing Restricted Shares issued pursuant to this Agreement shall, until all Restrictions imposed pursuant to this Agreement lapse or shall have been removed and the Restricted Shares shall thereby have become vested or the Restricted Shares represented thereby have been forfeited hereunder, bear the following legend (or such other legend as shall be determined by the Administrator):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF A RESTRICTED STOCK AWARD AGREEMENT, BY AND BETWEEN BJS WHOLESALE CLUB HOLDINGS, INC. AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH AGREEMENT.
(d) Escrow . The Secretary of the Company or such other escrow Participant as the Administrator may appoint may retain physical custody of any certificates representing the Restricted Shares (and any securities that constitute Retained Distributions) until all of the Restrictions imposed pursuant to this Agreement lapse or shall have been removed; in such event Participant shall not retain
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Subject to a review of the plan, when available, for any possible unfavorable inconsistencies. |
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physical custody of any certificates representing unvested Restricted Shares issued to him or her (or any certificates representing securities that constitute Retained Distributions). Participant, by acceptance of the Award, shall be deemed to appoint, and does so appoint the Company and each of its authorized representatives as Participants attorney(s)-in-fact to effect any transfer of unvested forfeited Restricted Shares or securities that constitute Retained Distributions (or Restricted Shares otherwise reacquired by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.
(e) Delivery of Certificates and Payment Upon Vesting .
(i) As soon as administratively practicable after the vesting of any Restricted Shares subject to the Award pursuant to Section 2.2(c) , the Company shall, as applicable, either remove the notations on any Restricted Shares subject to the Award issued in book entry form that have vested or deliver to Participant a certificate or certificates, without the legend set forth in Section 2.1(c) , evidencing the number of Restricted Shares subject to the Award that have vested.
(ii) As soon as administratively practicable after the vesting of any Restricted Shares subject to the Award pursuant to Section 2.2(c) , the Company shall (A) as applicable, either remove the notations on any securities that constitute Retained Distributions issued in book entry form with respect to such Restricted Shares or deliver to Participant a certificate or certificates evidencing the number of securities that constitute Retained Distributions with respect to such Restricted Shares and (B) pay Participant in cash an amount equal to all cash dividends or other cash distributions that constitute Retained Distributions with respect to such Restricted Shares.
(iii) Participant (or the beneficiary or personal representative of Participant in the event of Participants death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances required by the Company in connection with this Section 2.1(e) . The Restricted Shares and securities that constitute Retained Distributions delivered pursuant to this Section 2.1(e) shall no longer be subject to the Restrictions hereunder.
2.2 Restrictions .
(a) Forfeiture . Any Restricted Shares that are not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company. Notwithstanding the forgoing, following a Termination of Service at any time (1) by the Company without Cause (other than due to death or Disability) or (2) by the Participant for Good Reason:
(i) If a Corporate Transaction is consummated within the 90-day period following such Termination of Services, the Restricted Shares (and Retained Distributions thereon) shall vest pursuant to Section 2.2(c)(ii) as if the Participant had remained continuously employed or engaged in active service through the consummation of such Corporate Transaction; or
(ii) If a Corporate Transaction is not consummated within the 90-day period following such Termination of Services, on the 91st day following the Cessation Date, the monthly installment of the Restricted Shares (and Retained Distributions thereon) (to the extent not previously 100% vested) that would have vested on the next succeeding scheduled monthly vesting date immediately following the Cessation Date shall become vested.
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(b) Restricted Shares Not Transferable . No Restricted Shares or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 10.3(a)(i) of the Plan; provided, however, that this Section 2.2(b ) notwithstanding, with the consent of the Administrator and subject to the terms of the Plan, the Restricted Shares may be transferred to a Permitted Transferee, pursuant to any such conditions and procedures the Administrator may require. For purposes of this Agreement, Restrictions shall mean the restrictions on sale or other transfer set forth in this Section 2.2(b) and the exposure to forfeiture set forth in Section 2.2(a) .
(c) Vesting and Lapse of Restrictions .
(i) Subject to Participants continued employment with or service to a Company Group Member on each applicable vesting date and subject to Sections 4.11 and 4.16 hereof, the Award (and Retained Distributions thereon) shall vest and the Restrictions shall lapse in accordance with the vesting schedule set forth in the Grant Notice.
(ii) Furthermore, upon the consummation of a Corporate Transaction, subject to Participants continued employment with or service to a Company Group Member from the Grant Date through the consummation of such Corporate Transaction, 100% of the unvested portion of the Award (and Retained Distributions thereon) shall vest and the Restrictions shall lapse immediately prior to such Corporate Transaction.
(d) Retained Distributions . Unless otherwise determined by the Administrator, the Company will retain custody of all cash dividends and other distributions ( Retained Distributions ) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the Restrictions and the other terms and conditions under this Agreement that are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall vest in accordance with Section 2.2(a)(i) , Section 2.2(a)(ii) or Section 2.2(c) , as applies, and such Retained Distributions shall not bear interest or be segregated in separate accounts. Any Retained Distributions with respect to Restricted Shares that have not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
2.3 Consideration to the Company . In consideration of the grant of the Award by the Company, Participant agrees to render faithful and efficient services to the Company Group. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company Group or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
ARTICLE III.
RESTRICTIVE COVENANTS
3.1 Restriction on Competition and Solicitation . While employed or engaged by the Company Group, and for a period beginning on the date of Cessation Date for any reason and ending on the first anniversary of such date of the Cessation Date (the Restricted Period ), Participant shall not (i) directly or indirectly through another entity induce or attempt to induce any customer, supplier, licensee
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or other business relation of a Company Group Member to cease doing business with any member of the Company Group or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company Group Member, (ii) engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company Group with respect to any business or activity of the Company Group entered into by the Company Group after the Grant Date, or (iii) either alone or in association with others (A) solicit, or permit any organization directly or indirectly controlled by the Participant to solicit, any employee of the Company Group to leave the employ of the Company Group, or (B) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Participant to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company Group at the time of the termination or cessation of the Participants employment with the Company Group; provided that this clause (B) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company Group has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
3.2 Confidentiality . Except as Participant reasonably and in good faith determines to be required in the faithful performance of Participants duties for the Company Group or in accordance with Section 3.5, Participant shall, during the Participants period of service with the Company Group and after the Cessation Date, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, for Participants benefit or the benefit of any other Person, any confidential or proprietary information or trade secrets of or relating to the Company Group, including, without limitation, information with respect to the Company Groups operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment ( Proprietary Information ), or deliver to any Person, any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. Participants obligation to maintain and not use, disseminate, disclose or publish, or use for Participants benefit or the benefit of any other Person, any Proprietary Information after the Cessation Date will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of Participants direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company Group. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company Group (and any successor or assignee of the Company Group). In accordance with 18 U.S.C. Section 1833, the Company hereby notifies Participant that, notwithstanding anything to the contrary herein, (a) Participant shall not be in breach of this Section 3.3 and shall not be held criminally or civilly liable under any federal or state trade secret law (i) for the disclosure of a trade secret that is made in confidence to a federal, state or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (b) if Participant files a lawsuit for retaliation by the Company Group for reporting a suspected violation of law, Participant may disclose a trade secret to Participants attorney, and may use trade secret information in the court proceeding, if Participant files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
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3.3 Return of Company Group Property . Upon Participants Termination of Service for any reason, Participant will promptly deliver to the Company Group (i) all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents that are Proprietary Information, including all physical and digital copies thereof, and (ii) all other Company Group property (including, without limitation, any personal computer or wireless device and related accessories, keys, credit cards and other similar items) which is in his or her possession, custody or control.
3.4 Response to Subpoena; Whistleblower Protection . Participant may respond to a lawful and valid subpoena or other legal process but shall give the Company Group the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company Group and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. Participant does not need the prior authorization of the Company Group to make any such reports or disclosures and Participant shall not be not required to notify the Company Group that such reports or disclosures have been made.
3.5 Non-Disparagement. Participant agrees not to disparage the Company Group, any of its products or practices, or any of its directors, officers, agents, representatives, partners, members, equity holders or Affiliates, either orally or in writing, at any time; provided that Participant may confer in confidence with Participants legal representatives and make truthful statements as required by law. The Company agrees that at no time during Participants employment or engagement by the Company Group or thereafter, shall the Company (through any public statement) or any of the then-current officers or directors of the Company Group (each such person a Company Party ) make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of Participant; provided, that no Company Party shall be required to make any untruthful statement or to violate any law.
3.6 Restrictions Upon Subsequent Employment . Prior to accepting other employment or any other service relationship during the Restricted Period, Participant shall provide a copy of this Article III to any recruiter who assists Participant in obtaining other employment or any other service relationship and to any employer or other Person with which Participant discusses potential employment or any other service relationship.
3.7 Enforcement . In the event the terms of this Article III shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. Any breach or violation by Participant of the provisions of this Article III shall toll the running of any time periods set forth in this Article III for the duration of any such breach or violation.
3.8 Forfeiture Upon Violation . Notwithstanding any other provision of this Agreement that may provide to the contrary, in the event of Participants violation of any restrictive covenant within this Article III or any other agreement by and between Participant and any Company Group Member, as determined by the Company, in its sole discretion, then (a) the Restricted Shares shall immediately be terminated and forfeited in its entirety and (b) Participant shall pay to the Company in cash any amounts paid to Participant in respect of the Restricted Shares during the 12-month period immediately preceding
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(or at any time after) the date of such violation. By accepting these Restricted Shares, Participant hereby acknowledges, agrees and authorizes the Company to reduce any amounts owed by any Company Group Member (including amounts owed as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Participant by any Company Group Member), by the amounts Participant owes to the Company under this Section 3.9. To the extent such amounts are not recovered by the Company through such set-off, Participant agrees to pay such amounts immediately to the Company upon demand. This right of set-off is in addition to any other remedies the Company may have against Participant for Participants breach of this Agreement or any other agreement. Participants obligations under this Section 3.9 shall be cumulative (but not duplicative) of any similar obligations Participant may have pursuant to this Agreement or any other agreement with any Company Group Member.
3.9 Injunctive Relief . Participant recognizes and acknowledges that a breach of the covenants contained in this Article III will cause irreparable damage to the Company Group and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, Participant agrees that in the event of a breach of any of the covenants contained in this Article III, in addition to any other remedy which may be available at law or in equity, the Company Group will be entitled to specific performance and injunctive relief.
3.10 Special Definition . As used in this Article III, the following terms shall have the ascribed meanings:
(a) Affiliate shall mean shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given such term under Rule 405 of the Securities Act.
ARTICLE IV.
OTHER PROVISIONS
4.1 Tax Withholding . Notwithstanding any other provision of this Agreement:
(a) The Company Group has the authority to deduct or withhold, or require Participant to remit to the applicable Company Group Member, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by Applicable Law to be withheld with respect to any taxable event arising pursuant to this Agreement in accordance with the terms of the Plan. Notwithstanding the foregoing, the Participant may, at his election made at the time such tax is due, make such payment by directing the Company to withhold a number of Shares subject to the Award having a then current aggregate Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income, unless and to the minimum extent that the board of directors of the Company (the Board ) determines in its good faith discretion that allowing for such share withholding would have a material adverse affect on the Companys liquidity position in a manner that could reasonably be expected to materially adversely affect the Companys ability to operate the business in the ordinary course or achieve its strategic objectives.
(b) The Company shall not be obligated to record the Restricted Shares in the name of Participant in the books and records of the Companys transfer agent (or deliver any new certificate representing Restricted Shares to Participant or his or her legal representative) unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the grant of the Award or the issuance or vesting of Restricted Shares hereunder or any other taxable event with respect to the Restricted Shares.
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(c) Participant is ultimately liable and responsible for, and, to the extent permitted by Applicable Law, agrees to indemnify and keep indemnified the Company Group from, all taxes owed in connection with the Award, regardless of any action any Company Group Member takes with respect to any tax withholding obligations that arise in connection with the Award. No Company Group Member makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding or vesting of the Award or the subsequent sale of Shares. The Company Group does not commit and is under no obligation to structure the Award to reduce or eliminate Participants tax liability.
4.2 Conditions to Delivery of Stock . Subject to Section 2.1 , the Restricted Shares deliverable under this Award may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares under this Award prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body that the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares;
(e) The receipt of any applicable withholding tax in accordance with Section 4.1 by the Company Group Member with respect to which the applicable withholding obligation arises; and
(f) The lapse of such reasonable period of time following the grant of this Award as the Administrator may from time to time establish for reasons of administrative convenience.
4.3 Rights as Stockholder . Except as otherwise provided herein, upon the Grant Date, Participant shall have all the rights of a stockholder with respect to the Restricted Shares, subject to the Restrictions herein, including the right to vote the Restricted Shares and the right to receive any cash or stock dividends paid to or made with respect to the Restricted Shares; provided, however, that at the discretion of the Company, and prior to the delivery of Restricted Shares, Participant may be required to execute a stockholders agreement in such form as shall be determined by the Company.
4.4 Section 83(b) Election . Participant understands that Section 83(a) of the Code taxes as ordinary income the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares and any Retained Distributions at the time the Restrictions on such Restricted Shares and Retained Distributions lapse. Participant understands that, notwithstanding the preceding sentence, Participant may elect to be taxed at the time of the Grant Date, rather than at the time the Restrictions lapse, by filing an election under Section 83(b) of the Code (an 83(b) Election )
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with the Internal Revenue Service within 30 days of the Grant Date. In the event that Participant files an 83(b) Election, Participant shall provide the Company a copy thereof prior to the expiration of such 30 day period. Participant understands that in the event an 83(b) Election is filed with the Internal Revenue Service within such time period, Participant will recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares as of the Grant Date. Participant further understands that an additional copy of such 83(b) Election form should be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Participant acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the Award hereunder, and does not purport to be complete. PARTICIPANT FURTHER ACKNOWLEDGES THAT THE COMPANY IS NOT RESPONSIBLE FOR FILING PARTICIPANTS 83(b) ELECTION, AND THE COMPANY HAS DIRECTED PARTICIPANT TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH PARTICIPANT MAY RESIDE, AND THE TAX CONSEQUENCES OF PARTICIPANTS DEATH. PARTICIPANT HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING PARTICIPANTS 83(b) ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR FROM FAILURE TO FILE THE ELECTION AND PAYING TAXES RESULTING FROM THE LAPSE OF THE RESTRICTIONS ON THE UNVESTED RESTRICTED SHARES AND RETAINED DISTRIBUTIONS. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANTS PURCHASE OR DISPOSITION OF THE RESTRICTED SHARES AND PARTICIPANT REPRESENTS THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
4.5 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
4.6 Adjustments . The Administrator may accelerate the vesting of all or a portion of the Restricted Shares in such circumstances as it, in its sole discretion, may determine. Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.
4.7 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 4.7 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
4.8 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.9 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
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4.10 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
4.11 Amendment, Suspension and Termination . [To the extent permitted by the Plan], 3 this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board, provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of Participant.
4.12 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 2.2 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.13 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Award, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.14 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
4.15 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.16 Section 409A . This Award is intended not to constitute nonqualified deferred compensation within the meaning of Section 409A. However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other Person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
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Subject to a review of the plan, when available, for any possible unfavorable implications. |
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4.17 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.18 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets.
4.19 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
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Exhibit 10.5(a)
AMENDMENT TO RESTRICTED STOCK AWARD LETTER AGREEMENT
This Amendment to the Restricted Stock Award Letter Agreement (the Amendment ), dated as of June 24, 2018 (the Effective Date ), is made by and between BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), and Christopher Baldwin, (the Grantee ).
WHEREAS, the Company and the Grantee previously entered that certain Restricted Stock Award Letter Agreement, dated as of March 27, 2018, including the exhibits thereto (the Letter Agreement );
WHEREAS, the Letter Agreement may be amended by an instrument in writing, signed by each of the Company and the Grantee; and
WHEREAS, the Company and the Grantee have mutually agreed that it is in their best interest to amend the Letter Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Notwithstanding anything to the contrary in the Letter Agreement (including, for the avoidance of doubt, the exhibits thereto), the Award shall be subject to the terms and conditions of an award agreement, substantially on the form attached hereto as Exhibit A (the Restricted Stock Agreement ). For the avoidance of doubt, the Award Agreement as attached hereto shall supersede in all respects the form of Award Agreement attached to the Letter Agreement.
2. Except as provided in this Amendment, the Letter Agreement shall remain in full force and effect. This Amendment may be executed in one or more counterparts.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment to the Restricted Stock Letter Agreement as of the day and year first above written.
BJS WHOLESALE CLUB HOLDINGS, INC. | ||
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Name: |
Acknowledged and agreed
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Christopher Baldwin |
Signature Page for Amendment to Restricted Stock Award Agreement
Exhibit A
BJ S W HOLESALE C LUB H OLDINGS , I NC .
2018 INCENTIVE AWARD PLAN
RESTRICTED STOCK AWARD GRANT NOTICE AND
RESTRICTED STOCK AWARD AGREEMENT
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) the number of shares of Restricted Stock set forth below (the Restricted Shares ). The Restricted Shares are subject to the terms and conditions set forth in this Restricted Stock Award Grant Notice (the Grant Notice ), the Plan and the Restricted Stock Award Agreement attached hereto as Exhibit A (the Agreement ), each of which is incorporated into this Grant Notice by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
Participant: |
Christopher Baldwin |
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Grant Date: |
[ ] 1 |
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Total Number of Shares of Restricted Stock: |
[ ] Shares |
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Purchase Price: |
$0.00 |
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Vesting Schedule: | The Restricted Shares shall become fully vested upon the 30 th day following the Public Trading Date, subject to Participants continued employment with or service to a Company Group Member on such date. |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Agreement, the Plan and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Grant Notice, the Agreement and the Plan.
BJS WHOLESALE CLUB HOLDINGS, INC. | PARTICIPANT | |||||
By: |
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By: |
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Print Name: | [ ] | Print Name: | Christopher Baldwin | |||
Title: | [ ] |
1 |
To be granted on or shortly following the IPO. Calculation of the number of shares to be pursuant to a spreadsheet that was circulated. |
EXHIBIT A
TO RESTRICTED STOCK AWARD GRANT NOTICE
RESTRICTED STOCK AWARD AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant the number of Restricted Shares set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice. For purposes of this Agreement,
(a) Cause shall have the meaning set forth in the Employment Agreement.
(b) Cessation Date shall mean the date of Participants Termination of Service (regardless of the reason for such termination).
(c) Company Group shall mean the Company and its Subsidiaries.
(d) Company Group Member shall mean each member of the Company Group.
(e) Employment Agreement shall mean the Employment Agreement between the Participant, the Company and BJs Wholesale Club, Inc., dated as of September 1, 2015, as may be amended from time to time.
(f) Non-Compete Event shall mean following the Cessation Date, the Participant (i) directly or indirectly through another entity inducing or attempting to induce any customer, supplier, licensee or other business relation of a Company Group Member to cease doing business with any member of the Company Group or in any way interferes with the relationship between any such customer, supplier, licensee or business relation and the Company Group Member, (ii) engaging in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company Group with respect to any business or activity of the Company Group entered into by the Company Group after the Grant Date.
1.2 Incorporation of Terms of Plan . The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, each of which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
AWARD OF RESTRICTED SHARES
2.1 Award of Restricted Shares .
(a) Award . In consideration of Participants past and/or continued employment with or service to any Company Group Member, and for other good and valuable consideration that the Administrator has determined exceeds the aggregate par value of the Shares subject to the Award, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has issued to Participant the number of Restricted Shares set forth in the Grant Notice upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustments as provided in Article 12 of the Plan.
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(b) Purchase Price; Book Entry Form . The purchase price of the Restricted Shares is set forth on the Grant Notice. At the sole discretion of the Administrator, the Restricted Shares (and any securities that constitute Retained Distributions (as defined below)) will be issued in either (i) uncertificated form, with the Restricted Shares (and securities that constitute Retained Distributions) recorded in the name of Participant in the books and records of the Companys transfer agent with appropriate notations regarding the Restrictions (as defined below) imposed pursuant to this Agreement, and upon vesting, the lapse of the Transfer Restrictions (as defined below) and the satisfaction of all conditions set forth in Section 2.2 , the Company shall cause the book entries evidencing the Restricted Shares (and any securities that constitute Retained Distributions) to indicate that the Restrictions have lapsed; or (ii) certificate form pursuant to the terms of Section 2.1(c) and Section 2.1(d) .
(c) Legend . Any certificates representing Restricted Shares issued pursuant to this Agreement shall, until all Restrictions imposed pursuant to this Agreement lapse or shall have been removed and the Restricted Shares shall thereby have become vested and transferable or the Restricted Shares represented thereby have been forfeited hereunder, bear the following legend (or such other legend as shall be determined by the Administrator):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF A RESTRICTED STOCK AWARD AGREEMENT, BY AND BETWEEN BJS WHOLESALE CLUB HOLDINGS, INC. AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH AGREEMENT.
(d) Escrow . The Secretary of the Company or such other escrow Participant as the Administrator may appoint may retain physical custody of any certificates representing the Restricted Shares (and any securities that constitute Retained Distributions) until all of the Restrictions imposed pursuant to this Agreement lapse or shall have been removed; in such event Participant shall not retain physical custody of any certificates representing unvested Restricted Shares or Restricted Shares subject to Transfer Restrictions issued to him or her. Participant, by acceptance of the Award, shall be deemed to appoint, and does so appoint the Company and each of its authorized representatives as Participants attorney(s)-in-fact to effect any transfer of unvested and/or forfeited Restricted Shares or securities that constitute Retained Distributions (or Restricted Shares otherwise reacquired by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.
(e) Delivery of Certificates and Payment Upon Vesting and Lapse of Transfer Restrictions
(i) As soon as administratively practicable after the vesting of any Restricted Shares and the lapse of the Transfer Restrictions on any Restricted Shares subject to the Award pursuant to Section 2.2(b) (d) , the Company shall, as applicable, either remove the notations on any Restricted Shares subject to the Award issued in book entry form that have vested and are no longer subject to the Transfer Restrictions or deliver to Participant a certificate or certificates, without the legend set forth in Section 2.1(c) , evidencing the number of Restricted Shares subject to the Award that have vested and for which the Transfer Restrictions have lapsed.
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(ii) As soon as administratively practicable after the vesting of any Restricted Shares and the lapse of Transfer Restrictions on any Restricted Shares subject to the Award pursuant to Section 2.2(b) (d) , the Company shall (A) as applicable, either remove the notations on any securities that constitute Retained Distributions issued in book entry form with respect to such Restricted Shares or deliver to Participant a certificate or certificates evidencing the number of securities that constitute Retained Distributions with respect to such Restricted Shares and (B) pay Participant in cash an amount equal to all cash dividends or other cash distributions that constitute Retained Distributions with respect to such Restricted Shares.
(iii) Participant (or the beneficiary or personal representative of Participant in the event of Participants death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances required by the Company in connection with this Section 2.1(e) . The Restricted Shares and securities that constitute Retained Distributions delivered pursuant to this Section 2.1(e) shall no longer be subject to the Restrictions hereunder.
2.2 Restrictions .
(a) Forfeiture . Any Restricted Shares that are not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
(b) Restricted Shares Not Transferable . Notwithstanding Section 10.3(a)(i) of the Plan but subject to Section 2.2(c) of this Agreement, no Restricted Shares (whether vested or unvested) or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect (the Transfer Restrictions ); provided, however, that this Section 2.2(b) notwithstanding, with the consent of the Administrator and subject to the terms of the Plan, the Restricted Shares may be transferred to a Permitted Transferee, pursuant to any such conditions and procedures the Administrator may require.
(c) Lapse of Transfer Restrictions; Non-Compete Event . The Transfer Restrictions shall lapse in equal installments on the last day of each calendar month ending during the period commencing on the Grant Date and ending on September 30, 2020 such that the Transfer Restrictions on all Restricted Shares granted hereunder shall have lapsed on the September 30, 2020. Notwithstanding any other provision of this Agreement to the contrary, if, on or prior to September 30, 2020, a Non-Compete Event occurs or Participant experiences a termination of Services by the Company for Cause, then all Restricted Shares for which the Transfer Restrictions have not lapsed prior to such Non-Compete Event or the date of Participants Termination of Services by the Company for Cause (less any Restricted Shares that have theretofore been surrendered to or withheld by the Company pursuant to Section 10.2 of the Plan to satisfy any tax withholding obligations), shall be immediately forfeited for no consideration.
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(d) Vesting . Subject to Section 12.4 of the Plan and subject to Participants continued employment with or service to a Company Group Member on the vesting date and subject to Sections 4.11 and 4.16 hereof, the Award shall become vested (and, except as set forth in Section 2.2(c), not be subject to forfeiture or repurchase by the Company) in accordance with the vesting schedule set forth in the Grant Notice. For purposes of this Agreement, Restrictions shall mean the restrictions on sale or other transfer set forth in Section 2.2(b) and (c) , the exposure to forfeiture set forth in Section 2.2(a) and the vesting schedule set forth in this Section 2.2(d) .
(e) Retained Distributions . Unless otherwise determined by the Administrator, the Company will retain custody of all cash dividends and other distributions ( Retained Distributions ) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the Restrictions and the other terms and conditions under this Agreement that are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested in accordance with Section 2.2(d) , and such Retained Distributions shall not bear interest or be segregated in separate accounts. Any Retained Distributions with respect to Restricted Shares that have not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
2.3 Consideration to the Company . In consideration of the grant of the Award by the Company, Participant agrees to render faithful and efficient services to the Company Group. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company Group or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
ARTICLE III.
RESTRICTIVE COVENANTS
3.1 Restriction on Competition and Solicitation . While employed or engaged by the Company Group, and for a period beginning on the date of Cessation Date for any reason and ending on the first anniversary of such date of the Cessation Date (the Restricted Period ), Participant shall not (i) directly or indirectly through another entity induce or attempt to induce any customer, supplier, licensee or other business relation of a Company Group Member to cease doing business with any member of the Company Group or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company Group Member, (ii) engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company Group with respect to any business or activity of the Company Group entered into by the Company Group after the Grant Date, or (iii) either alone or in association with others (A) solicit, or permit any organization directly or indirectly controlled by the Participant to solicit, any employee of the Company Group to leave the employ of the Company Group, or (B) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Participant to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company Group at the time of the termination or cessation of the Participants employment with the Company Group; provided that this clause (B) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company Group has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
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3.2 Confidentiality . Except as Participant reasonably and in good faith determines to be required in the faithful performance of Participants duties for the Company Group or in accordance with Section 3.4 , Participant shall, during the Participants period of service with the Company Group and after the Cessation Date, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, for Participants benefit or the benefit of any other Person, any confidential or proprietary information or trade secrets of or relating to the Company Group, including, without limitation, information with respect to the Company Groups operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment ( Proprietary Information ), or deliver to any Person, any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. Participants obligation to maintain and not use, disseminate, disclose or publish, or use for Participants benefit or the benefit of any other Person, any Proprietary Information after the Cessation Date will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of Participants direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company Group. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company Group (and any successor or assignee of the Company Group). In accordance with 18 U.S.C. Section 1833, the Company hereby notifies Participant that, notwithstanding anything to the contrary herein, (a) Participant shall not be in breach of this Section 3.2 and shall not be held criminally or civilly liable under any federal or state trade secret law (i) for the disclosure of a trade secret that is made in confidence to a federal, state or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (b) if Participant files a lawsuit for retaliation by the Company Group for reporting a suspected violation of law, Participant may disclose a trade secret to Participants attorney, and may use trade secret information in the court proceeding, if Participant files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
3.3 Return of Company Group Property . Upon Participants Termination of Service for any reason, Participant will promptly deliver to the Company Group (i) all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents that are Proprietary Information, including all physical and digital copies thereof, and (ii) all other Company Group property (including, without limitation, any personal computer or wireless device and related accessories, keys, credit cards and other similar items) which is in his or her possession, custody or control.
3.4 Response to Subpoena; Whistleblower Protection . Participant may respond to a lawful and valid subpoena or other legal process but shall give the Company Group the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company Group and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. Participant does not need the prior authorization of the Company Group to make any such reports or disclosures and Participant shall not be not required to notify the Company Group that such reports or disclosures have been made.
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3.5 Non-Disparagement . Participant agrees not to disparage the Company Group, any of its products or practices, or any of its directors, officers, agents, representatives, partners, members, equity holders or Affiliates, either orally or in writing, at any time; provided that Participant may confer in confidence with Participants legal representatives and make truthful statements as required by law. The Company agrees that at no time during Participants employment or engagement by the Company Group or thereafter, shall the Company (through any public statement) or any of the then-current officers or directors of the Company Group (each such person a Company Party ) make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of Participant; provided , that no Company Party shall be required to make any untruthful statement or to violate any law.
3.6 Restrictions Upon Subsequent Employment . Prior to accepting other employment or any other service relationship during the Restricted Period, Participant shall provide a copy of this Article III to any recruiter who assists Participant in obtaining other employment or any other service relationship and to any employer or other Person with which Participant discusses potential employment or any other service relationship.
3.7 Enforcement . In the event the terms of this Article III shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. Any breach or violation by Participant of the provisions of this Article III shall toll the running of any time periods set forth in this Article III for the duration of any such breach or violation.
3.8 Forfeiture Upon Violation . Notwithstanding any other provision of this Agreement that may provide to the contrary, in the event of Participants violation of any restrictive covenant within this Article III or any other agreement by and between Participant and any Company Group Member, as determined by the Company, in its sole discretion, then (a) the Restricted Shares shall immediately be terminated and forfeited in its entirety and (b) Participant shall pay to the Company in cash any amounts paid to Participant in respect of the Restricted Shares during the 12-month period immediately preceding (or at any time after) the date of such violation. By accepting these Restricted Shares, Participant hereby acknowledges, agrees and authorizes the Company to reduce any amounts owed by any Company Group Member (including amounts owed as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Participant by any Company Group Member), by the amounts Participant owes to the Company under this Section 3.8. To the extent such amounts are not recovered by the Company through such set-off, Participant agrees to pay such amounts immediately to the Company upon demand. This right of set-off is in addition to any other remedies the Company may have against Participant for Participants breach of this Agreement or any other agreement. Participants obligations under this Section 3.8 shall be cumulative (but not duplicative) of any similar obligations Participant may have pursuant to this Agreement or any other agreement with any Company Group Member.
3.9 Injunctive Relief . Participant recognizes and acknowledges that a breach of the covenants contained in this Article III will cause irreparable damage to the Company Group and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, Participant agrees that in the event of a breach of any of the covenants contained in this Article III, in addition to any other remedy which may be available at law or in equity, the Company Group will be entitled to specific performance and injunctive relief.
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3.10 Special Definition . As used in this Article III, the following terms shall have the ascribed meanings:
(a) Affiliate shall mean shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given such term under Rule 405 of the Securities Act.
ARTICLE IV.
OTHER PROVISIONS
4.1 Tax Withholding . Notwithstanding any other provision of this Agreement:
(a) The Company Group has the authority to deduct or withhold, or require Participant to remit to the applicable Company Group Member, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by Applicable Law to be withheld with respect to any taxable event arising pursuant to this Agreement in accordance with the terms of the Plan. Notwithstanding the foregoing, the Participant may, at his election made at the time such tax is due, make such payment by directing the Company to withhold a number of Shares subject to the Award having a then current aggregate Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income, unless and to the minimum extent that the board of directors of the Company (the Board ) determines in its good faith discretion that allowing for such share withholding would have a material adverse affect on the Companys liquidity position in a manner that could reasonably be expected to materially adversely affect the Companys ability to operate the business in the ordinary course or achieve its strategic objectives.
(b) The Company shall not be obligated to record the Restricted Shares in the name of Participant in the books and records of the Companys transfer agent (or deliver any new certificate representing Restricted Shares to Participant or his or her legal representative) unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the grant of the Award or the issuance or vesting of Restricted Shares hereunder or any other taxable event with respect to the Restricted Shares.
(c) Participant is ultimately liable and responsible for, and, to the extent permitted by Applicable Law, agrees to indemnify and keep indemnified the Company Group from, all taxes owed in connection with the Award, regardless of any action any Company Group Member takes with respect to any tax withholding obligations that arise in connection with the Award. No Company Group Member makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding or vesting of the Award or the subsequent sale of Shares. The Company Group does not commit and is under no obligation to structure the Award to reduce or eliminate Participants tax liability.
4.2 Conditions to Delivery of Stock . Subject to Section 2.1 , the Restricted Shares deliverable under this Award may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares under this Award prior to fulfillment of all of the following conditions:
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(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body that the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares;
(e) The receipt of any applicable withholding tax in accordance with Section 4.1 by the Company Group Member with respect to which the applicable withholding obligation arises; and
(f) The lapse of such reasonable period of time following the grant of this Award as the Administrator may from time to time establish for reasons of administrative convenience.
4.3 Rights as Stockholder . Except as otherwise provided herein, and subject to Section 2.2(d) , upon the Grant Date, Participant shall have all the rights of a stockholder with respect to the Restricted Shares, subject to the Restrictions herein, including the right to vote the Restricted Shares and the right to receive any cash or stock dividends paid to or made with respect to the Restricted Shares; provided, however, that at the discretion of the Company, and prior to the delivery of Restricted Shares, Participant may be required to execute a stockholders agreement in such form as shall be determined by the Company.
4.4 Section 83(b) Election . Participant understands that Section 83(a) of the Code taxes as ordinary income the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares and any Retained Distributions at the time the Restrictions on such Restricted Shares and Retained Distributions lapse. Participant understands that, notwithstanding the preceding sentence, Participant may elect to be taxed at the time of the Grant Date, rather than at the time the Restrictions lapse, by filing an election under Section 83(b) of the Code (an 83(b) Election ) with the Internal Revenue Service within 30 days of the Grant Date. In the event that Participant files an 83(b) Election, Participant shall provide the Company a copy thereof prior to the expiration of such 30 day period. Participant understands that in the event an 83(b) Election is filed with the Internal Revenue Service within such time period, Participant will recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares as of the Grant Date. Participant further understands that an additional copy of such 83(b) Election form should be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Participant acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the Award hereunder, and does not purport to be complete. PARTICIPANT FURTHER ACKNOWLEDGES THAT THE COMPANY IS NOT RESPONSIBLE FOR FILING PARTICIPANTS 83(b) ELECTION, AND THE COMPANY HAS DIRECTED PARTICIPANT TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH PARTICIPANT MAY RESIDE, AND THE TAX CONSEQUENCES OF PARTICIPANTS DEATH. PARTICIPANT HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING PARTICIPANTS 83(b) ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR FROM FAILURE TO FILE THE ELECTION AND PAYING TAXES RESULTING FROM THE LAPSE OF THE RESTRICTIONS ON THE UNVESTED RESTRICTED SHARES AND RETAINED DISTRIBUTIONS. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANTS PURCHASE OR DISPOSITION OF THE RESTRICTED SHARES AND PARTICIPANT REPRESENTS THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
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4.5 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
4.6 Adjustments . The Administrator may accelerate the vesting of all or a portion of the Restricted Shares in such circumstances as it, in its sole discretion, may determine. Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.
4.7 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 4.7 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
4.8 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.9 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
4.10 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
4.11 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board, provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of Participant.
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4.12 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 2.2 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.13 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Award, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.14 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
4.15 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.16 Section 409A . This Award is intended not to constitute nonqualified deferred compensation within the meaning of Section 409A. However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other Person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
4.17 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.18 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets.
4.19 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
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Exhibit 10.6
NON-QUALIFIED STOCK OPTION AGREEMENT
OF
BEACON HOLDING INC.
THIS AGREEMENT (the Agreement ) is effective as of September 8, 2015 (the Grant Date ) by and between Beacon Holding Inc., a Delaware corporation (the Company ) and Christopher J. Baldwin, an employee, consultant or director of the Company or one of its Subsidiaries (hereinafter referred to as the Optionee ).
WHEREAS, the Board has approved the Second Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. (as it may be amended from time to time, the Plan ), the terms of which are hereby incorporated by reference and made a part of this Agreement;
WHEREAS, the Board has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or one of its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; and
WHEREAS, the Optionee has entered into a Management Stockholders Agreement with the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms used in this Agreement and not defined below shall have the meaning given such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.
Section 1.1 Base Option shall have the meaning set forth in Section 2.3.
Section 1.2 Cause shall have the meaning set forth in the Employment Agreement, and shall apply for all purposes under this Agreement and the Management Stockholders Agreement (the Management Stockholders Agreement to the contrary notwithstanding).
Section 1.3 Company shall have the meaning set forth in the preamble hereto.
Section 1.4 Confidential Information shall have the meaning set forth in Section 4.1(a).
Section 1.5 Disability shall mean disability as defined in the Employment Agreement.
Section 1.6 Employment Agreement shall mean that certain Employment Agreement between the Optionee, the Company and BJs Wholesale Club, Inc., dated as of September 1, 2015, as may be amended from time to time.
Section 1.7 Fair Market Value shall have the meaning set forth in the Plan; provided that, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, Fair Market Value shall be determined in accordance with (and is subject to disagreement procedures set forth in) the Management Stockholders Agreement.
Section 1.8 Good Reason shall have the meaning set forth in the Employment Agreement, and shall apply for all purposes under this Agreement and the Management Stockholders Agreement (the Management Stockholders Agreement to the contrary notwithstanding).
Section 1.9 Grant Date shall have the meaning set forth in the preamble hereto.
Section 1.10 Option shall mean the non-qualified stock option to purchase Common Stock granted under this Agreement.
Section 1.11 Optionee shall have the meaning set forth in the preamble hereto.
Section 1.12 Outperformance Option shall have the meaning set forth in Section 2.3.
Section 1.13 Plan shall have the meaning set forth in the Recitals hereto.
Section 1.14 Third Party Information shall have the meaning set forth in Section 4.3.
Section 1.15 Work Product shall have the meaning set forth in Section 4.2.
ARTICLE II.
GRANT OF OPTION
Section 2.1 Grant of Option . In consideration of the Optionees agreement to enter into or remain in the employ of, consultancy to or other service relationship with the Company or one of its Subsidiaries, and for other good and valuable consideration, as of the Grant Date, the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of 150,000 shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement. The Board shall not exercise its discretion under Section 5.6 of the Plan to impose any restriction that is not explicitly set forth in this Agreement, the Plan or the Management Stockholders Agreement.
Section 2.2 Option Subject to Plan . The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.
Section 2.3 Option Price . The purchase price of the first 75,000 shares of Common Stock covered by the Option (such portion of the Option, the Base Option ) shall be $41.00 per share (without commission or other charge), which is not less than 100% of Fair Market Value as of the Grant Date. The purchase price of the remaining 75,000 shares of Common Stock covered by the Option (such portion of the Option, the Outperformance Option ) shall be $75.00 per share (without commission or other charge), which is more than 100% of Fair Market Value as of the Grant Date.
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ARTICLE III.
EXERCISABILITY
Section 3.1 Commencement of Exercisability .
Section 3.2 Duration of Exercisability . The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable.
Section 3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after, and shall expire on, the first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) Except for such longer period as the Committee may otherwise approve, upon the Optionees Termination of Services for any reason other than (i) termination by the Company for Cause or (ii) due to the Optionees death or Disability, immediately following the 90th day following the date of such Termination of Services; or
(c) Notwithstanding the provisions of Section 3.1, in the event of the Optionees Termination of Services by the Company for Cause, the Optionee shall, immediately prior to such Termination of Services (and subject to such Termination of Services), forfeit the Option, whether vested or unvested; or
(d) In the case of a Termination of Services due to the Optionees death or Disability, the expiration of one year from the date of the Optionees Termination of Services; or
(e) The date the Optionee first violates any of the restrictive covenants set forth in Article IV.
Section 3.4 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than 10 shares of Common Stock and shall be for whole shares of Common Stock only.
Section 3.5 Exercise of Option . The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including, without limitation, the provisions of Article V of the Plan; provided that, with respect to the Option covered by this Agreement: (a) payment for the shares with respect to which the Option is exercised may be made in the form of shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised and (b) payment of withholding tax obligations arising in connection with the exercise of the Option may be made by the Optionee electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined.
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ARTICLE IV.
RESTRICTIVE COVENANTS
Section 4.1 Obligation to Maintain Confidentiality .
(a) The Optionee agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Confidential Information ) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Confidential Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Optionee will not disclose any Confidential Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his duties as an employee of the Company) without written approval by the Board, either during or after his employment with the Company, unless and until such Confidential Information has become public knowledge without fault by the Optionee.
(b) The Optionee agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Confidential Information, whether created by the Optionee or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by the Optionee only in the performance of his duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Optionee shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his employment. After such delivery, the Optionee shall not retain any such materials or copies thereof or any such tangible property.
(c) The Optionee agrees that his obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Optionee.
Section 4.2 Ownership of Property . Optionee acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Companys or any of its Subsidiaries or Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Optionee (either solely or jointly with others) while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) ( Work Product ) belong to the
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Company or such Subsidiary or Affiliate and Optionee hereby assigns, and agrees to assign, all of the above Work Product to the Company or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by Optionee in the course of Optionees work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Optionee hereby assigns and agrees to assign to the Company or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Optionee shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Optionees employment with or service to the Company and its Subsidiaries and Affiliates) to establish and confirm the Companys or such Subsidiarys or Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
Section 4.3 Third Party Information . Optionee understands that the Company and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Companys and its Subsidiaries and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Optionees employment with or service to the Company or its Subsidiaries or Affiliates and thereafter, and without in any way limiting the provisions of Section 4.1 above, Optionee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company or its Subsidiaries and Affiliates who need to know such information in connection with their work for the Company or its Subsidiaries and Affiliates) or use, except in connection with Optionees work for the Company or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees employment with or service to the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
Section 4.4 Use of Information of Prior Employers . During Optionees employment and/or services, Optionee will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Optionee has an obligation of confidentiality, and will not bring onto the premises of the Company, its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Optionee has an obligation of confidentiality unless consented to in writing by the former employer or person. Optionee will use in the performance of Optionees duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company, its Subsidiaries or Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Optionee has an obligation of confidentiality, approved for such use in writing by such former employer or person.
Section 4.5 Noncompetition; Nonsolicitation . Optionee acknowledges that, in the course of Optionees employment and/or services, Optionee will become familiar with the Companys and its Subsidiaries and Affiliates trade secrets and with other confidential information concerning the Company and its Subsidiaries and Affiliates and that Optionees services will be of special, unique and extraordinary value to the Company and its Subsidiaries and Affiliates. Therefore, Optionee agrees that:
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(a) Restriction . While employed or engaged by the Company or any of its Subsidiaries or Affiliates, and for a period beginning on the date of Optionees Termination of Services for any reason and ending on the first anniversary of such date of Termination of Services, Optionee shall not (i) directly or indirectly through another entity induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its Subsidiaries or Affiliates to cease doing business with the Company or its Subsidiaries or Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its Subsidiaries or Affiliates, (ii) engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company with respect to any business or activity of the Company entered into by the Company after the Grant Date, or (iii) either alone or in association with others (A) solicit, or permit any organization directly or indirectly controlled by the Optionee to solicit, any employee of the Company to leave the employ of the Company, or (B) solicit for employment, hire or engage a an independent contractor, or permit any organization directly or indirectly controlled by the Optionee to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Optionees employment with the Company; provided that this clause (B) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
(b) Enforcement . If, at the time of enforcement of Section 4.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Optionee agrees that because his or her services are unique and Optionee has access to confidential information, money damages would be an inadequate remedy for any breach of this Article IV. Optionee agrees that the Company, its Subsidiaries and Affiliates, in the event of a breach or threatened breach of this Article IV, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
(c) Non-disparagement . Optionee agrees that at no time during his employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall he make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company or any of its Subsidiaries or Affiliates or any of their respective directors, officers or employees. The Company agrees that at no time during Optionees employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall the Company (through any public statement) or any of the then-current officers or directors of the Company or any Subsidiary of the Company (each such person a Company Party ) make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of Optionee; provided , that neither Optionee nor any Company Party shall be required to make any untruthful statement or to violate any law.
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Section 4.6 Acknowledgments . Optionee acknowledges that the provisions of this Article IV are (a) in addition to, and not in limitation of, any obligation of Optionees under the terms of any employment agreement with the Company or any of its Subsidiaries or Affiliates, (b) in consideration of (i) employment with or engagement by the Company or any of its Subsidiaries or Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Optionee agrees and acknowledges that the restrictions contained in Article IV do not preclude Optionee from earning a livelihood, nor do they unreasonably impose limitations on Optionees ability to earn a living. Optionee agrees and acknowledges that the potential harm to the Company or its Subsidiaries or Affiliates of the non-enforcement of this Article IV outweighs any potential harm to Optionee of its enforcement by injunction or otherwise. Optionee acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Optionee by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company, and its Subsidiaries and Affiliates now existing or to be developed in the future. Optionee expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
Section 4.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Optionee violates any of the restrictive covenants set forth in Section 4.5(a), then Optionee shall pay to the Company in cash any financial gain Optionee realizes from exercising all or a portion of this Option. For purposes of this Section 4.7, financial gain shall equal any excess of the Fair Market Value of the Common Stock on the date of exercise over the purchase price set forth in Section 2.3, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered). By accepting this Option, Optionee consents to and authorizes the Company to deduct from any amounts payable by the Company to Optionee any amounts Optionee owes to the Company under this Section 4.7. This right of set-off is in addition to any other remedies the Company may have against Optionee for Optionees breach of this Agreement. Optionees obligations under this Section 4.7 shall be cumulative (but not duplicative) of any similar obligations Optionee has pursuant to this Agreement or any other agreement with the Company.
ARTICLE V.
OTHER PROVISIONS
Section 5.1 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of, or providing services to, the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without Cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Optionee.
Section 5.2 Shares Subject to Plan and Management Stockholders Agreement; Entire Agreement . The Optionee acknowledges that any shares acquired upon exercise of the Option are subject to the terms of the Plan and the Management Stockholders Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to
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the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement (together with the Plan and the Management Stockholders Agreement) shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
Section 5.3 Construction . This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 5.4 Conformity to Securities Laws . The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.5 Amendment, Suspension and Termination . The Option may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided that, except as provided by Section 7.1 of the Plan, none of the amendment, suspension or termination of this Agreement shall, without the consent of the Optionee, alter or impair any rights or obligations under the Option.
Section 5.6 Section 409A . To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that the Committee determines that this Option may be subject to Section 409A of the Code, the Committee may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A of the Code; provided that the Committee shall notify the Optionee in writing of any amendment, policy or procedure so adopted that adversely alters or impairs the Optionees rights and the Optionee may reject the application of such amendment, policy or procedure by written notice to the Company, it being understood that the Optionee will thereby accept any risk of adverse tax treatment and indemnify the Company for any taxes, interest and penalties incurred by the Company in relation to such adverse tax treatment. Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from the Optionee or other Person to the Company or any of its Affiliates, employees or agents.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto, effective as of the date first above written.
BEACON HOLDING INC. |
||
By: | /s/ Graham N. Luce | |
Graham N. Luce | ||
Its: | Secretary |
Signature Page to Non-Qualified Stock Option Agreement
/s/ Christopher J. Baldwin |
Christopher J. Baldwin |
Residence Address: |
Optionees Social Security Number: |
On File |
Signature Page to Non-Qualified Stock Option Agreement
Exhibit 10.7
NON-QUALIFIED STOCK OPTION AGREEMENT
OF
BEACON HOLDING INC.
THIS AGREEMENT (the Agreement ) is effective as of March 24, 2016 (the Grant Date ) by and between Beacon Holding Inc., a Delaware corporation (the Company ) and Christopher J. Baldwin, an employee, consultant or director of the Company or one of its Subsidiaries (hereinafter referred to as the Optionee ).
WHEREAS, the Board has approved the Third Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. (as it may be amended from time to time, the Plan ), the terms of which are hereby incorporated by reference and made a part of this Agreement;
WHEREAS, the Board has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or one of its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue the Option; and
WHEREAS, the Optionee has entered into a Management Stockholders Agreement with the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms used in this Agreement and not defined below shall have the meaning given such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.
Section 1.1 Cause shall have the meaning set forth in the Employment Agreement, and shall apply for all purposes under this Agreement and the Management Stockholders Agreement (the Management Stockholders Agreement to the contrary notwithstanding).
Section 1.2 Company shall have the meaning set forth in the preamble hereto.
Section 1.3 Confidential Information shall have the meaning set forth in Section 4.1(a).
Section 1.4 Cumulative EBITDA shall mean (a) for Fiscal 2018, the sum of EBITDA for Fiscal 2017 and Fiscal 2018, and (b) for Fiscal 2019, the sum of EBITDA for Fiscal 2017, Fiscal 2018 and Fiscal 2019.
Section 1.5 Cumulative EBITDA Target for each of Fiscal 2018 and Fiscal 2019 shall be the amount set forth on Exhibit A , in each case, as may be adjusted pursuant to Section 1.8 hereof or Section 7.1(a) of the Plan (including, without limitation, any adjustments to reflect extraordinary or non-recurring events and/or the pro forma impact of any acquisitions or dispositions by the Company and/or any of its subsidiaries (including any acquisition or disposition of a minority interest)).
Section 1.6 Disability shall mean disability as defined in the Employment Agreement.
Section 1.7 Early Termination Event shall mean the consummation of a Change in Control (i) prior to July 1, 2016 or (ii) pursuant to a definitive transaction document to consummate such Change in Control entered into by the Company or any of its Affiliates prior to July 1, 2016.
Section 1.8 EBITDA shall mean, for any fiscal year, earnings before interest, taxes, depreciation and amortization plus transaction, management and/or similar fees paid to the Principal Stockholders and/or their affiliates (so long as such fees are treated as expenses in the calculation of earnings), together with such adjustments as the Committee shall determine to be fair and appropriate in its discretion, including adjustments consistent with the basis on which the EBITDA Targets were originally established. For purposes of Section 1.5, Section 1.9 or this Section 1.8, reasons for adjustments may include, without limitation, the following factors (to the extent not already reflected in establishing the EBITDA Targets and Cumulative EBITDA Targets): any restructuring of the Companys operations (including reductions in force and store closure costs); unrealized mark-to-market on hedging instruments; the impact of any sale-leaseback transactions of real or other property; any acquisition or divestiture of a group of one or more stores, a major administrative unit, major line of business or major assets outside of the ordinary course of business (including, without limitation, acquisition or divestiture of any minority interest in any such stores, administrative units, lines of business or assets); the effect of any non-cash charges, such as impairment of real or intangible assets or stock compensation charges, or any non-cash income items; any effects of adjustments in the Companys consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting; any unusual or infrequently occurring items in accordance with GAAP; and any changes to GAAP to comply with new legislation or rules promulgated by the Securities and Exchange Commission, the Financial Accounting Standards Board or any similar or successor entity. The Committees determination of such fair and appropriate adjustment(s) shall be made within 90 days following the delivery of the audit report for the fiscal year first impacted by the adjustment, and shall be based on the Companys accounting as set forth in its books and records.
Section 1.9 EBITDA Target for each of Fiscal 2017, Fiscal 2018 and Fiscal 2019 shall be the amount set forth on Exhibit A , in each case, as may be adjusted pursuant to Section 1.8 hereof or Section 7.1(a) of the Plan (including, without limitation, any adjustments to reflect extraordinary or non-recurring events and/or the pro forma impact of any acquisitions or dispositions by the Company and/or any of its subsidiaries (including any acquisition or disposition of a minority interest)).
Section 1.10 Employment Agreement shall mean that certain Employment Agreement between the Optionee, the Company and BJs Wholesale Club, Inc., dated as of September 1, 2015, as may be amended from time to time.
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Section 1.11 Fair Market Value shall have the meaning set forth in the Plan; provided that, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, Fair Market Value shall be determined in accordance with (and is subject to disagreement procedures set forth in) the Management Stockholders Agreement.
Section 1.12 Fiscal 2017 shall mean the fiscal year ending on or about January 31, 2017.
Section 1.13 Fiscal 2018 shall mean the fiscal year ending on or about January 31, 2018.
Section 1.14 Fiscal 2019 shall mean the fiscal year ending on or about January 31, 2019.
Section 1.15 Good Reason shall have the meaning set forth in the Employment Agreement, and shall apply for all purposes under this Agreement and the Management Stockholders Agreement (the Management Stockholders Agreement to the contrary notwithstanding).
Section 1.16 Grant Date shall have the meaning set forth in the preamble hereto.
Section 1.17 Initial Time-Based Vesting Shares shall mean a number of shares of Common Stock subject to the Time-Based Option equal to the product of (a) a fraction, the numerator of which is the number of calendar months that have ended after February 1, 2016 and on or prior to the Initial Vesting Date and the denominator of which is thirty-five (35) (provided that such fraction shall in no event exceed one (1)), and (b) 30,000.
Section 1.18 Initial Vesting Date shall mean the later of (a) July 1, 2016 or (b) if the Company or any of its Affiliates has entered into a definitive transaction document to consummate a Change in Control prior to July 1, 2016, the date on which such definitive transaction document is terminated or the Board otherwise determines in writing not to consummate such Change in Control.
Section 1.19 Investment shall mean the sum of (a) the aggregate value as of September 1, 2015 (which the parties acknowledge and agree is $41.00 per share of Common Stock) of the equity securities of the Company and its subsidiaries held by the Principal Stockholders, as of September 1, 2015, and (b) any investment of funds (and the fair market value of any property contributed as of the time of such contribution) by the Principal Stockholders in exchange for equity securities of the Company and its subsidiaries after September 1, 2015.
Section 1.20 Option shall mean the non-qualified stock option to purchase Common Stock granted under this Agreement.
Section 1.21 Optionee shall have the meaning set forth in the preamble hereto.
Section 1.22 Performance-Based Option shall mean the portion of the Option with respect to 70,000 shares of Common Stock that does not constitute the Time-Based Option.
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Section 1.23 Performance-Based Option Vesting Date shall mean, for each of Fiscal 2017, Fiscal 2018 and Fiscal 2019, the later of (a) the date on which the Board (or its designee) determines EBITDA for such fiscal year (which in no event will be more than 120 days after the last day of such fiscal year) and (b) the Initial Vesting Date.
Section 1.24 Plan shall have the meaning set forth in the Recitals hereto.
Section 1.25 Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC, and CVC Beacon LP.
Section 1.26 Principal Stockholder IRR shall mean the internal rate of return (compounded annually) achieved by the Principal Stockholders in respect of an investment equal to the Investment, as of immediately prior to a Change in Control, for the period commencing on September 1, 2015 and ending on the date of such Change of Control, which internal rate of return shall be based on the amount of all Proceeds received by the Principal Stockholders in connection with such Change in Control. Principal Stockholder IRR shall be calculated using the XIRR function in the most recent version of Microsoft Excel (or if such program is no longer available, such other software program for calculating internal rate of return reasonably acceptable to the Board). For the purposes of the calculation of Principal Stockholder IRR, the equity securities held by the Principal Stockholders as of September 1, 2015 (as described in Section 1.19(a)) shall be deemed to have been invested on September 1, 2015, and any investment of funds by the Principal Stockholders after September 1, 2015 (as described in Section 1.19(b)) shall be deemed to have been invested on the date of such investment.
Section 1.27 Principal Stockholder MOIC shall mean, with respect to a Change in Control, the ratio of (a) the amount of all Proceeds received by the Principal Stockholders with respect to the Investment on or prior to such Change of Control, to (b) the amount of the Investment as of immediately prior to such Change of Control.
Section 1.28 Proceeds shall mean, with respect to a Change in Control, the cash proceeds and the fair market value of non-cash proceeds received by the Principal Stockholders in respect of the Investment following September 1, 2015 and on or prior to such Change in Control, after taking into account, to the extent applicable, all post-closing adjustments relating to such Change in Control, and assuming the exercise of all vested options and warrants outstanding as of the effective date of such Change in Control (after giving effect to any dilution of securities or instruments arising in connection with such Change in Control); provided , however , that (a) if the Principal Stockholders retain any portion of the Investment following such Change in Control, the fair market value of such portion of the Investment as of such Change in Control shall be deemed non-cash proceeds for purposes of calculating the Proceeds, (b) the fair market value of any non-cash proceeds (including stock) received in connection with a Change in Control shall be determined by the Board in good faith as of the date of such Change in Control, and (c) in the event that the receipt of any portion of the Proceeds by the Principal Stockholders is delayed beyond the date of the applicable Change in Control and made subject to any contingencies or potential post-closing adjustments, such as an escrow arrangement, the Proceeds shall include an estimate, determined as of or prior to the date of the Change in Control by the Board in good faith of the fair market value of such portion of the Proceeds (rather than the actual amounts ultimately received, if any, with respect to such portion of the Proceeds).
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Section 1.29 Third Party Information shall have the meaning set forth in Section 4.3.
Section 1.30 Time-Based Option shall mean a portion of the Option with respect to 30,000 shares of Common Stock.
Section 1.31 Work Product shall have the meaning set forth in Section 4.2.
ARTICLE II.
GRANT OF OPTION
Section 2.1 Grant of Option . In consideration of the Optionees agreement to enter into or remain in the employ of, consultancy to or other service relationship with the Company or one of its Subsidiaries, and for other good and valuable consideration, as of the Grant Date, the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of 100,000 shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement. The Board shall not exercise its discretion under Section 5.6 of the Plan to impose any restriction that is not explicitly set forth in this Agreement, the Plan or the Management Stockholders Agreement.
Section 2.2 Option Subject to Plan . The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.
Section 2.3 Option Price . The purchase price of the 100,000 shares of Common Stock covered by the Option shall be $49.00 per share, which is equal to 100% of Fair Market Value as of the Grant Date.
ARTICLE III.
VESTING AND EXERCISABILITY
Section 3.1 Vesting .
Section 3.2 Commencement and Duration of Exercisability . The Option (or an applicable portion thereof) shall become exercisable on the date on which it (or the applicable portion thereof) becomes vested pursuant to Section 3.1 (which, for the avoidance of doubt, will not occur in any event prior to the Initial Vesting Date). The installments that become vested and exercisable as provided for in Section 3.1 and this Section 3.2 are cumulative. Each such installment which becomes vested and exercisable pursuant to Section 3.1 and this Section 3.2 shall remain exercisable until it becomes unexercisable.
Section 3.3 Expiration of Option . Notwithstanding anything to the contrary herein, in the event of an Early Termination Event, the Option shall expire on the date immediately prior to the Early Termination Event and, for the avoidance of doubt, the Option shall not be exercisable to any extent by anyone prior to such expiration. In the event an Early Termination Event does not occur, the Option may not be exercised to any extent by anyone after, and shall expire on, the first to occur of the following events:
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(a) The tenth anniversary of the Grant Date; or
(b) Except for such longer period as the Committee may otherwise approve, in the event of the Optionees Termination of Services for any reason other than as set forth in Sections 3.3(c) through (e), (i) with respect to the Time-Based Option and the portion of the Performance-Based Option that had previously become vested, the 90th day following the date of such Termination of Services and (ii) with respect to the portion of the Performance-Based Option for the fiscal year ending prior to the date of Termination of Services but before the Performance-Based Option Vesting Date for such prior fiscal year, the 90th day following the Performance-Based Option Vesting Date for such prior fiscal year; or
(c) Notwithstanding the provisions of Section 3.1, in the case of the Optionees Termination of Services by the Company for Cause, the Optionee shall, immediately prior to such Termination of Services (and subject to such Termination of Services), forfeit the Option, whether vested or unvested; or
(d) In the case of a Termination of Services by the Company without Cause or by the Optionee for Good Reason, (i) with respect to the Time-Based Option and the portion of the Performance-Based Option that had previously become vested, the 181st day following the date of such Termination of Services and (ii) with respect to the portion of the Performance-Based Option that had not previously become vested, the later of (x) the 181st day following the date of such Termination of Services and (y) the 90th day following the Performance-Based Option Vesting Date for the fiscal year in which the date of such Termination of Services occurs; or
(e) In the case of a Termination of Services due to the Optionees death or Disability, the first anniversary of the date of the Optionees Termination of Services; or
(f) The date the Optionee first violates any of the restrictive covenants set forth in Article IV;
provided that, in the event of a Termination of Services prior to the Initial Vesting Date other than by the Company for Cause, the portion of the Option that remains eligible to become vested after such Termination of Services pursuant to the last sentence of Section 3.1(b) and/or pursuant to Section 3.1(d) or Section 3.1(e) (and only such portion) shall remain outstanding through the later of (x) the expiration date set forth in Section 3.3(b), (d) or (e), as applicable, and (y) the 90th day following the Initial Vesting Date, subject to earlier expiration in the event of an Early Termination Event or pursuant to Section 3.3(a) or (f).
Section 3.4 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than 10 shares of Common Stock and shall be for whole shares of Common Stock only.
Section 3.5 Exercise of Option . The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including, without limitation, the provisions of Article V of the Plan; provided that, with respect to the Option covered by this Agreement:
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(a) payment for the shares with respect to which the Option is exercised may be made in the form of shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised and (b) payment of withholding tax obligations arising in connection with the exercise of the Option may be made by the Optionee electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined.
ARTICLE IV.
RESTRICTIVE COVENANTS
Section 4.1 Obligation to Maintain Confidentiality .
(a) The Optionee agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Confidential Information ) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Confidential Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Optionee will not disclose any Confidential Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his duties as an employee of the Company) without written approval by the Board, either during or after his employment with the Company, unless and until such Confidential Information has become public knowledge without fault by the Optionee.
(b) The Optionee agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Confidential Information, whether created by the Optionee or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by the Optionee only in the performance of his duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Optionee shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his employment. After such delivery, the Optionee shall not retain any such materials or copies thereof or any such tangible property.
(c) The Optionee agrees that his obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Optionee.
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Section 4.2 Ownership of Property . Optionee acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Companys or any of its Subsidiaries or Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Optionee (either solely or jointly with others) while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) ( Work Product ) belong to the Company or such Subsidiary or Affiliate and Optionee hereby assigns, and agrees to assign, all of the above Work Product to the Company or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by Optionee in the course of Optionees work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Optionee hereby assigns and agrees to assign to the Company or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Optionee shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Optionees employment with or service to the Company and its Subsidiaries and Affiliates) to establish and confirm the Companys or such Subsidiarys or Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
Section 4.3 Third Party Information . Optionee understands that the Company and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Companys and its Subsidiaries and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Optionees employment with or service to the Company or its Subsidiaries or Affiliates and thereafter, and without in any way limiting the provisions of Section 4.1 above, Optionee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company or its Subsidiaries and Affiliates who need to know such information in connection with their work for the Company or its Subsidiaries and Affiliates) or use, except in connection with Optionees work for the Company or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees employment with or service to the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
Section 4.4 Use of Information of Prior Employers . During Optionees employment and/or services, Optionee will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Optionee has an obligation of confidentiality, and will not bring onto the premises of the Company, its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Optionee has an obligation of confidentiality unless
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consented to in writing by the former employer or person. Optionee will use in the performance of Optionees duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company, its Subsidiaries or Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Optionee has an obligation of confidentiality, approved for such use in writing by such former employer or person.
Section 4.5 Noncompetition; Nonsolicitation . Optionee acknowledges that, in the course of Optionees employment and/or services, Optionee will become familiar with the Companys and its Subsidiaries and Affiliates trade secrets and with other confidential information concerning the Company and its Subsidiaries and Affiliates and that Optionees services will be of special, unique and extraordinary value to the Company and its Subsidiaries and Affiliates. Therefore, Optionee agrees that:
(a) Restriction . While employed or engaged by the Company or any of its Subsidiaries or Affiliates, and for a period beginning on the date of Optionees Termination of Services for any reason and ending on the first anniversary of such date of Termination of Services, Optionee shall not (i) directly or indirectly through another entity induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its Subsidiaries or Affiliates to cease doing business with the Company or its Subsidiaries or Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its Subsidiaries or Affiliates, (ii) engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company with respect to any business or activity of the Company entered into by the Company after the Grant Date, or (iii) either alone or in association with others (A) solicit, or permit any organization directly or indirectly controlled by the Optionee to solicit, any employee of the Company to leave the employ of the Company, or (B) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Optionee to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Optionees employment with the Company; provided that this clause (B) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
(b) Enforcement . If, at the time of enforcement of Section 4.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Optionee agrees that because his or her services are unique and Optionee has access to confidential information, money damages would be an inadequate remedy for any breach of this Article IV. Optionee agrees that the Company, its Subsidiaries and Affiliates, in the event of a breach or threatened breach of this Article IV, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
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(c) Non-disparagement . Optionee agrees that at no time during his employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall he make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company or any of its Subsidiaries or Affiliates or any of their respective directors, officers or employees. The Company agrees that at no time during Optionees employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall the Company (through any public statement) or any of the then-current officers or directors of the Company or any Subsidiary of the Company (each such person a Company Party ) make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of Optionee; provided , that neither Optionee nor any Company Party shall be required to make any untruthful statement or to violate any law.
Section 4.6 Acknowledgments . Optionee acknowledges that the provisions of this Article IV are (a) in addition to, and not in limitation of, any obligation of Optionees under the terms of any employment agreement with the Company or any of its Subsidiaries or Affiliates, (b) in consideration of (i) employment with or engagement by the Company or any of its Subsidiaries or Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Optionee agrees and acknowledges that the restrictions contained in Article IV do not preclude Optionee from earning a livelihood, nor do they unreasonably impose limitations on Optionees ability to earn a living. Optionee agrees and acknowledges that the potential harm to the Company or its Subsidiaries or Affiliates of the non-enforcement of this Article IV outweighs any potential harm to Optionee of its enforcement by injunction or otherwise. Optionee acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Optionee by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company, and its Subsidiaries and Affiliates now existing or to be developed in the future. Optionee expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
Section 4.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Optionee violates any of the restrictive covenants set forth in Section 4.5(a), then Optionee shall pay to the Company in cash any financial gain Optionee realizes from exercising all or a portion of this Option. For purposes of this Section 4.7, financial gain shall equal any excess of the Fair Market Value of the Common Stock on the date of exercise over the purchase price set forth in Section 2.3, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered). By accepting this Option, Optionee consents to and authorizes the Company to deduct from any amounts payable by the Company to Optionee any amounts Optionee owes to the Company under this Section 4.7. This right of set-off is in addition to any other remedies the Company may have against Optionee for Optionees breach of this Agreement. Optionees obligations under this Section 4.7 shall be cumulative (but not duplicative) of any similar obligations Optionee has pursuant to this Agreement or any other agreement with the Company.
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ARTICLE V.
OTHER PROVISIONS
Section 5.1 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of, or providing services to, the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without Cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Optionee.
Section 5.2 Shares Subject to Plan and Management Stockholders Agreement; Entire Agreement . The Optionee acknowledges that any shares acquired upon exercise of the Option are subject to the terms of the Plan and the Management Stockholders Agreement and the Option granted pursuant to this Agreement is in full satisfaction of the obligation to grant the Supplemental Option (as defined in the Employment Agreement). The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement (together with the Plan and the Management Stockholders Agreement) shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
Section 5.3 Construction . This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 5.4 Conformity to Securities Laws . The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.5 Amendment, Suspension and Termination . The Option may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided that, except as provided by Section 7.1 of the Plan, none of the amendment, suspension or termination of this Agreement shall, without the consent of the Optionee, alter or impair any rights or obligations under the Option.
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Section 5.6 Section 409A . To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that the Committee determines that this Option may be subject to Section 409A of the Code, the Committee may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A of the Code; provided that the Committee shall notify the Optionee in writing of any amendment, policy or procedure so adopted that adversely alters or impairs the Optionees rights and the Optionee may reject the application of such amendment, policy or procedure by written notice to the Company, it being understood that the Optionee will thereby accept any risk of adverse tax treatment and indemnify the Company for any taxes, interest and penalties incurred by the Company in relation to such adverse tax treatment. Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from the Optionee or other Person to the Company or any of its Affiliates, employees or agents.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto, effective as of the date first above written.
BEACON HOLDING INC. | ||
By: |
/s/ Graham N. Luce |
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Graham N. Luce | ||
Its: |
Secretary |
Signature Page to Non-Qualified Stock Option Agreement
/s/ Christopher J. Baldwin |
Christopher J. Baldwin |
Residence Address: |
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Optionees Social Security Number: |
On File |
Exhibit 10.8
Robert W. Eddy
EMPLOYMENT AGREEMENT
AGREEMENT dated as of January 30,2011, between Robert W. Eddy, whose address is (Executive), and BJs Wholesale Club, Inc., a Delaware corporation, whose principal office is 25 Research Drive, Westborough, Massachusetts (Employer or Company).
WITNESSETH
WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company and Executive agree as follows:
1. Employment and Duties .
1.1 Employment .
(a) Commencing on January 30, 2011 (the Effective Date), the Company agrees to employ the Executive and the Executive agrees to be employed by the Company for a period of five (5) years, ending on January 30,2016 (Initial Term).
(b) Subsequent to the Initial Term, the Executive shall remain employed by the Company pursuant to the terms of this Agreement subject to the termination provisions of Section 3 below.
1.2 Duties . As of the Effective Date, the Executive shall serve the Company as its Executive Vice President and Chief Financial Officer, to serve in such capacity or other capacities as designated by the Board of Directors, the Chief Executive Officer (CEO) or his/her designee from time to time. During the term of this Agreement, the Executive shall serve the Company faithfully, diligently and to the best of his/her ability and shall devote substantially all of his/her business time, energy and skill to the affairs of the Company as necessary to perform the duties of his/her position, and he/she shall not assume a position in any other business without the express written permission of the CEO; provided that the Executive may upon disclosure to the CEO (i) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executives duties to the Company and (ii) the Executive does not make any passive investments where the Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit the Executives participation in any of the foregoing endeavors if the CEO believes, in his/her sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executives ability to perform the duties under this Agreement.
2. Compensation and Benefits .
2.1 Base Salary . The Executive shall receive a Base Salary at the rate of $450,000.00 per year. Such Base Salary shall be subject to periodic adjustment from time to time as determined by the Board of Directors in its sole discretion. Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated the executive employees.
2.2 Policies and Fringe Benefits . The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. The Executive shall be eligible to participate in all benefit programs that the Company establishes and makes available to all of its executives on such terms as the Board of Directors shall determine, if any, to the extent that the Executive meets the eligibility requirements to participate as set forth in the applicable plan or policy. Nothing herein limits the Companys right to modify, change, limit eligibility or discontinue any plan or policy at any time, with or without prior notice.
2.3 Reimbursement of Expenses . The Company shall reimburse the Executive for all reasonable and appropriate travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his/her responsibilities or services under this Agreement, in accordance with policies and procedures, and subject to limitations, adopted by the Company from time to time.
2.4 Withholding . All salary and other compensation payable to the Executive pursuant to this Agreement shall be subject to applicable taxes and withholdings.
3. Termination of Employment and Benefits Upon Termination .
3.1 General . The Executives employment pursuant to this Agreement shall terminate upon the earliest to occur of (i) the Executives death, (ii) a termination by reason of disability, (iii) a termination by the Company with or without Cause, (iv) a termination by the Executive, or (v) expiration of the Initial Term and any renewals or extensions thereof, unless at the expiration of such Initial Term, renewals or extensions thereof the Company determines that the Executives employment will continue under separate terms and conditions. Whenever the Executives employment shall terminate, and regardless of the reason for such termination, effective that same date he/she shall resign all offices, appointments and/or other positions the Executive may hold with the Company including, but not limited to, any parent corporation, subsidiaries or divisions of the Company or any such parent.
3.2 Termination Due to Death . The Executives employment shall automatically terminate upon the date of the Executives death. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) (i) all amounts earned but unpaid hereunder through the date of termination with respect to salary, automobile allowance and vested but unused vacation; (ii) to the extent not already paid, any amounts to which the Executive is entitled under the Companys annual incentive compensation plan for the fiscal year ended immediately prior to the date of termination; (iii) his/her vested account balance under the BJs Wholesale Club, Inc. 401(k) Savings Plan for Salaried Employees; and (iv) any unreimbursed expenses incurred in accordance with Company policy (collectively, Earned Obligations);
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid to the Executives estate at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following the Executives death.
3.3 Termination Due to Disability . The Executives employment may be terminated by reason of the Executives disability, upon notice to the Executive, in the event of the inability of the Executive to perform his/her duties hereunder by reason of disability, whether by reason of injury (physical or mental), illness (physical or mental) or otherwise. For purposes of this Agreement, a disability is defined as the occurrence when the Executive is incapacitated for a continuous period exceeding one hundred twenty (120) days, as certified by a physician selected by the Executive and the Company in good faith. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) all Earned Obligations;
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following a termination of employment due to disability.
3.4 Termination by the Company for Cause or by the Executive . The Company may terminate the Executives employment at any time for Cause by providing the Executive notice of such termination. For the purpose of this Agreement, termination by the Company for Cause shall refer to the Companys termination of the Executives employment because it has determined, in its sole and exclusive discretion, that he/she has: (i) refused or failed to devote his/her full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or he/she has failed to fulfill directives of the CEO, the CEOs designee or the Board of Directors; (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or policy of the Company or breach of fiduciary duty; (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Companys funds or property; (iv) been convicted of any crime which
reasonably could affect in an adverse manner the reputation of the Company or the Executives ability to perform his/her duties hereunder; (v) been grossly negligent in the performance of his/her duties; or (vi) materially breached this Agreement including, but not limited to, his/her obligations set forth in Sections 4 and 5 below. If the Executives employment terminates pursuant to this Section 3.4 by the Company for Cause or by reason of the Executives resignation at any time, the Executive shall only receive the Earned Obligations, if any, through his/her termination date. Nothing herein waives any rights the Company may have for damages or equitable relief.
3.5 Termination by the Company Without Cause . The Company may terminate the Executives employment without Cause at any time effective upon the Executives receipt of notice of such termination. No compensation or other benefits shall be payable to or accrue to the Executive in the event of his/her termination without Cause except as follows:
(a) all Earned Obligations;
(b) Subject to the Executive entering into a binding and irrevocable release of claims and separation agreement prepared by the Company and the expiration on or before the 60 th day after the Executives separation from service of any period during which the Executive is entitled to revoke the release, the Executive shall be eligible on such sixtieth (60 th ) day to receive:
(1) continuation of Base Salary for a period of twenty-four (24) months (the Severance Period), payable in such manner and at such times as the Executives Base Salary was being paid immediately prior to such termination;
(2) an amount equal to the difference between the Executives actual COBRA premium costs and the amount the Executive would have paid had the Executive continued coverage as an employee under the Companys applicable health plans without regard to the pre-tax benefits the Executive would have received under the BJs Wholesale Club, Inc. Flexible Benefits Plan provided that the Executive elects to continue to participate in the Companys medical and/or dental plans for team members pursuant to a valid COBRA election (and if and only if such participation is legally and contractually permissible) and provided, however, that the Companys obligations under this clause 3.5(b)(2) shall (A) not extend beyond the Severance Period, (B) be eliminated if the Executive discontinues COBRA benefits or (C) be reduced or eliminated to the extent that the Executive receives similar coverage and benefits under the plans and programs of a subsequent employer or entity or becomes eligible for similar coverage under a spouses employer;
(3) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) payments or benefits under other plans of the Company to the extent that the plans provide for benefits following a termination of employment.
Notwithstanding the foregoing, the payments and benefits described in Section 3.5(b) above shall immediately terminate, and the Company shall have no further obligations to the Executive with respect thereto, in the event that the Executive (i) becomes employed by Wal-Mart Stores, Inc., Costco Wholesale Corporation, Sams Clubs, or any of their respective subsidiaries or affiliates; or (ii) breaches any provision of Sections 4 or 5 of this Agreement.
3.6 Special Rules Applicable to Deferred Compensation .
(a) Delayed Payment for Specified Employees . Notwithstanding any other provision of this Agreement, if on the date of his separation from service, Executive is a Specified Employee, neither Base Salary pursuant to Section 3.5(b)(1) nor any other amount constituting the deferral of compensation, within the meaning of Section 409A(d) of the Internal Revenue Code (Code) and the regulations issued thereunder, that would otherwise be paid solely as a result of such separation shall be paid to Executive during the six-month period beginning on the date of such separation, provided that (i) such delay shall not be required to the extent that the sum of such payments during the six-month period does not exceed two times the lesser of (A) Executives Base Salary for the calendar year preceding the separation from service (adjusted for permanent increases taking effect during such year) or (B) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year of Executives separation from service, (ii) the originally scheduled payment, together with each installment (if any) that would otherwise have been paid to Executive during the six-month period, shall be paid on the first day of the seventh month following such termination, and (iii) if Executive dies during the period in which no payment may be made, such period shall immediately end and all installments then due to Executive shall be paid in accordance with Executives beneficiary designation or, if no such designation has been made or applies, to his estate. For purposes of the preceding sentence, Executives status as a Specified Employee, which shall be determined in accordance with regulations under Sections 409A and 416 of the Code without regard to Section 416(i)(5) of the Code, begins on April 1, based upon his being described in the following sentence during the calendar year preceding such date and shall continue for a period of 12 consecutive months after such April 1. Executive is described in this sentence if, at any time during a calendar year, (i) he was an officer of the Company having annual compensation from the Company, and all entities aggregated with it under Section 414(b) and (c) of the Code, in excess of $130,000, as adjusted under Section 416(i)(A) of the Code, and was among the 50 such officers with the highest annual compensation; (ii) he owned (or was considered as owning within the meaning of Section 318 of the Code) more than 5% of the outstanding stock of the Company or stock possessing more than 5% of the total combined voting power of all stock of the Company; or (iii) he owned (or was considered as owning within the meaning of Section 318 of the Code) more than 1% of the outstanding stock of the Company or stock possessing more than 1% of the total combined voting power of all stock of the Company, and had annual compensation from the Company in excess of $150,000. For purposes of the preceding sentence, an individuals annual compensation shall be the total compensation reported in box 1 of IRS Form W-2 for the applicable calendar year.
(b) Acceleration of Payments Prohibited . Notwithstanding anything to the contrary, Sections 3.3(a), 3.3(c), 3.4, 3.5(a) and 3.5(c) shall be construed and applied so that the time of payment of any amount constituting the deferral of compensation, within the meaning of Section 409A(d) of the Code and the regulations issued thereunder, shall be determined in accordance with the plan or other arrangement providing such payment and shall not be accelerated as a result of Executives disability or termination of employment to which this Agreement applies.
4. Non-Competition and Non-Solicitation .
4.1 Restricted Activities . While the Executive is employed by the Company and for a period of twenty-four (24) months after the termination or cessation of such employment for any reason, the Executive will not directly or indirectly:
(a) Engage in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Companys business. A business or enterprise shall be deemed competitive if it shall operate a chain of membership warehouse clubs (by way of example, but not limitation, Sams Club or Costco), warehouse stores selling food and/or general merchandise that includes a warehouse store located within 10 miles of any then existing BJs Wholesale Club warehouse store, or any other business that competes with the Company. Competitive business or enterprise also includes any store or business operated or owned by Wal-Mart Stores, Inc., Costco Wholesale Corporation, or any of the respective affiliates thereof. The term then existing shall refer to any such warehouse store that is, at the time of termination of the Executives employment, operated by the Company or any of its subsidiaries or divisions or under lease for operation as aforesaid; or
(b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Executive to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Executive to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Executives employment with the Company; provided that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
4.2 Extension of Restrictions . If the Executive violates the provisions of Section 4.1, the twenty-four (24) month period referred to in Section 4.1 shall recommence and the Executive shall continue to be bound by the restrictions set forth in Section 4.1 until a period of twenty-four (24) months has expired without any violation of such provisions.
4.3 Interpretation . If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
4.4 Equitable Remedies . The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 4 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 4, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
5. Proprietary Information .
5.1 Proprietary Information .
(a) The Executive agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Proprietary Information) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Executive will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his/her duties as an employee of the Company) without written approval by an executive officer of the Company, either during or after his/her employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into his/her custody or possession, shall be and are the exclusive property of the Company to be used by the Executive only in the performance of his/her duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Executive shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his/her employment. After such delivery, the Executive shall not retain any such materials or copies thereof or any such tangible property.
(c) The Executive agrees that his/her obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his/her obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive.
5.2 Equitable Remedies . The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 5 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 5, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
6. Other Agreements . The Executive represents that his/her performance of all the terms of this Agreement and the performance of his/her duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Executive is a party (including without limitation any nondisclosure or non-competition agreement). Any agreement to which the Executive is a party relating to non-disclosure, non-competition or non-solicitation of employees or customers is listed on Schedule A attached hereto.
7. Miscellaneous .
7.1 Notices . Any notice delivered under this Agreement shall be deemed duly delivered four (4) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set form in the introductory paragraph hereto. Either party may change the address to which notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 7.1.
7.2 Pronouns . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
7.3 Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement, including but not limited to the Employment Agreement, dated September 11, 2007, entered into by the Company and the Executive.
7.4 Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.
7.5 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof), except as may be preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §1001 et seq. Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Executive each consents to the jurisdiction of such a court. The Company and the Executive each hereby irrevocably waives any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.
7.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Companys assets or business; provided, however, that the obligations of the Executive are personal and shall not be assigned by him/her.
7.7 Waivers . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. Notwithstanding the foregoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a third party engaged in multiple lines of business succeeds to the Companys assets or business, then for purposes of Section 4.1(a), the term Company shall mean and refer to the business of the Company as it existed immediately prior to such event and as it subsequently develops and not to the third partys other businesses.
7.8 Captions . The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
7.9 Severability . In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
* * * * *
THE EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY
READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE
PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC.
/s/ Laura J. Sen | /s/ Robert W. Eddy | |||
Laura J. Sen | Robert W. Eddy | |||
President and Chief Executive Officer | Executive Vice President and | |||
Chief Financial Officer |
ATTEST: | WITNESS: |
|
LP 11: Employment Agreements/Employment Agreement Eddy 2011
SCHEDULE A
Agreements containing Restrictive Covenants
Schedule A
Executives initials
Exhibit 10.9
Lee Delaney
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT dated as of December 6, 2018 between Lee Delaney, whose address is c/o BJs Wholesale Club, Inc., 25 Research Drive, Westborough, Massachusetts 01582 (Executive), and BJs Wholesale Club, Inc., a Delaware corporation, whose principal office is 25 Research Drive, Westborough, Massachusetts (Employer or Company).
WITNESSETH
WHEREAS, Executive and the Company previously entered into an employment agreement dated May 2, 2016 (the Original Employment Agreement); and
WHEREAS, Executive and the Company desire to amend and restate the Original Employment Agreement to remove Executives residential address from the preamble, all other terms and conditions of the Original Employment Agreement remain unchanged and are set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company and the Executive agree as follows:
1. Employment and Duties.
1.1 Employment . Commencing on May 2, 2016 (the Effective Date), the Company agrees to employ the Executive and the Executive agrees to be employed by the Company subject to the terms set forth herein.
1.2 Duties . As of the Effective Date, the Executive shall serve the Company as its Chief Growth Officer to serve in such capacity or other capacities as designated by the Board of Directors, the Chief Executive Officer (CEO) or his/her designee from time to time. During the term of this Agreement, the Executive shall serve the Company faithfully, diligently and to the best of his/her ability and shall devote substantially all of his/her business time, energy and skill to the affairs of the Company as necessary to perform the duties of his/her position, and he/she shall not assume a position in any other business without the express written permission of the CEO; provided that the Executive may upon disclosure to the CEO: (i) serve as a member of not more than one for-profit board of directors so long as the Executive receives prior written permission from the CEO, (ii) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executives duties to the Company and (iii) make passive investments where the Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit the Executives participation in any of the foregoing endeavors if the CEO believes, in his/her sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executives ability to perform the duties under this Agreement.
2. Compensation and Benefits .
2.1 Base Salary . The Executive shall receive a Base Salary at the rate of $600,000 per year. Such Base Salary shall be subject to periodic adjustment from time to time as determined by the Board of Directors in its sole discretion. Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated the executive employees.
2.2 Policies and Fringe Benefits . The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. The Executive shall be eligible to participate in all benefit programs that the Company establishes and makes available to all of its executives on such terms as the Board of Directors shall determine, if any, to the extent that the Executive meets the eligibility requirements to participate as set forth in the applicable plan or policy. Nothing herein limits the Companys right to modify, change, limit eligibility, or discontinue any plan or policy at any time, with or without prior notice.
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2.3 Reimbursement of Expenses . The Company shall reimburse the Executive for all reasonable and appropriate travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his/her responsibilities or services under this Agreement, in accordance with policies and procedures, and subject to limitations, adopted by the Company from time to time.
2.4 Withholding . All salary and other compensation payable to the Executive pursuant to this Agreement shall be subject to applicable taxes and withholdings.
3. Termination of Employment and Benefits upon Termination.
3.1 General . The Executives employment pursuant to this Agreement shall terminate upon the earliest to occur of (i) the Executives death, (ii) a termination by reason of disability, (iii) a termination by the Company with or without Cause, or (iv) a termination by the Executive. Whenever the Executives employment shall terminate, and regardless of the reason for such termination, effective that same date he/she shall resign all offices, appointments and/or other positions the Executive may hold with the Company including, but not limited to, any parent corporation, subsidiaries or divisions of the Company or any such parent.
3.2 Termination Due to Death . The Executives employment shall automatically terminate upon the date of the Executives death. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) (i) all amounts earned but unpaid hereunder through the date of termination with respect to salary and vested but unused vacation; (ii) to the extent not already paid, any amounts to which the Executive is entitled under the Companys annual incentive compensation plan for the fiscal year ended immediately prior to the date of termination; (iii) his/her vested account balance under the BJs Wholesale Club, Inc. 401(k) Savings Plan for Salaried Employees; and (iv) any unreimbursed expenses incurred in accordance with Company policy (collectively, Earned Obligations);
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid to the Executives estate at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following the Executives death.
3.3 Termination Due to Disability . The Executives employment may be terminated by reason of the Executives disability, upon notice to the Executive, in the event of the inability of the Executive to perform his/her duties hereunder by reason of disability, whether by reason of injury (physical or mental), illness (physical or mental) or otherwise. For purposes of this Agreement, a disability is defined as the occurrence when the Executive is incapacitated for a continuous period exceeding one hundred twenty (120) days, as certified by a physician selected by the Executive and the Company in good faith. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) all Earned Obligations;
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
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(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following a termination of employment due to disability.
3.4 Termination by the Company for Cause or by the Executive . The Company may terminate the Executives employment at any time for Cause by providing the Executive notice of such termination. For the purpose of this Agreement, termination by the Company for Cause shall refer to the Companys termination of the Executives employment because it has determined, in its sole and exclusive discretion, that he/she has: (i) refused or failed to devote his/her full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or he/she has failed to fulfill directives of the CEO, the CEOs designee or the Board of Directors; (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or policy of the Company or breach of fiduciary duty; (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Companys funds or property; (iv) been convicted of any crime which reasonably could affect in an adverse manner the reputation of the Company or the Executives ability to perform his/her duties hereunder; (v) been grossly negligent in the performance of his/her duties; or (vi) materially breached this Agreement including, but not limited to, his/her obligations set forth in Sections 4 and 5 below. If the Executives employment terminates pursuant to this Section 3.4 by the Company for Cause or by reason of the Executives resignation at any time, the Executive shall only receive the Earned Obligations, if any, through his/her termination date. Nothing herein waives any rights the Company may have for damages or equitable relief.
3.5 Termination by the Company Without Cause . The Company may terminate the Executives employment without Cause at any time effective upon the Executives receipt of notice of such termination. No compensation or other benefits shall be payable to or accrue to the Executive in the event of his/her termination without Cause except as follows:
(a) all Earned Obligations;
(b) In the event of such termination, unless: (x) such termination occurs subsequent to a Change in Control (as hereinafter defined) of the Company that occurs prior to May 9, 2017, and (y) Executive does not forfeit that certain option to purchase 40,000 shares of common stock of Beacon Holding, Inc. at a strike price of $75.00, then subject to the Executive entering into a binding and irrevocable release of claims and separation agreement prepared by the Company and the expiration on or before the 60th day after the Executives separation from service of any period during which the Executive is entitled to revoke the release, the Executive shall be eligible on such sixtieth (60th) day to receive:
(1) continuation of Base Salary for a period of twenty-four (24) months (the Severance Period), payable in such manner and at such times as the Executives Base Salary was being paid immediately prior to such termination;
(2) an amount equal to the difference between the Executives actual COBRA premium costs and the amount the Executive would have paid had the Executive continued coverage as an employee under the Companys applicable health plans without regard to the pre-tax benefits the Executive would have received under the BJs Wholesale Club, Inc. Flexible Benefits Plan provided that the Executive elects to continue to participate in the Companys medical and/or dental plans for team members pursuant to a valid COBRA election (and if and only if such participation is legally and contractually permissible) and provided, however, that the Companys obligations under this clause 3.5(b)(2) shall (A) not extend beyond the Severance Period, (B) be eliminated if the Executive discontinues COBRA benefits or (C) be reduced or eliminated to the extent that the Executive receives similar coverage and benefits under the plans and programs of a subsequent employer or entity or becomes eligible for similar coverage under a spouses employer;
(3) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
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(c) payments or benefits under other plans of the Company to the extent that the plans provide for benefits following a termination of employment.
Notwithstanding the foregoing, the payments and benefits described in Section 3.5(b) above shall immediately terminate, and the Company shall have no further obligations to the Executive with respect thereto, in the event that the Executive (i) becomes employed by Wal-Mart Stores, Inc., Costco Wholesale Corporation, Sams Club, or any of their respective subsidiaries or affiliates; or (ii) breaches any provision of Sections 4 or 5 of this Agreement.
Change in Control shall have the meaning provided in the Second Amended and Restated 2011 Stock Option Plan of Beacon Holding, Inc.
3.6 Special Rules Applicable to Deferred Compensation .
Notwithstanding anything herein to the contrary, Sections 3.3(a), 3.3(c), 3.4, 3.5(a) and 3.5(c) shall be construed and applied so that the time of payment of any amount constituting the deferral of compensation, within the meaning of Section 409A(d) of the Code and the regulations issued thereunder, shall be determined in accordance with the plan or other arrangement providing such payment and shall not be accelerated as a result of the Executives disability or termination of employment to which this Agreement applies.
4. Non-Competition and Non-Solicitation .
4.1 Restricted Activities . While the Executive is employed by the Company and for a period of twenty-four (24) months after the termination or cessation of such employment for any reason, the Executive will not directly or indirectly:
(a) Engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof) (such companies, the Named Competitors), or any other person or entity that competes with the Company with respect to any business or activity of the Company entered into by the Company after the Effective Date; provided, however, that in the event Executive is employed by Bain & Company, Inc., the foregoing restriction shall apply for a period of 24 months as to the Named Competitors and 12 months as to all other companies; or
(b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Executive to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Executive to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Executives employment with the Company; provided that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
4.2 Extension of Restrictions . If the Executive violates the provisions of Section 4.1, the twenty-four (24) month period referred to in Section 4.1 shall recommence and the Executive shall continue to be bound by the restrictions set forth in Section 4.1 until a period of twenty-four (24) months has expired without any violation of such provisions.
4.3 Interpretation . If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
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4.4 Equitable Remedies . The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 4 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 4, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
5. Proprietary Information .
5.1 Proprietary Information .
(a) The Executive agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Proprietary Information) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Executive will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his/her duties as an employee of the Company) without written approval by an executive officer of the Company, either during or after his/her employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into his/her custody or possession, shall be and are the exclusive property of the Company to be used by the Executive only in the performance of his/her duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Executive shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his/her employment. After such delivery, the Executive shall not retain any such materials or copies thereof or any such tangible property.
(c) The Executive agrees that his/her obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his/her obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive.
5.2 Equitable Remedies . The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 5 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 5, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
6. Other Agreements . The Executive represents that his/her performance of all the terms of this Agreement and the performance of his/her duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Executive is a party (including without limitation any nondisclosure or non-competition agreement). Any agreement to which the Executive is a party relating to nondisclosure, non-competition, or non-solicitation of employees or customers is listed on Schedule A attached hereto.
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7. Miscellaneous .
7.1 Notices . Any notice delivered under this Agreement shall be deemed duly delivered four (4) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto. Either party may change the address to which notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 7.1.
7.2 Pronouns . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
7.3 Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.
7.4 Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.
7.5 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof), except as may be preempted by the Employee Retirement Income Security Act of 1974,29 U.S.C. §1001 et seq. Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Executive each consents to the jurisdiction of such a court. The Company and the Executive each hereby irrevocably waives any right to a trial by jury in any action, suit, or other legal proceeding arising under or relating to any provision of this Agreement.
7.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Companys assets or business; provided, however, that the obligations of the Executive are personal and shall not be assigned by him/her.
7.7 Waivers . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. Notwithstanding the foregoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a third party engaged in multiple lines of business succeeds to the Companys assets or business, then for purposes of Section 4.1(a), the term Company shall mean and refer to the business of the Company as it existed immediately prior to such event and as it subsequently develops and not to the third partys other businesses.
7.8 Captions . The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
7.9 Severability . In case any provision of this Agreement shall be invalid, illegal, or otherwise unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
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THE EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC. | ||||||
/s/ Christopher Baldwin |
/s/ Lee Delaney |
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Christopher Baldwin President and Chief Executive Officer |
Lee Delaney Executive Vice President, Chief Commercial Officer |
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ATTEST: |
/s/ Graham N. Luce |
WITNESS: |
/s/ Graham N. Luce |
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SCHEDULE A
Agreements containing Restrictive Covenants
Schedule A
Executives initials
8
Exhibit 10.10
Brian Poulliot
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT dated as of December 6, 2018 between Brian Poulliot, whose address is c/o BJs Wholesale Club, Inc., 25 Research Drive, Westborough, Massachusetts 01582 (Executive), and BJs Wholesale Club, Inc., a Delaware corporation, whose principal office is 25 Research Drive, Westborough, Massachusetts (Employer or Company).
WITNESSETH
WHEREAS, Executive and the Company previously entered into an employment agreement dated October 16, 2016 (the Original Employment Agreement); and
WHEREAS, Executive and the Company desire to amend and restate the Original Employment Agreement to remove Executives residential address from the preamble, all other terms and conditions of the Original Employment Agreement remain unchanged and are set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company and the Executive agree as follows:
1. Employment and Duties .
1.1 Employment . Commencing on October 16, 2016 (the Effective Date), the Company agrees to employ the Executive and the Executive agrees to be employed by the Company subject to the terms set forth herein.
1.2 Duties . As of the Effective Date, the Executive shall serve the Company as its Executive Vice President, Chief Membership Officer to serve in such capacity or other capacities as designated by the Board of Directors, the Chief Executive Officer (CEO) or his/her designee from time to time. During the term of this Agreement, the Executive shall serve the Company faithfully, diligently and to the best of his/her ability and shall devote substantially all of his/her business time, energy and skill to the affairs of the Company as necessary to perform the duties of his/her position, and he/she shall not assume a position in any other business without the express written permission of the CEO; provided that the Executive may upon disclosure to the CEO: (i) serve as a member of not more than one for-profit board of directors so long as the Executive receives prior written permission from the CEO, (ii) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executives duties to the Company and (iii) make passive investments where the Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit the Executives participation in any of the foregoing endeavors if the CEO believes, in his/her sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executives ability to perform the duties under this Agreement.
2. Compensation and Benefits.
2.1 Base Salary . The Executive shall receive a Base Salary at the rate of $375,000 per year. Such Base Salary shall be subject to periodic adjustment from time to time as determined by the Board of Directors in its sole discretion. Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated the executive employees.
2.2 Policies and Fringe Benefits . The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. The Executive shall be eligible to participate in all benefit programs that the Company establishes and makes available to all of its executives on such terms as the Board of Directors shall determine, if any, to the extent that the Executive meets the eligibility requirements to participate as set forth in the applicable plan or policy. Nothing herein limits the Companys right to modify, change, limit eligibility, or discontinue any plan or policy at any time, with or without prior notice.
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2.3 Reimbursement of Expenses . The Company shall reimburse the Executive for all reasonable and appropriate travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his/her responsibilities or services under this Agreement, in accordance with policies and procedures, and subject to limitations, adopted by the Company from time to time.
2.4 Withholding . All salary and other compensation payable to the Executive pursuant to this Agreement shall be subject to applicable taxes and withholdings.
3. Termination of Employment and Benefits upon Termination.
3.1 General . The Executives employment pursuant to this Agreement shall terminate upon the earliest to occur of (i) the Executives death, (ii) a termination by reason of disability, (iii) a termination by the Company with or without Cause, or (iv) a termination by the Executive. Whenever the Executives employment shall terminate, and regardless of the reason for such termination, effective that same date he/she shall resign all offices, appointments and/or other positions the Executive may hold with the Company including, but not limited to, any parent corporation, subsidiaries or divisions of the Company or any such parent.
3.2 Termination Due to Death . The Executives employment shall automatically terminate upon the date of the Executives death. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) (i) all amounts earned but unpaid hereunder through the date of termination with respect to salary and vested but unused vacation; (ii) to the extent not already paid, any amounts to which the Executive is entitled under the Companys annual incentive compensation plan for the fiscal year ended immediately prior to the date of termination; (iii) his/her vested account balance under the BJs Wholesale Club, Inc. 401(k) Savings Plan for Salaried Employees; and (iv) any unreimbursed expenses incurred in accordance with Company policy (collectively, Earned Obligations);
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid to the Executives estate at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following the Executives death.
3.3 Termination Due to Disability . The Executives employment may be terminated by reason of the Executives disability, upon notice to the Executive, in the event of the inability of the Executive to perform his/her duties hereunder by reason of disability, whether by reason of injury (physical or mental), illness (physical or mental) or otherwise. For purposes of this Agreement, a disability is defined as the occurrence when the Executive is incapacitated for a continuous period exceeding one hundred twenty (120) days, as certified by a physician selected by the Executive and the Company in good faith. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) all Earned Obligations;
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
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(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following a termination of employment due to disability.
3.4 Termination by the Company for Cause or by the Executive . The Company may terminate the Executives employment at any time for Cause by providing the Executive notice of such termination. For the purpose of this Agreement, termination by the Company for Cause shall refer to the Companys termination of the Executives employment because it has determined, in its sole and exclusive discretion, that he/she has: (i) refused or failed to devote his/her full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or he/she has failed to fulfill directives of the CEO, the CEOs designee or the Board of Directors; (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or policy of the Company or breach of fiduciary duty; (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Companys funds or property; (iv) been convicted of any crime which reasonably could affect in an adverse manner the reputation of the Company or the Executives ability to perform his/her duties hereunder; (v) been grossly negligent in the performance of his/her duties; or (vi) materially breached this Agreement including, but not limited to, his/her obligations set forth in Sections 4 and 5 below. If the Executives employment terminates pursuant to this Section 3.4 by the Company for Cause or by reason of the Executives resignation at any time, the Executive shall only receive the Earned Obligations, if any, through his/her termination date. Nothing herein waives any rights the Company may have for damages or equitable relief.
3.5 Termination by the Company Without Cause . The Company may terminate the Executives employment without Cause at any time effective upon the Executives receipt of notice of such termination. No compensation or other benefits shall be payable to or accrue to the Executive in the event of his/her termination without Cause except as follows:
(a) all Earned Obligations;
(b) Subject to the Executive entering into a binding and irrevocable release of claims and separation agreement prepared by the Company and the expiration on or before the 60 th day after the Executives separation from service of any period during which the Executive is entitled to revoke the release, the Executive shall be eligible on such sixtieth (60 th ) day to receive:
(1) continuation of Base Salary for a period of twenty-four (24) months (the Severance Period), payable in such manner and at such times as the Executives Base Salary was being paid immediately prior to such termination;
(2) an amount equal to the difference between the Executives actual COBRA premium costs and the amount the Executive would have paid had the Executive continued coverage as an employee under the Companys applicable health plans without regard to the pre-tax benefits the Executive would have received under the BJs Wholesale Club, Inc. Flexible Benefits Plan provided that the Executive elects to continue to participate in the Companys medical and/or dental plans for team members pursuant to a valid COBRA election (and if and only if such participation is legally and contractually permissible) and provided, however, that the Companys obligations under this clause 3.5(b)(2) shall (A) not extend beyond the Severance Period, (B) be eliminated if the Executive discontinues COBRA benefits or (C) be reduced or eliminated to the extent that the Executive receives similar coverage and benefits under the plans and programs of a subsequent employer or entity or becomes eligible for similar coverage under a spouses employer;
(3) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will
be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
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(c) payments or benefits under other plans of the Company to the extent that the plans provide for benefits following a termination of employment.
Notwithstanding the foregoing, the payments and benefits described in Section 3.5(b) above shall immediately terminate, and the Company shall have no further obligations to the Executive with respect thereto, in the event that the Executive (i) becomes employed by Wal-Mart Stores, Inc., Costco Wholesale Corporation, Sams Club, or any of their respective subsidiaries or affiliates; or (ii) breaches any provision of Sections 4 or 5 of this Agreement.
3.6 Special Rules Applicable to Deferred Compensation .
Notwithstanding anything herein to the contrary, Sections 3.3(a), 3.3(c), 3.4, 3.5(a) and 3.5(c) shall be construed and applied so that the time of payment of any amount constituting the deferral of compensation, within the meaning of Section 409A(d) of the Code and the regulations issued thereunder, shall be determined in accordance with the plan or other arrangement providing such payment and shall not be accelerated as a result of the Executives disability or termination of employment to which this Agreement applies.
4. Non-Competition and Non-Solicitation .
4.1 Restricted Activities. While the Executive is employed by the Company and for a period of twenty-four (24) months after the termination or cessation of such employment for any reason, the Executive will not directly or indirectly:
(a) Engage in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Companys business. A business or enterprise shall be deemed competitive if it shall operate a chain of membership warehouse clubs (by way of example but not limitation, Sams Club or Costco or their respective affiliates), warehouse stores selling food and/or general merchandise, or any other person or entity that competes with the Company, including without limitation Wal-Mart Stores, Inc., Target Corporation, or any of their respective affiliates; or
(b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Executive to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Executive to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Executives employment with the Company; provided that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
4.2 Extension of Restrictions . If the Executive violates the provisions of Section 4.1, the twenty-four (24) month period referred to in Section 4.1 shall recommence and the Executive shall continue to be bound by the restrictions set forth in Section 4.1 until a period of twenty-four (24) months has expired without any violation of such provisions.
4.3 Interpretation. If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
4.4 Equitable Remedies . The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 4 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 4, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
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5. Proprietary Information.
5.1 Proprietary Information.
(a) The Executive agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Proprietary Information) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Executive will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his/her duties as an employee of the Company) without written approval by an executive officer of the Company, either during or after his/her employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into his/her custody or possession, shall be and are the exclusive property of the Company to be used by the Executive only in the performance of his/her duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Executive shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his/her employment. After such delivery, the Executive shall not retain any such materials or copies thereof or any such tangible property.
(c) The Executive agrees that his/her obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his/her obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive.
5.2 Equitable Remedies . The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 5 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 5, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
6. Other Agreements . The Executive represents that his/her performance of all the terms of this Agreement and the performance of his/her duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Executive is a party (including without limitation any nondisclosure or non-competition agreement). Any agreement to which the Executive is a party relating to nondisclosure, non -competition, or non-solicitation of employees or customers is listed on Schedule A attached hereto.
7. Miscellaneous.
7.1 Notices . Any notice delivered under this Agreement shall be deemed duly delivered four (4) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto. Either party may change the address to which notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 7.1.
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7.2 Pronouns . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
7.3 Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.
7.4 Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.
7.5 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof), except as may be preempted by the Employee Retirement Income Security Act of 1974,29 U.S.C. §1001 et seq. Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Executive each consents to the jurisdiction of such a court. The Company and the Executive each hereby irrevocably waives any right to a trial by jury in any action, suit, or other legal proceeding arising under or relating to any provision of this Agreement.
7.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Companys assets or business; provided, however, that the obligations of the Executive are personal and shall not be assigned by him/her.
7.7 Waivers . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. Notwithstanding the foregoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a third party engaged in multiple lines of business succeeds to the Companys assets or business, then for purposes of Section 4.1(a), the term Company shall mean and refer to the business of the Company as it existed immediately prior to such event and as it subsequently develops and not to the third partys other businesses.
7.8 Captions . The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
7.9 Severability . In case any provision of this Agreement shall be invalid, illegal, or otherwise unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
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THE EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC. |
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/s/ Christopher Baldwin |
/s/ Brian Poulliot |
|||
Christopher Baldwin President and Chief Executive Officer |
Brian Poulliot EVP, Chief Membership Officer |
ATTEST: |
/s/ Graham N. Luce |
WITNESS: |
/s/ Graham N. Luce |
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SCHEDULE A
Agreements containing Restrictive Covenants
Schedule A
Executives initials
8
Exhibit 10.11
Scott Kessler
EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 30, 2017 between Scott Kessler, whose address is (Executive), and BJs Wholesale Club, Inc., a Delaware corporation, whose principal office is 25 Research Drive, Westborough, Massachusetts (Employer or Company).
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company and the Executive agree as follows:
1. Employment and Duties .
1.1 Employment . Commencing on May 30, 2017 (the Effective Date), the Company agrees to employ the Executive and the Executive agrees to be employed by the Company subject to the terms set forth herein.
1.2 Duties . As of the Effective Date, the Executive shall serve the Company as its Executive Vice President, Chief Information Officer, to serve in such capacity or other capacities as designated by the Board of Directors, the Chief Executive Officer (CEO) or his/her designee from time to time. During the term of this Agreement, the Executive shall serve the Company faithfully, diligently and to the best of his/her ability and shall devote substantially all of his/her business time, energy and skill to the affairs of the Company as necessary to perform the duties of his/her position, and he/she shall not assume a position in any other business without the express written permission of the CEO; provided that the Executive may upon disclosure to the CEO: (i) serve as a member of not more than one for-profit board of directors so long as the Executive receives prior written permission from the CEO, (ii) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executives duties to the Company and (iii) make passive investments where the Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit the Executives participation in any of the foregoing endeavors if the CEO believes, in his/her sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executives ability to perform the duties under this Agreement.
2. |
Compensation and Benefits . |
2.1 Base Salary . The Executive shall receive a Base Salary at the rate of $450,000 per year. Such Base Salary shall be subject to periodic adjustment from time to time as determined by the Board of Directors in its sole discretion. Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated the executive employees.
2.2 Policies and Fringe Benefits . The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. The Executive shall be eligible to participate in all benefit programs that the Company establishes and makes available to all of its executives on such terms as the Board of Directors shall determine, if any, to the extent that the Executive meets the eligibility requirements to participate as set forth in the applicable plan or policy. Nothing herein limits the Companys right to modify, change, limit eligibility, or discontinue any plan or policy at any time, with or without prior notice.
2.3 Reimbursement of Expenses . The Company shall reimburse the Executive for all reasonable and appropriate travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his/her responsibilities or services under this Agreement, in accordance with policies and procedures, and subject to limitations, adopted by the Company from time to time.
2.4 Withholding . All salary and other compensation payable to the Executive pursuant to this Agreement shall be subject to applicable taxes and withholdings.
2.5 Relocation Payment . You will be paid a relocation stipend of $150,000, payable on or before the third week of employment.
3. |
Termination of Employment and Benefits upon Termination. |
3.1 General . The Executives employment pursuant to this Agreement shall terminate upon the earliest to occur of (i) the Executives death, (ii) a termination by reason of disability, (iii) a termination by the Company with or without Cause, or (iv) a termination by the Executive. Whenever the Executives employment shall terminate, and regardless of the reason for such termination, effective that same date he/she shall resign all offices, appointments and/or other positions the Executive may hold with the Company including, but not limited to, any parent corporation, subsidiaries or divisions of the Company or any such parent.
3.2 Termination Due to Death . The Executives employment shall automatically terminate upon the date of the Executives death. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) (i) all amounts earned but unpaid hereunder through the date of termination with respect to salary and vested but unused vacation; (ii) to the extent not already paid, any amounts to which the Executive is entitled under the Companys annual incentive compensation plan for the fiscal year ended immediately prior to the date of termination; (iii) his/her vested account balance under the BJs Wholesale Club, Inc. 401(k) Savings Plan for Salaried Employees; and (iv) any unreimbursed expenses incurred in accordance with Company policy (collectively, Earned Obligations);
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(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid to the Executives estate at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following the Executives death.
3.3 Termination Due to Disability . The Executives employment may be terminated by reason of the Executives disability, upon notice to the Executive, in the event of the inability of the Executive to perform his/her duties hereunder by reason of disability whether by reason of injury (physical or mental), illness (physical or mental) or otherwise. For purposes of this Agreement, a disability is defined as the occurrence when the Executive is incapacitated for a continuous period exceeding one hundred twenty (120) days, as certified by a physician selected by the Executive and the Company in good faith. No compensation or other benefits shall be payable to or accrue to the Executive hereunder except as follows:
(a) all Earned Obligations;
(b) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and
(c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following a termination of employment due to disability.
3.4 Termination by the Company for Cause or by the Executive . The Company may terminate the Executives employment at any time for Cause by providing the Executive notice of such termination. For the purpose of this Agreement, termination by the Company for Cause shall refer to the Companys termination of the Executives employment because it has determined, in its sole and exclusive discretion, that he/she has: (i) refused or failed to devote his/her full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or he/she has failed to fulfill directives of the CEO, the CEOs designee or the Board of Directors; (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or policy of the Company or breach of fiduciary duty; (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Companys funds or property; (iv) been convicted of any crime which
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reasonably could affect in an adverse manner the reputation of the Company or the Executives ability to perform his/her duties hereunder; (v) been grossly negligent in the performance of his/her duties; or (vi) materially breached this Agreement including, but not limited to, his/her obligations set forth in Sections 4 and 5 below. If the Executives employment terminates pursuant to this Section 3.4 by the Company for Cause or by reason of the Executives resignation at any time, the Executive shall only receive the Earned Obligations, if any, through his/her termination date. Nothing herein waives any rights the Company may have for damages or equitable relief.
3.5 Termination by the Company Without Cause . The Company may terminate the Executives employment without Cause at any time effective upon the Executives receipt of notice of such termination. No compensation or other benefits shall be payable to or accrue to the Executive in the event of his/her termination without Cause except as follows:
(a) all Earned Obligations;
(b) In the event of such termination, then subject to the Executive entering into a binding and irrevocable release of claims and separation agreement prepared by the Company and the expiration on or before the 60 th day after the Executives separation from service of any period during which the Executive is entitled to revoke the release, the Executive shall be eligible on such sixtieth (60 th ) day to receive:
(1) continuation of Base Salary for a period of twenty-four (24) months (the Severance Period), payable in such manner and at such times as the Executives Base Salary was being paid immediately prior to such termination;
(2) an amount equal to the difference between the Executives actual COBRA premium costs and the amount the Executive would have paid had the Executive continued coverage as an employee under the Companys applicable health plans without regard to the pre-tax benefits the Executive would have received under the BJs Wholesale Club, Inc. Flexible Benefits Plan provided that the Executive elects to continue to participate in the Companys medical and/or dental plans for team members pursuant to a valid COBRA election (and if and only if such participation is legally and contractually permissible) and provided, however, that the Companys obligations under this clause 3.5(b)(2) shall (A) not extend beyond the Severance Period, (B) be eliminated if the Executive discontinues COBRA benefits or (C) be reduced or eliminated to the extent that the Executive receives similar coverage and benefits under the plans and programs of a subsequent employer or entity or becomes eligible for similar coverage under a spouses employer;
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(3) any amounts the Executive would have been entitled to receive under the Companys annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid;
(4) in the event such termination occurs within one year following a Change in Control (which shall have the meaning given to such term in the Fourth Amended and Restated 2011 Stock Option Agreement of Beacon Holdings, Inc.), an amount equal to the product of: (i) (A) the price per share of Beacon Holdings, Inc. common stock at which such Change in Control was consummated, minus (B) $49.00, multiplied by (ii) the number of unvested options under that certain option agreement between you and the Company, dated as of the date hereof; and
(c) payments or benefits under other plans of the Company to the extent that the plans provide for benefits following a termination of employment.
Notwithstanding the foregoing, the payments and benefits described in Section 3.5(b) above shall immediately terminate, and the Company shall have no further obligations to the Executive with respect thereto, in the event that the Executive (i) becomes employed by Wal-Mart Stores, Inc., Costco Wholesale Corporation, Sams Club, or any of their respective subsidiaries or affiliates; or (ii) breaches any provision of Sections 4 or 5 of this Agreement.
3.6 Special Rules Applicable to Deferred Compensation .
Notwithstanding anything herein to the contrary, Sections 3.3(a), 3.3(c), 3.4, 3.5(a) and 3.5(c) shall be construed and applied so that the time of payment of any amount constituting the deferral of compensation, within the meaning of Section 409A(d) of the Code and the regulations issued thereunder, shall be determined in accordance with the plan or other arrangement providing such payment and shall not be accelerated as a result of the Executives disability or termination of employment to which this Agreement applies.
4. Non-Competition and Non-Solicitation .
4.1 Restricted Activities . While the Executive is employed by the Company and for a period of twenty-four (24) months after the termination or cessation of such employment for any reason, the Executive will not directly or indirectly:
(a) Engage in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East,
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Inc. and any successors thereof) (such companies, the Named Competitors), or any other person or entity that competes with the Company with respect to any business or activity of the Company entered into by the Company after the Effective Date; provided, however, that in the event Executive is employed by Bain & Company, Inc., the foregoing restriction shall apply for a period of 24 months as to the Named Competitors and 12 months as to all other companies; or
(b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Executive to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Executive to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Executives employment with the Company; provided that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six (6) months or longer at the time of such solicitation, hiring or employment.
4.2 Extension of Restrictions . If the Executive violates the provisions of Section 4.1, the twenty-four (24) month period referred to in Section 4.1 shall recommence and the Executive shall continue to be bound by the restrictions set forth in Section 4.1 until a period of twenty-four (24) months has expired without any violation of such provisions.
4.3 Interpretation . If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
4.4 Equitable Remedies . The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 4 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 4, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
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5. Proprietary Information .
5.1 Proprietary Information .
(a) The Executive agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Companys business, business relationships or financial affairs (collectively, Proprietary Information) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Executive will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his/her duties as an employee of the Company) without written approval by an executive officer of the Company, either during or after his/her employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into his/her custody or possession, shall be and are the exclusive property of the Company to be used by the Executive only in the performance of his/her duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Executive shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of his/her employment. After such delivery, the Executive shall not retain any such materials or copies thereof or any such tangible property.
(c) The Executive agrees that his/her obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his/her obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive.
5.2 Equitable Remedies . The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 5 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 5, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.
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6. Other Agreements . The Executive represents that his/her performance of all the terms of this Agreement and the performance of his/her duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Executive is a party (including without limitation any nondisclosure or non-competition agreement). Any agreement to which the Executive is a party relating to nondisclosure, non-competition, or non-solicitation of employees or customers is listed on Schedule A attached hereto.
7. Miscellaneous .
7.1 Notices . Any notice delivered under this Agreement shall be deemed duly delivered four (4) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto. Either party may change the address to which notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 7.1.
7.2 Pronouns . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
7.3 Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.
7.4 Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.
7.5 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof), except as may be preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §1001 et seq. Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Executive each consents to the jurisdiction of such a court. The Company and the Executive each hereby irrevocably waives any right to a trial by jury in any action, suit, or other legal proceeding arising under or relating to any provision of this Agreement.
7.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Companys assets or business; provided, however, that the obligations of the Executive are personal and shall not be assigned by him/her.
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7.7 Waivers . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. Notwithstanding the foregoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a third party engaged in multiple lines of business succeeds to the Companys assets or business, then for purposes of Section 4.1(a), the term Company shall mean and refer to the business of the Company as it existed immediately prior to such event and as it subsequently develops and not to the third partys other businesses.
7.8 Captions . The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
7.9 Severability . In case any provision of this Agreement shall be invalid, illegal, or otherwise unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
* * * * *
THE EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
BJS WHOLESALE CLUB, INC. | ||||||||
/s/ Christopher J. Baldwin | /s/ Scott Kessler | |||||||
Christopher J. Baldwin President and Chief Executive Officer |
Scott Kessler Executive Vice President and Chief Information Officer |
|||||||
ATTEST: |
/s/ Graham N. Luce |
WITNESS: |
/s/ Graham N. Luce |
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LP12:Employment Agreements/Employment Agreement Template EVP 2012
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SCHEDULE A
Agreements containing Restrictive Covenants
Schedule A
Executives initials
A0146175.3
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Exhibit 10.12
FOURTH AMENDED AND RESTATED
2011 STOCK OPTION PLAN
OF
BEACON HOLDING INC.
Beacon Holding Inc., a Delaware corporation, hereby adopts this Fourth Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. (as amended from time to time, the Plan ), which amends and restates the Third Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc., adopted as of September 1, 2015, in its entirety. The purposes of the Plan are as follows:
(1) To further the growth, development and financial success of the Company (as defined herein) and its Subsidiaries (as defined herein) by providing additional incentives to Employees, Consultants and Independent Directors (as such terms are defined below) of the Company and its Subsidiaries who have been or will be given responsibility for the management or administration of the Companys or one of its Subsidiaries business affairs, by assisting them to become owners of Common Stock (as defined herein), thereby enabling them to benefit directly from the growth, development and financial success of the Company and its Subsidiaries.
(2) To enable the Company and its Subsidiaries to obtain and retain the services of the type of professional, technical and managerial Employees, Consultants and Independent Directors considered essential to the long-range success of the Company and its Subsidiaries by providing and offering them an opportunity to become owners of Common Stock through the exercise of Options (as defined herein), including, in the case of certain Employees, Options that are intended to qualify as incentive stock options under Section 422 of the Code (as defined herein).
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates.
Section 1.1 Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given such term under Rule 405 of the Securities Act.
Section 1.2 Board shall mean the Board of Directors of the Company.
Section 1.3 Change in Control shall mean (a) the sale of all or substantially all of the assets of the Company, BJs Wholesale Club, Inc. ( BJs ) or any wholly-owned Subsidiary interposed between the Company and BJs (an Intermediate Subsidiary ) to any other Person (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), or (b) a change in beneficial ownership or control of the Company, BJs or any Intermediate Subsidiary effected through a transaction or series of transactions (other than an offering of
Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby (i) any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company, BJs or any Intermediate Subsidiary possessing more than 50% of the total combined voting power of such entitys securities outstanding immediately after such acquisition, or (ii) following an initial public offering, the Principal Stockholders and their respective Affiliates directly or indirectly hold beneficial ownership of securities of each of the Company, BJs and any Intermediate Subsidiary possessing less than 10% of the total combined voting power of such entitys voting securities outstanding immediately after such transaction or series of transactions.
Section 1.4 Change in Control Allocation Amount shall equal 102,900 shares of Common Stock; less the number of shares of Common Stock subject to Options granted under Section 3.1(a) of the Plan after the Closing Date (as defined in the Merger Agreement), excluding (a) the number of shares of Common Stock subject to Options granted under the Plan to Vice Presidents of the Company or its Subsidiaries on or prior to February 29, 2012 (up to a maximum of 34,300 shares) and (b) the number of shares subject to Options granted under the Plan that represent awards to new hires who replace former Optionees (up to the number of shares subject to any previous Option grant(s) to such former Optionees) (such awards, Replacement Awards ). The Committee shall, in its good faith discretion, determine whether awards are Replacement Awards.
Section 1.5 Code shall mean the Internal Revenue Code of 1986, as amended.
Section 1.6 Committee shall mean the Committee appointed as provided in Section 6.1.
Section 1.7 Common Stock shall mean the common stock of the Company, par value $0.01 per share.
Section 1.8 Company shall mean Beacon Holding Inc., a Delaware corporation. In addition, Company shall mean any corporation assuming, or issuing new employee stock options in substitution for, Incentive Stock Options outstanding under the Plan in a transaction to which Section 424(a) of the Code applies.
Section 1.9 Consultant shall mean any consultant or adviser if: (a) the consultant or adviser renders bona fide services to the Company or a Subsidiary thereof; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Companys securities; and (c) the consultant or adviser is a natural person.
Section 1.10 Director shall mean a member of the Board.
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Section 1.11 Eligible Representative for an Optionee shall mean such Optionees personal representative or such other person as is empowered under the deceased Optionees will or the then applicable laws of descent and distribution to represent the Optionee hereunder.
Section 1.12 Employee shall mean, with respect to any entity, any employee of such entity (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code).
Section 1.13 Equity Restructuring shall mean a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, non-recurring cash dividend, that affects the shares of Common Stock (or other securities of the Company) or the share price of the Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Options.
Section 1.14 Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Section 1.15 Fair Market Value of a share of Common Stock as of a given date shall be:
(a) The closing price of a share of Common Stock on the New York Stock Exchange, Nasdaq or such other principal exchange on which such shares are then trading, if any (or as reported on any composite index which includes the New York Stock Exchange, Nasdaq or such other principal exchange), for the most recent trading day prior to such determination date on which a sale occurred; or
(b) If Common Stock is not traded on an exchange but is quoted on a quotation system, the mean between the closing representative bid and asked prices for a share of Common Stock on the most recent trading day prior to such determination date on which sales prices or bid and asked prices, as applicable, as reported by such quotation system; or
(c) Unless otherwise set forth in the applicable Stock Option Agreement, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, the fair market value of a share of Common Stock as determined by the Board in its sole discretion.
Section 1.16 Incentive Stock Option shall mean an Option that conforms to the applicable provisions of Section 422 of the Code and that is designated as an Incentive Stock Option by the Committee.
Section 1.17 Independent Director shall mean a member of the Board who is not an Employee of the Company or any of its Subsidiaries.
Section 1.18 Initial Public Offering shall mean the first issuance by the Company of any class of common equity securities that is required to be registered (other than on a Form S-8) under Section 12 of the Exchange Act.
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Section 1.19 Investment shall (a) for all Options granted prior to February 1, 2016, mean the investment of funds on the Closing Date by the Principal Stockholders in exchange for Investment Securities and (b) for all Options granted on or after February 1, 2016, have the meaning set forth in the applicable Optionees Stock Option Agreement. For the avoidance of doubt, for purposes of the definition of Qualifying Change in Control, Investment shall have the meaning applicable for Options granted prior to February 1, 2016.
Section 1.20 Investment Securities shall mean the debt and equity securities of the Company and its Subsidiaries purchased on the Closing Date by the Principal Stockholders.
Section 1.21 Investor Return shall (a) mean for all Options granted prior to February 1, 2016, the annual compounded pre-tax internal rate of return on the Investment determined with respect to the period beginning on the Closing Date and ending on the effective date of a Change in Control and (b) for all Options granted on or after February 1, 2016, have the meaning set forth in the applicable Optionees Stock Option Agreement.
Section 1.22 Management Stockholders Agreement shall mean an agreement by and between the Optionee and the Company which contains certain restrictions and limitations applicable to the shares of Common Stock acquired upon Option exercise (and/or to other shares of Common Stock, if any, held by the Optionee during the term of such agreement), the terms of which shall be determined by the Board in its discretion.
Section 1.23 Merger Agreement has the meaning set forth in Section 7.1(a).
Section 1.24 Non-Qualified Stock Option shall mean an Option which is not an incentive stock option within the meaning of Section 422 of the Code.
Section 1.25 Officer shall mean an officer of the Company, as defined in Rule 16a-l(f) under the Exchange Act, as such Rule may be amended from time to time.
Section 1.26 Option shall mean an option granted under the Plan to purchase Common Stock. Subject to Section 3.2, an Option shall, as determined by the Committee, be either an Incentive Stock Option or a Non-Qualified Stock Option.
Section 1.27 Optionee shall mean an Employee, Consultant or Independent Director to whom an Option is granted under the Plan.
Section 1.28 Person shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
Section 1.29 Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC, and CVC Beacon LP (f/k/a CVC Beacon LLC).
Section 1.30 Proceeds shall (a) for all Options granted prior to February 1, 2016, mean the aggregate fair market value of the consideration received in respect of the Investment Securities by the Principal Stockholders prior to or in connection with a Change in Control, after
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taking into account all post closing adjustments, and assuming exercise of all options and warrants outstanding as of the effective date of such Change in Control (after giving effect to any dilution of securities or instruments arising in connection with such Change in Control); provided, however , that if the Principal Stockholders retain any portion of the Investment following such Change in Control, the fair market value of such portion of the Investment immediately following such Change in Control shall be deemed consideration received for purposes of calculating the Proceeds; and provided, further , that the fair market value of any non-cash consideration (including stock) shall be determined as of the date of such Change in Control and (b) for all Options granted on or after February 1, 2016, have the meaning set forth in the applicable Optionees Stock Option Agreement. For the avoidance of doubt, for purposes of the definition of Qualifying Change in Control, Proceeds shall have the meaning applicable for Options granted prior to February 1, 2016.
Section 1.31 Qualifying Change in Control shall mean a Change in Control upon which the Principal Stockholders receive Proceeds greater than or equal to the Target Amount with respect to the Investment.
Section 1.32 Rule 16b-3 shall mean Rule 16b-3 promulgated under the Exchange Act, as such Rule may be amended from time to time.
Section 1.33 Securities Act shall mean the Securities Act of 1933, as amended.
Section 1.34 Stock Option Agreement shall have the meaning set forth in Section 4.1.
Section 1.35 Subsidiary of any entity shall mean any corporation in an unbroken chain of corporations beginning with such entity if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
Section 1.36 Target Amount shall mean:
(a) for all Options granted prior to February 1, 2016, with respect to the Investment, a dollar amount representing either:
(i) both (A) 2.5 times the amount of the Investment and (B) a 25% Investor Return on the Investment; or
(ii) 3.5 times the amount of the Investment; and
(b) for all Options granted on or after February 1, 2016, Target Amount shall have the meaning set forth in the applicable Optionees Stock Option Agreement.
For the avoidance of doubt, for purposes of the definition of Qualifying Change in Control, Target Amount shall have the meaning applicable for Options granted prior to February 1, 2016.
Section 1.37 Termination of Consultancy shall mean the time when the engagement of an Optionee as a Consultant to the Company or a Subsidiary thereof is terminated for any
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reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding a termination where there is a simultaneous commencement of employment with the Company or any Subsidiary thereof. The Committee, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy.
Section 1.38 Termination of Directorship shall mean the time when an Optionee who is an Independent Director ceases to be a Director for any reason, including but not by way of limitation, a termination by resignation, failure to be elected or appointed, death or retirement. The Board, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Directorship.
Section 1.39 Termination of Employment shall mean the time when the employee- employer relationship between an Optionee and the Company (and its Subsidiaries), is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement, but excluding a termination where there is a simultaneous reemployment by the Company or one of its Subsidiaries of the Employee. The Committee shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under Section 422(a)(2) of the Code.
Section 1.40 Termination of Services shall mean the time of any Termination of Employment, Termination of Consultancy or Termination of Directorship, as applicable, following which an Optionee no longer provides any services to the Company or any Subsidiary thereof as (a) an Employee, (b) a Consultant, or (c) an Independent Director. The Board shall determine the effect of all matters and questions relating to Termination of Services, including, but not by way of limitation, all questions of whether a particular leave of absence constitutes a Termination of Services.
Section 1.41 Weighted Average Exercise Price shall mean, as of any date, (a) the aggregate sum for all outstanding Options of the product of (i) the exercise price and (ii) the number of shares of Common Stock subject to outstanding Options with such exercise price divided by (b) the number of shares of Common Stock subject to outstanding Options.
ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1 Shares Subject to Plan . The shares of stock subject to Options shall be shares of Common Stock. Subject to Section 7.1, the aggregate number of such shares which may be issued upon exercise of Options shall not exceed 1,536,802 shares of Common Stock.
Section 2.2 Unexercised Options . If any Option (or portion thereof) expires or is canceled without having been fully exercised, the number of shares of Common Stock subject to
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such Option (or portion thereof), but as to which such Option was not exercised prior to its expiration or cancellation, may again be optioned hereunder, subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
Section 3.1 Eligibility . Subject to Section 3.2, any (a) Employee of the Company or one of its Subsidiaries; (b) Consultant; or (c) Independent Director shall be eligible to be granted Options.
Section 3.2 Qualification of Incentive Stock Options . Notwithstanding Section 3.1, no Incentive Stock Option shall be granted to any person who is not an Employee of the Company or one of its Subsidiaries.
Section 3.3 Granting of Options to Employees and Consultants
(a) The Committee shall from time to time:
(i) Select from among the Employees and Consultants of the Company and any of its Subsidiaries (including those to whom Options have been previously granted under the Plan) such of them as in its opinion should be granted Options;
(ii) Determine the number of shares of Common Stock to be subject to such Options granted to such Employees and Consultants and, subject to Section 3.2, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options; and
(iii) Determine the terms and conditions of such Options, consistent with the Plan.
(b) Upon the selection of an Employee or Consultant of the Company or any of its Subsidiaries to be granted an Option pursuant to Section 3.3(a), the Committee shall instruct the corporate secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may require as a condition to the grant of an Option to such Employee or Consultant that such Employee or Consultant surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Committee deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.
Section 3.4 Granting of Options to Independent Directors
(a) The Board may from time to time:
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(i) Select from among the Independent Directors (including those to whom Options have previously been granted under the Plan) such of them as in its opinion should be granted Options;
(ii) Determine the number of shares of Common Stock to be subject to such Options granted to such selected Independent Directors; and
(iii) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that all Options granted to Independent Directors shall be Non-Qualified Stock Options.
(b) Upon the selection of an Independent Director to be granted an Option pursuant to Section 3.4(a), the Board shall instruct the corporate secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Board may require as a condition to the grant of an Option to an Independent Director that the Independent Director surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Board deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.
Section 3.5 Allocation upon Qualifying Change in Control .
(a) Immediately prior to a Qualifying Change in Control (and subject to the consummation thereof), the Committee shall grant options (the Allocation Options ) to purchase a number of shares of Common Stock equal to the Change in Control Allocation Amount to those certain Optionees who received Options on the Closing Date, in amounts as determined by the Committee in its sole discretion; provided that in no event shall any Optionee be eligible to receive any Allocation Options unless such Optionee remains continuously employed by the Company and/or an Affiliate thereof during the period beginning on the Closing Date and ending on the date of consummation of such Qualifying Change in Control. To the extent that (i) Options have been granted to any person(s) described in Section 3.1(b) or 3.1(c) prior to a Qualifying Change in Control and (ii) it is necessary to grant the Allocation Options under the Plan, the Board shall amend the Plan to increase the number of shares reserved for issuance under Section 2.1 by such number of shares as is necessary to cover all Allocation Options to be granted in connection with such Qualifying Change in Control.
(b) The exercise price with respect to the shares subject to the Allocation Options shall be equal to the Weighted Average Exercise Price as of the grant of the Allocation Options.
(c) Each Allocation Option shall be fully and solely exercisable upon the consummation of a Qualifying Change in Control and shall in all events be granted in compliance with Section 409A; to the extent that the exercise price of any Allocation Option is
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less than the Fair Market Value per share of Common Stock as of the date of grant, then the Allocation Options shall be intended not to constitute non-qualified deferred compensation that is subject to Section 409A and the Plan and each Stock Option Agreement evidencing such Allocation Options shall be interpreted accordingly.
(d) Notwithstanding anything to the contrary in this Section 3.5, the Company may in its sole discretion, in lieu of grant of the Allocation Options, pay certain Optionees who received Options in connection with the transactions contemplated by the Merger Agreement, subject to their continued employment through the date of consummation of the Qualifying Change in Control, an amount in cash or other property equal to the aggregate of the excess of the Fair Market Value of the shares subject to the Allocation Options over the exercise price of the Allocation Options.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1 Stock Option Agreement . Each Option shall be evidenced by a written stock option agreement ( Stock Option Agreement ), which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Committee (or the Board in the case of Options granted to Independent Directors) shall determine, consistent with the Plan. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as incentive stock options within the meaning of Section 422 of the Code.
Section 4.2 Exercisability of Options
(a) Each Option shall become exercisable according to the terms of the applicable Stock Option Agreement; provided , however , that by a resolution adopted after an Option is granted the Committee (or the Board in the case of Options granted to Independent Directors) may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or any portion thereof may be exercised.
(b) Except as otherwise provided in the applicable Stock Option Agreement, no portion of an Option which is unexercisable at Termination of Employment, Termination of Consultancy or Termination of Directorship, as applicable, shall thereafter become exercisable.
(c) To the extent that the aggregate Fair Market Value of stock with respect to which incentive stock options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company or any Subsidiary thereof) exceeds $100,000, such options shall be treated and taxable as Non-Qualified Stock Options. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted, and the stock issued upon exercise of options shall designate whether such stock was acquired upon exercise of an Incentive Stock Option. For purposes of these rules, the Fair Market Value of stock shall be determined as of the date of grant of the Option granted with respect to such stock.
Section 4.3 Option Price . Subject to Section 3.5(b), the price of the shares subject to
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each Option shall be set by the Committee (or the Board in the case of Options granted to Independent Directors); provided , however , that in the case of an Incentive Stock Option, the price per share shall be not less than 100% of the Fair Market Value of such shares on the date such Option is granted; and provided , further , that in the case of an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, the price per share shall not be less than 110% of the Fair Market Value of such shares on the date such Incentive Stock Option is granted.
Section 4.4 Expiration of Options . No Option may be exercised to any extent by anyone after the first to occur of the following events (or such earlier date as may be set forth in any applicable Stock Option Agreement):
(a) With respect to a Non-Qualified Stock Option, the expiration of ten years from the date the Non-Qualified Stock Option was granted; or
(b) With respect to an Incentive Stock Option in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, 10% or less of the total combined voting power of all classes of stock of the Company or any Subsidiary thereof, the expiration of ten years from the date the Incentive Stock Option was granted; or
(c) With respect to an Incentive Stock Option in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary thereof, the expiration of five years from the date the Incentive Stock Option was granted.
Section 4.5 At-Will Employment . Nothing in the Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of, or as a Consultant to, the Company or any Subsidiary thereof, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary thereof, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Optionee and the Company or any Subsidiary thereof.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1 Person Eligible to Exercise . During the lifetime of the Optionee, only he or she may exercise an Option (or any portion thereof); provided , however , that the Optionees Eligible Representative may exercise such Optionees Option during the period of his or her disability, notwithstanding that an Option so exercised may not qualify as an Incentive Stock Option. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his or her Eligible Representative.
Section 5.2 Partial Exercise . At any time and from time to time prior to the time when the Option becomes unexercisable under the Plan or the applicable Stock Option Agreement, the
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exercisable portion of an Option may be exercised in whole or in part; provided , however , that the Company shall not be required to issue fractional shares and the Committee (or the Board in the case of Options granted to Independent Directors) may, by the terms of the Stock Option Agreement, require any partial exercise to exceed a specified minimum number of shares.
Section 5.3 Manner of Exercise . An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the corporate secretary of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or his or her Eligible Representative stating that such Option or portion is exercised, and specifically stating the number of shares with respect to which the Option is being exercised;
(b) A copy of the Management Stockholders Agreement signed by the Optionee or Eligible Representative, as applicable;
(c) Full payment for the shares with respect to which such Option or portion is thereby exercised:
(i) In cash, by certified or bank cashier check, or by wire transfer; or
(ii) With the consent of the Committee (or the Board in the case of Options granted to Independent Directors), (A) shares of Common Stock which have been owned by the Optionee for at least six months (or such other time period as may be determined by the Committee (or the Board in the case of Options granted to Independent Directors)), duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (B) except with respect to Incentive Stock Options, shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised; (C) following an Initial Public Offering and pursuant to any policies and procedures adopted by the Committee (or the Board in the case of Options granted to Independent Directors), delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; or (D) any combination of the consideration listed in this Section 5.3(c) or any other property of any kind which is deemed to constitute good and valuable consideration by the Committee (or the Board in the case of Options granted to Independent Directors);
(d) The payment to the Company (in cash, by certified or bank cashier check, by wire transfer or by any other means of payment approved by the Committee) of all amounts necessary to satisfy any and all federal, state and local tax withholding requirements arising in connection with the exercise of the Option; provided that the Committee may, in its sole discretion, allow the Optionee to satisfy the withholding tax obligations arising in connection with the exercise of any Option under the Plan by electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market
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Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined;
(e) Such representations and documents as the Committee (or the Board in the case of Options granted to Independent Directors) deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act, Exchange Act and any other federal or state securities laws or regulations. The Committee (or the Board in the case of Options granted to Independent Directors) may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and
(f) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.
Section 5.4 Conditions to Issuance of Stock Certificates . The shares of Common Stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. A certificate of shares will be delivered to the Optionee at the Companys principal place of business within thirty days of receipt by the Company of the written notice and payment, unless an earlier date is agreed upon. Notwithstanding the above, the Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on any and all stock exchanges on which such class of stock is then listed;
(b) The execution by the Optionee and delivery to the Company of the Management Stockholders Agreement;
(c) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee (or the Board in the case of Options granted to Independent Directors) shall, in its sole discretion, deem necessary or advisable;
(d) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee (or the Board in the case of Options granted to Independent Directors) shall, in its sole discretion, determine to be necessary or advisable; and
(e) The payment to the Company of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Option.
Section 5.5 Rights as Stockholders . The holder of an Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until such holder has signed
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the Management Stockholders Agreement and certificates representing such shares have been issued by the Company to such holder.
Section 5.6 Transfer Restrictions . Shares acquired upon exercise of an Option shall be subject to the terms and conditions of the Management Stockholders Agreement. In addition, the Committee (or the Board in the case of Options granted to Independent Directors), in its sole discretion, may impose further restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require an Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within two years from the date of granting such Option or one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Incentive Stock Option refer to such requirement.
ARTICLE VI.
ADMINISTRATION
Section 6.1 Committee . Prior to an Initial Public Offering, the Committee shall be the Compensation Committee (or, if no Compensation Committee exists, the Board). Following an Initial Public Offering, if any, the full Board shall administer the Plan unless and until there is appointed a Compensation Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) that, unless otherwise determined by the Board, shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a non-employee director as defined by Rule 16b-3 and an outside director for purposes of Section 162(m) of the Code), provided that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 6.1 or otherwise provided in the charter (or similar governing document) of the Committee. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code (in each case, to the extent applicable), or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. The governance of the Committee shall be subject to the charter (or similar governing document) of the Committee as approved by the Board.
Section 6.2 Delegation of Authority . The Committee may, but need not, from time to time delegate some or all of its authority to grant Options under the Plan to a committee or subcommittee consisting of one or more members of the Committee or of one or more Officers of the Company; provided, however, that the Committee may not delegate its authority to grant Options to individuals (a) who are subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (b) whose compensation the Committee determines is, or may become, subject to the deduction limitations set forth in Section 162(m) of the Code or (c) who are Officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so
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delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 6.2 shall serve in such capacity at the pleasure of the Committee.
Section 6.3 Duties and Powers of the Committee . It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Options granted to Independent Directors. Any such interpretations and rules in regard to Incentive Stock Options shall be consistent with the terms and conditions applicable to incentive stock options within the meaning of Section 422 of the Code. All determinations and decisions made by the Committee under any provision of the Plan or of any Option granted thereunder shall be final, conclusive and binding on all persons.
Section 6.4 Compensation, Professional Assistance, Good Faith Actions . The members of the Committee shall receive such compensation, if any, for their services hereunder as may be determined by the Board. All expenses and liabilities incurred by the members of the Committee or the Board in connection with the administration of the Plan shall be borne by the Company. The Committee or the Board may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee and the Board in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Board shall be fully protected by the Company in respect to any such action, determination or interpretation.
ARTICLE VII.
OTHER PROVISIONS
Section 7.1 Changes in Common Stock; Disposition of Assets and Corporate Events
(a) In the event of any stock split, spin-off, share combination, reclassification, recapitalization, liquidation, dissolution, reorganization, merger, Change in Control, payment of a dividend or distribution (other than a cash dividend paid as part of a regular dividend program) or other similar transaction or occurrence (including an Equity Restructuring) which affects the equity securities of the Company or the value thereof, the Committee shall (i) adjust the number and kind of shares subject to the Plan (including pursuant to Section 3.5(a)) and available for or covered by Options, (ii) adjust the exercise prices related to outstanding Options, and/or (iii) take such other action (including, without limitation providing for payment of a cash amount to holders of outstanding Options and adjusting performance targets), in each case as it deems reasonably necessary to address, on an equitable basis, the effect of the applicable corporate event on the Plan and any outstanding Options, without adverse tax consequences under Section 409A of the Code; provided that, for purposes of this Section 7.1(a), any payment of management or transaction fees to the Principal
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Stockholders (other than any transaction fees paid to the Principal Stockholders in connection with the transaction evidenced by that certain Merger Agreement, dated as of June 28, 2011, by and among BJs, the Company and Beacon Merger Sub Inc., a Delaware corporation (the Merger Agreement )) in excess of $8,000,000, in any calendar year shall be treated as a distribution resulting in adjustment and/or other actions described in this Section 7.1(a).
(b) Subject to Section 3.5, in the event of a Change in Control: (i) if provided in the applicable Stock Option Agreement or otherwise determined by the Committee in its sole discretion, any outstanding Options then held by Optionees which are unexercisable or otherwise unvested shall automatically be deemed exercisable or otherwise vested as of immediately prior to such Change in Control and (ii) the Committee may, to the extent determined by the Committee to be permitted under Section 409A of the Code, but shall not be obligated to: (A) cancel outstanding Options for a payment equal to the excess, if any, of the value of the consideration to be paid in the Change in Control transaction to holders of the same number of shares of Common Stock subject to such Options (or, if no consideration is paid in any such transaction, the Fair Market Value of the Common Stock subject to such Options) over the aggregate exercise price of such Options (and, for the avoidance of doubt, any Options having an exercise price equal to or greater than the consideration to be paid in the Change in Control may be cancelled without payment in respect thereof); (B) provide for the issuance of substitute awards that will preserve in no less favorable a manner the otherwise applicable terms of any affected Options previously granted hereunder, as determined by the Committee in its sole discretion; or (C) provide that for a period of at least ten business days prior to the Change in Control, Options shall be exercisable as to all shares subject thereto (where, for the avoidance of doubt, an Optionee shall have the ability to request that such shares be withheld to satisfy the payment of the exercise price of such Options and/or to satisfy any tax withholding obligations that the Optionee may incur as a result of such exercise) and that, upon the occurrence of the Change in Control, such Options shall terminate and be of no further force and effect.
Section 7.2 Options Not Transferable . No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.2 shall prevent transfers by will or by the applicable laws of descent and distribution.
Section 7.3 Amendment, Suspension or Termination of the Plan. The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without stockholder approval within 12 months before or after such action, no action of the Board or the Committee may, except as provided in Section 7.1, increase any limit imposed in Section 2.1 on the maximum number of shares which may be issued on exercise of Options, reduce the minimum Option price requirements of Section 4.3, or extend the limit imposed in this Section 7.3 on the period during which Options may be granted. In addition, no amendment to Section 3.5 or the definitions of Qualifying Change in Control, Change in Control Allocation Amount, or Weighted Average Exercise Price may be made without the written consent of Optionees who received
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Options on the Closing Date who are then still employed by the Company and/or an Affiliate thereof and who hold the right to receive upon exercise a majority of the shares of Common Stock subject to such Options. Except as provided by Section 7.1, neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, alter or impair any rights or obligations under any Option theretofore granted. No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after the expiration of ten years from the earlier of (a) the date this Fourth Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. is adopted by the Board and (b) the date this Fourth Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. is approved by the Companys stockholders.
Section 7.4 Effect of Plan Upon Other Option and Compensation Plans . The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in this Plan shall be construed to limit the right of the Company or any Affiliate (a) to establish any other forms of incentives or compensation for directors, employees or consultants of the Company or any Affiliate; or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.
Section 7.5 Approval of Plan by Stockholders . This Plan was approved by the Companys stockholders on or prior to the date of the Boards adoption of this Fourth Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc.
Section 7.6 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.
Section 7.7 Conformity to Securities Laws . The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder to the extent the Company or any Optionee is subject to the provisions thereof. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 7.8 Governing Law . To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 7.9 Severability . In the event any portion of the Plan or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the
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illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
Section 7.10 Section 409A . To the extent applicable, the Plan and Stock Option Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any Option may be subject to Section 409A of the Code, the Committee may, with the consent of the applicable Optionee (to the extent the Optionees rights are adversely affected), adopt such amendments to the Plan and the applicable Stock Option Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A. Notwithstanding anything herein to the contrary, no provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from any Optionee or other Person to the Company or any of its Affiliates, employees or agents.
* * * * *
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Exhibit 10.12(a)
AMENDMENT TO THE
FOURTH AMENDED AND RESTATED 2011 STOCK OPTION PLAN
OF
BJS WHOLESALE CLUB HOLDINGS, INC.
THIS AMENDMENT TO THE FOURTH AMENDED AND RESTATED 2011 STOCK OPTION PLAN OF BJS WHOLESALE CLUB HOLDINGS, INC. (this Amendment ), dated as of June 14, 2018, is made and adopted by BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Plan (as defined below). This Amendment shall become effective upon the consummation of an initial public offering of the Companys common stock and if such an initial public offering does not occur on or prior to December 31, 2018 this Amendment shall be void ab initio.
RECITALS
WHEREAS, the Company maintains the Fourth Amended and Restated 2011 Stock Option Plan of Beacon Holding Inc. (the Plan );
WHEREAS, as of February 23, 2018, Beacon Holding Inc. was renamed BJs Wholesale Club Holdings, Inc.;
WHEREAS, in connection with the Companys initial public offering the Company intends to adopt the BJs Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the 2018 Plan ) which 2018 Plan will become effective on the day immediately prior to the Public Trading Date (as defined in the 2018 Plan) (the Effective Date );
WHEREAS, the Company desires to amend the Plan as set forth herein; and
WHEREAS, pursuant to Section 7.3 of the Plan, the Plan may be amended at any time and from time to time by the Board or the Committee;.
NOW, THEREFORE, BE IT RESOLVED, that the Plan shall be amended as follows:
1. |
Each reference to Beacon Holding Inc. (including, without limitation in the name of the Plan) shall be amended to BJs Wholesale Club Holdings, Inc.. |
2. |
Section 2.2 shall be deleted in its entirety and replaced with the following: |
Section 2.2 Share Counting . If any Option (or portion thereof) expires or is canceled without having been fully exercised, the number of shares of Common Stock subject to such Option (or portion thereof), but as to which such Option was not exercised prior to its expiration or cancellation, may again be optioned hereunder, subject to the limitations of Section 2.1. In addition, (i) shares of Common Stock tendered by an Optionee or withheld by the Company in payment of the exercise price of an Option and (ii) shares of Common Stock tendered by an Optionee or withheld by the Company to satisfy any tax withholding obligation with respect to an Option may again be optioned hereunder.
3. |
A new Section 3.6 shall be added to the Plan which states: |
Section 3.6 No Further Grants . Notwithstanding anything to the contrary herein, no further grants shall be made pursuant to the Plan on or following the Effective Date (and subject to the occurrence of the Public Trading Date). Any shares of Common Stock which, as of the Effective Date, are available for issuance under the Plan (including, without limitation, shares of Common Stock available pursuant to Section 2.2 hereof), and any shares of Common Stock that are subject to awards under the Plan which are forfeited or lapse unexercised, shall be available under the 2018 Plan to the extent provided in Section 3.1 thereof. For the avoidance of doubt, in lieu of granting Allocation Options pursuant to Section 3.5 hereof, the Company may in its sole discretion pay an amount in cash or other property (including, without limitation, options pursuant to the 2018 Plan) equal to the aggregate of the excess of the Fair Market Value of the shares subject to the Allocation Options over the exercise price of the Allocation Options.
4. |
Except as set forth herein, the Plan shall remain in full force and effect following the date of this Amendment. |
[signature page follows]
I hereby certify that the foregoing Amendment was adopted by the Board of Directors of BJs Wholesale Club Holdings, Inc. as of June 14, 2018.
* * * * *
Executed as of June 14, 2018.
By: |
|
|
Officer Name: | ||
Officer Title: |
Exhibit 10.13
EXECUTION VERSION
NON-QUALIFIED STOCK OPTION AGREEMENT
OF
BEACON HOLDING INC.
THIS AGREEMENT (the Agreement ) is entered into as of [ ] (the Grant Date ) by and between Beacon Holding Inc., a Delaware corporation (the Company ) and [ ], an employee, consultant or director of the Company or one of its Subsidiaries (hereinafter referred to as the Optionee ).
WHEREAS, the Board of Directors of the Company has approved the 2011 Stock Option Plan of Beacon Holding Inc. (as it may be amended from time to time, the Plan ), the terms of which are hereby incorporated by reference and made a part of this Agreement;
WHEREAS, the Committee appointed to administer the Plan pursuant to Section 6.1 of the Plan (the Committee ) has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or one of its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; and
WHEREAS, the Optionee has entered into a Management Stockholders Agreement with the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms used in this Agreement and not defined below shall have the meaning given such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.
Section 1.1 Cause shall have the meaning provided in the Optionees Change in Control Severance Agreement as in effect on the date hereof with the Company or a Subsidiary of the Company, as applicable, or if the Optionee does not have such a Change in Control Severance Agreement, but is a participant in the Change of Control Severance Benefit Plan for Key Employees in effect as of the date hereof (the Severance Plan ), Cause shall have the meaning provided in the Severance Plan, or if Cause is not defined therein or the Optionee is not a participant in the Severance Plan, then Cause shall mean the Optionees failure to substantially perform the Optionees duties as reasonably determined by the Board (other than as a result of the Optionees Disability); materially dishonest statements or acts of the Optionee with respect to the Company or any of its Subsidiaries or Affiliates; the commission by the Optionee of an act constituting a felony under the laws of the United States or any state thereof; gross negligence, willful misconduct or insubordination of the Optionee with respect to the Company or any of its Subsidiaries or Affiliates; or any other act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its Subsidiaries or Affiliates.
Section 1.2 Change in Control shall mean (i) the sale of all or substantially all of the assets of the Company, BJs Wholesale Club, Inc. ( BJs ) or any wholly-owned Subsidiary interposed between the Company and BJs (an Intermediate Subsidiary ) to any other Person (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), or (ii) a change in beneficial ownership or control of the Company, BJs or any Intermediate Subsidiary effected through a transaction or series of transactions (other than an offering of Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby (A) any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company, BJs or any Intermediate Subsidiary possessing more than 50% of the total combined voting power of such entitys securities outstanding immediately after such acquisition, or (B) following an initial public offering, the Principal Stockholders and their respective Affiliates directly or indirectly hold beneficial ownership of securities of each of the Company, BJs and any Intermediate Subsidiary possessing less than 10% of the total combined voting power of such entitys voting securities outstanding immediately after such transaction or series of transactions.
Section 1.3 Committee shall have the meaning set forth in the Recitals hereto.
Section 1.4 Company shall have the meaning set forth in the preamble hereto.
Section 1.5 Confidential Information shall have the meaning set forth in Section 4.1.
Section 1.6 Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
Section 1.7 EBITDA for a given period shall mean earnings before interest, taxes, depreciation and amortization plus transaction, management and/or similar fees paid to the Principal Stockholders and/or their Affiliates (so long as such fees are treated as expenses in the calculation of earnings), together with such adjustments as the Committee shall determine appropriate in its discretion after good faith consultation with the Chief Executive Officer and/or Chief Financial Officer, including adjustments consistent with the basis on which the EBITDA Targets were originally established. For the avoidance of doubt, no amounts related to discontinued operations under GAAP are to be included in the calculation of EBITDA or EBITDA Targets; provided that such operations were classified as discontinued operations prior to [ ]. Cumulative EBITDA as of a given date shall mean the total EBITDA from and after [ ] through such date.
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Section 1.8 EBITDA Target for each fiscal year ending in [ ] through [ ] shall be the amount set forth on Exhibit A . Cumulative EBITDA Target as of a given date shall mean the total EBITDA Target from and after [ ] through such date.
Section 1.9 Fair Market Value shall have the meaning set forth in the Plan; provided that, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, Fair Market Value shall be determined in accordance with (and is subject to disagreement procedures set forth in) the Management Stockholders Agreement.
Section 1.10 Good Reason shall have the meaning provided in the Optionees Change in Control Severance Agreement as in effect on the date hereof with the Company or a Subsidiary of the Company, as applicable, or if the Optionee does not have such a Change in Control Severance Agreement, but is a participant in the Severance Plan, Good Reason shall have the meaning provided in the Severance Plan, or if Good Reason is not defined therein or the Optionee is not a participant in the Severance Plan, then Good Reason shall mean any material adverse change by the Company in the Optionees job title, duties, responsibility or authority; failure by the Company to pay to the Optionee any material amount of base salary or bonus when due; any material diminution of the Optionees base salary (other than such a material diminution that is applied on a substantially comparable basis to similarly-situated employees of the Company or a Subsidiary of the Company); the termination or denial of the Optionees right to participate in employment related benefits that are offered similarly-situated employees of the Company or a Subsidiary of the Company; the movement of the Optionees principal location of work to a new location that is in excess of thirty-five (35) miles from the Optionees principal location of work as of the date that the Optionee becomes a party to this Agreement without the Optionees consent; provided that none of the events described in this definition of Good Reason shall constitute Good Reason unless the Optionee notifies the Company in writing of the event that is purported to constitute Good Reason (which notice is provided not later than the 30th day following the occurrence of the event purported to constitute Good Reason) and then only if the Company fails to cure such event within 30 days after the Companys receipt of such written notice.
Section 1.11 Grant Date shall have the meaning set forth in the preamble hereto.
Section 1.12 Investment shall mean the investment of funds on the Closing Date (as defined in the Merger Agreement) by the Principal Stockholders in exchange for Investment Securities.
Section 1.13 Investment Securities shall mean the debt and equity securities of the Company and its Subsidiaries purchased on the Closing Date by the Principal Stockholders.
Section 1.14 Investor Return shall mean the annual compounded pre-tax internal rate of return on the Investment determined with respect to the period beginning on the Closing Date and ending on the effective date of a Change in Control.
Section 1.15 Option shall mean the non-qualified stock option to purchase Common Stock granted under this Agreement.
Section 1.16 Optionee shall have the meaning set forth in the preamble hereto.
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Section 1.17 Plan shall have the meaning set forth in the Recitals hereto.
Section 1.18 Proceeds shall mean the aggregate fair market value of the consideration received in respect of the Investment Securities by the Principal Stockholders prior to or in connection with a Change in Control, after taking into account all post closing adjustments, and assuming exercise of all options and warrants outstanding as of the effective date of such Change in Control (after giving effect to any dilution of securities or instruments arising in connection with such Change in Control); provided , however , that if the Principal Stockholders retain any portion of the Investment following such Change in Control, the fair market value of such portion of the Investment immediately following such Change in Control shall be deemed consideration received for purposes of calculating the Proceeds; and provided , further , that the fair market value of any non-cash consideration (including stock) shall be determined as of the date of such Change in Control.
Section 1.19 Target Amount shall mean, with respect to the Investment, a dollar amount representing either:
(a) both (i) 2.5 times the amount of the Investment and (ii) a 25% Investor Return on the Investment; or
(b) 3.5 times the amount of the Investment.
Section 1.20 Third Party Information shall have the meaning set forth in Section 4.3.
Section 1.21 Work Product shall have the meaning set forth in Section 4.2.
ARTICLE II.
GRANT OF OPTION
Section 2.1 Grant of Option . In consideration of the Optionees agreement to enter into or remain in the employ of, consultancy to or other service relationship with the Company or one of its Subsidiaries, and for other good and valuable consideration, as of the Grant Date, the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of [ ] shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement.
Section 2.2 Option Subject to Plan . The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.
Section 2.3 Option Price . The purchase price of the shares of Common Stock covered by the Option shall be [ ] per share (without commission or other charge), which is not less than 100% of Fair Market Value as of the Grant Date.
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ARTICLE III.
EXERCISABILITY
Section 3.1 Commencement of Exercisability .
Section 3.2 Duration of Exercisability . The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable.
Section 3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after, and shall expire on, the first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) Except for such longer period as the Committee may otherwise approve, upon the Optionees Termination of Services for any reason other than (i) termination by the Company for Cause or (ii) due to the Optionees death or Disability, (A) if such Termination of Services occurs after January 31 of any fiscal year ending in [ ] through [ ], but prior to the Committees determination of EBITDA for such fiscal year, the 90th day following the Committees determination of EBITDA for such fiscal year or (B) if such Termination of Services occurs at any other time, the 90th day following the date of such Termination of Services; or
(c) Notwithstanding the provisions of Section 3.1, in the event of the Optionees Termination of Services by the Company for Cause, the Optionee shall, immediately prior to such Termination of Services (and subject to such Termination of Services), forfeit the Option, whether vested or unvested; or
(d) In the case of a Termination of Services due to the Optionees death or Disability, (i) if such Termination of Services occurs after January 31 of any fiscal year ending in [ ] through [ ], but prior to the Committees determination of EBITDA for such fiscal year, the expiration of one year from the Committees determination of EBITDA for such fiscal year or (ii) if such Termination of Services occurs at any other time, the expiration of one year from the date of the Optionees Termination of Services; or
(e) The date the Optionee first violates any of the restrictive covenants set forth in Article IV.
Section 3.4 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than 10 shares of Common Stock and shall be for whole shares of Common Stock only.
Section 3.5 Exercise of Option . The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including, without limitation, the provisions of Article V of the Plan; provided that, with respect to the Option covered by this Agreement: (a) payment for the shares with respect to which the Option is exercised may be made in the form of shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair
5
Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised and (b) payment of withholding tax obligations arising in connection with the exercise of the Option may be made by the Optionee electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined.
ARTICLE IV.
RESTRICTIVE COVENANTS
Section 4.1 Obligation to Maintain Confidentiality . Optionee acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company or any of its Subsidiaries or Affiliates obtained by Optionee while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) ( Confidential Information ) are the property of the Company or such Subsidiaries or Affiliates, including information concerning acquisition opportunities in or reasonably related to the Companys, or such Subsidiaries or Affiliates business or industry of which Optionee becomes aware during the period of Optionees employment or service. Therefore, Optionee agrees that he or she will not disclose to any unauthorized person, group or entity or use for Optionees own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees employment or service with the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. Optionee shall use reasonable best efforts to deliver to the Company on the date of his or her Termination of Services, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company and its Subsidiaries and Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which Optionee may then possess or have under his or her control, but excluding financial information of the Company relating to Optionees ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
Section 4.2 Ownership of Property . Optionee acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Companys or any of its Subsidiaries or Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Optionee (either solely or jointly with others) while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary
6
information or records) ( Work Product ) belong to the Company or such Subsidiary or Affiliate and Optionee hereby assigns, and agrees to assign, all of the above Work Product to the Company or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by Optionee in the course of Optionees work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Optionee hereby assigns and agrees to assign to the Company or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Optionee shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Optionees employment with or service to the Company and its Subsidiaries and Affiliates) to establish and confirm the Companys or such Subsidiarys or Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
Section 4.3 Third Party Information . Optionee understands that the Company and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Companys and its Subsidiaries and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Optionees employment with or service to the Company or its Subsidiaries or Affiliates and thereafter, and without in any way limiting the provisions of Section 4.1 above, Optionee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company or its Subsidiaries and Affiliates who need to know such information in connection with their work for the Company or its Subsidiaries and Affiliates) or use, except in connection with Optionees work for the Company or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees employment with or service to the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
Section 4.4 Use of Information of Prior Employers . During Optionees employment with and/or services, Optionee will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Optionee has an obligation of confidentiality, and will not bring onto the premises of the Company, its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Optionee has an obligation of confidentiality unless consented to in writing by the former employer or person. Optionee will use in the performance of Optionees duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company, its Subsidiaries or Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Optionee has an obligation of confidentiality, approved for such use in writing by such former employer or person.
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Section 4.5 Nonsolicitation . Optionee acknowledges that, in the course of Optionees employment and/or services, Optionee will become familiar with the Companys and its Subsidiaries and Affiliates trade secrets and with other confidential information concerning the Company and its Subsidiaries and Affiliates and that Optionees services will be of special, unique and extraordinary value to the Company and its Subsidiaries and Affiliates. Therefore, Optionee agrees that:
(a) Restriction . While employed or engaged by the Company or any of its Subsidiaries or Affiliates, and for a period beginning on the date of Optionees Termination of Services for any reason and ending on the second anniversary of such date of Termination of Services, Optionee shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or its Subsidiaries or Affiliates to leave the employ of the Company or any of its Subsidiaries or Affiliates, or in any way interfere with the relationship between the Company or its Subsidiaries or Affiliates and any employee thereof, and (ii) hire any person who was an employee of the Company or any of its Subsidiaries or Affiliates within 180 days prior to the time such employee was hired by Optionee, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its Subsidiaries or Affiliates to cease doing business with the Company or its Subsidiaries or Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its Subsidiaries or Affiliates or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company or its Subsidiaries or Affiliates and with which the Company, its Subsidiaries or Affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company, its Subsidiaries or Affiliates in the two-year period immediately preceding Optionees Termination of Services with the Company or any of its Subsidiaries or Affiliates.
(b) Enforcement . If, at the time of enforcement of Section 4.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Optionee agrees that because his or her services are unique and Optionee has access to confidential information, money damages would be an inadequate remedy for any breach of this Article IV. Optionee agrees that the Company, its Subsidiaries and Affiliates, in the event of a breach or threatened breach of this Article IV, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
(c) Non-disparagement . Optionee agrees that at no time during his employment or engagement by the Company or any of its Subsidiaries or Affiliates or thereafter, shall he make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company or any of its Subsidiaries or Affiliates or any of their respective directors, officers or employees; provided that Optionee shall not be required to make any untruthful statement or to violate any law.
Section 4.6 Acknowledgments . Optionee acknowledges that the provisions of this Article IV are (a) in addition to, and not in limitation of, any obligation of Optionees under the terms of any employment agreement with the Company or any of its Subsidiaries or Affiliates,
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(b) in consideration of (i) employment with or engagement by the Company or any of its Subsidiaries or Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Optionee agrees and acknowledges that the restrictions contained in Article IV do not preclude Optionee from earning a livelihood, nor do they unreasonably impose limitations on Optionees ability to earn a living. Optionee agrees and acknowledges that the potential harm to the Company or its Subsidiaries or Affiliates of the non-enforcement of this Article IV outweighs any potential harm to Optionee of its enforcement by injunction or otherwise. Optionee acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Optionee by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company, and its Subsidiaries and Affiliates now existing or to be developed in the future. Optionee expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
Section 4.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Optionee violates any of the restrictive covenants set forth in Section 4.5(a), then Optionee shall pay to the Company in cash any financial gain Optionee realizes from exercising all or a portion of this Option. For purposes of this Section 4.7, financial gain shall equal any excess of the Fair Market Value of the Common Stock on the date of exercise over the purchase price set forth in Section 2.3, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered). By accepting this Option, Optionee consents to and authorizes the Company to deduct from any amounts payable by the Company to Optionee any amounts Optionee owes to the Company under this Section 4.7. This right of set-off is in addition to any other remedies the Company may have against Optionee for Optionees breach of this Agreement. Optionees obligations under this Section 4.7 shall be cumulative (but not duplicative) of any similar obligations Optionee have pursuant to this Agreement or any other agreement with the Company.
ARTICLE V.
OTHER PROVISIONS
Section 5.1 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of, or providing services to, the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without Cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Optionee.
Section 5.2 Shares Subject to Plan and Management Stockholders Agreement; Entire Agreement . The Optionee acknowledges that any shares acquired upon exercise of the Option are subject to the terms of the Plan and the Management Stockholders Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement (together with the Plan and the Management Stockholders Agreement) shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
Section 5.3 Construction . This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 5.4 Conformity to Securities Laws . The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.5 Amendment, Suspension and Termination . The Option may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided that, except as provided by Section 7.1 of the Plan, none of the amendment, suspension or termination of this Agreement shall, without the consent of the Optionee, alter or impair any rights or obligations under the Option.
Section 5.6 Adjustments in EBITDA Targets . The EBITDA Targets (including the Cumulative EBITDA Targets) specified in Exhibit A are based upon certain revenue and expense assumptions about the future business of the Company as of the Grant Date. Accordingly, in the event that, after such date, the Committee determines, in its discretion, after good faith consultation with the Chief Executive Officer and/or Chief Financial Officer, that adjustments to the EBITDA Targets (including the Cumulative EBITDA Targets) are required, such adjustments will be made by the Committee. Reasons for such adjustments may include, without limitation, the following factors (to the extent not already reflected in establishing the EBITDA Targets and Cumulative EBITDA Targets): any restructuring of the Companys operations (including reductions in force and store closure costs); unrealized mark-to-market on hedging instruments; the impact of any sale-leaseback transactions of real or other property; any acquisition or divestiture of a group of one or more stores, a major administrative unit, major line of business or major assets outside of the ordinary course of business; the effect of any non-cash charges, such as impairment of real or intangible assets or stock compensation charges, or any non-cash income items; any effects of adjustments in the Companys consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting; any extraordinary items in accordance with GAAP; and any changes to GAAP to comply with new legislation or rules promulgated by the Securities and Exchange Commission, the Financial Accounting Standards Board, or any similar or successor entity. In any event, and notwithstanding anything herein to the contrary, the Committee shall have the discretion to make any adjustments to the calculation of EBITDA as it deems fair and appropriate. The Committees determination of such fair and appropriate adjustment(s) shall be made within 90 days following the delivery of the audit report for the fiscal year first impacted by the adjustment, and shall be based on the Companys accounting as set forth in its books and records.
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Section 5.7 Section 409A . To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that the Committee determines that this Option may be subject to Section 409A of the Code, the Committee may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A of the Code; provided that the Committee shall notify the Optionee in writing of any amendment, policy or procedure so adopted that adversely alters or impairs the Optionees rights and the Optionee may reject the application of such amendment, policy or procedure by written notice to the Company, it being understood that the Optionee will thereby accept any risk of adverse tax treatment and indemnify the Company for any taxes, interest and penalties incurred by the Company in relation to such adverse tax treatment. Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from the Optionee or other Person to the Company or any of its Affiliates, employees or agents.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written.
BEACON HOLDING INC. |
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[Optionee] | ||
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Exhibit 10.14
2012 DIRECTOR STOCK OPTION PLAN
OF
BEACON HOLDING INC.
Beacon Holding Inc., a Delaware corporation, hereby adopts this 2012 Director Stock Option Plan of Beacon Holding Inc. (as amended from time to time, the Plan ). The purposes of the Plan are as follows:
(1) To further the growth, development and financial success of the Company (as defined herein) and its Subsidiaries (as defined herein) by providing additional incentives to Independent Directors (as such term is defined below) of the Company and its Subsidiaries who have been or will be given responsibility for the administration of the Companys or one of its Subsidiaries business affairs, by assisting them to become owners of Common Stock (as defined herein), thereby enabling them to benefit directly from the growth, development and financial success of the Company and its Subsidiaries.
(2) To enable the Company and its Subsidiaries to obtain and retain the services of the type of professional Independent Directors considered essential to the long-range success of the Company and its Subsidiaries by providing and offering them an opportunity to become owners of Common Stock through the exercise of Options (as defined herein).
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates.
Section 1.1 Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given such term under Rule 405 of the Securities Act.
Section 1.2 Board shall mean the Board of Directors of the Company.
Section 1.3 Change in Control shall mean (a) the sale of all or substantially all of the assets of the Company, BJs Wholesale Club, Inc. ( BJs ) or any wholly-owned Subsidiary interposed between the Company and BJs (an Intermediate Subsidiary ) to any other Person (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), or (b) a change in beneficial ownership or control of the Company, BJs or any Intermediate Subsidiary effected through a transaction or series of transactions (other than an offering of Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby (i) any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company, BJs or any Intermediate Subsidiary possessing more than
50% of the total combined voting power of such entitys securities outstanding immediately after such acquisition, or (ii) following an initial public offering, the Principal Stockholders and their respective Affiliates directly or indirectly hold beneficial ownership of securities of each of the Company, BJs and any Intermediate Subsidiary possessing less than 10% of the total combined voting power of such entitys voting securities outstanding immediately after such transaction or series of transactions.
Section 1.4 Class A Stock shall mean the common stock of the Company designated as Class A Common Stock, par value $0.01 per share.
Section 1.5 Class B Stock shall mean the common stock of the Company designated as Class B Common Stock, par value $0.01 per share.
Section 1.6 Code shall mean the Internal Revenue Code of 1986, as amended.
Section 1.7 One share of Common Stock shall mean (a) prior to the effectiveness of the actions set forth in Section 9.01 of the Stockholders Agreement, one share of Class A Stock and one share of Class B Stock and (b) following the effectiveness of the actions set forth in Section 9.01 of the Stockholders Agreement, one share of the common stock of the Company, par value $0.01 per share.
Section 1.8 Company shall mean Beacon Holding Inc., a Delaware corporation.
Section 1.9 Director shall mean a member of the Board.
Section 1.10 Eligible Representative for an Optionee shall mean such Optionees personal representative or such other person as is empowered under the deceased Optionees will or the then applicable laws of descent and distribution to represent the Optionee hereunder.
Section 1.11 Employee shall mean, with respect to any entity, any employee of such entity (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code).
Section 1.12 Equity Restructuring shall mean a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, non-recurring cash dividend, that affects the shares of Common Stock (or other securities of the Company) or the share price of the Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Options.
Section 1.13 Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Section 1.14 Fair Market Value of a share of Common Stock as of a given date shall be:
(a) The closing price of a share of Common Stock on the New York Stock Exchange, Nasdaq or such other principal exchange on which such shares are then trading, if any
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(or as reported on any composite index which includes the New York Stock Exchange, Nasdaq or such other principal exchange), for the most recent trading day prior to such determination date on which a sale occurred; or
(b) If Common Stock is not traded on an exchange but is quoted on a quotation system, the mean between the closing representative bid and asked prices for a share of Common Stock on the most recent trading day prior to such determination date on which sales prices or bid and asked prices, as applicable, as reported by such quotation system; or
(c) Unless otherwise set forth in the applicable Stock Option Agreement, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, the fair market value of a share of Common Stock as determined by the Board in its sole discretion.
Section 1.15 Independent Director shall mean a member of the Board who is not an Employee of the Company or any of its Subsidiaries.
Section 1.16 Initial Public Offering shall mean the first issuance by the Company of any class of common equity securities that is required to be registered (other than on a Form S-8) under Section 12 of the Exchange Act.
Section 1.17 Management Stockholders Agreement shall mean an agreement by and between the Optionee and the Company which contains certain restrictions and limitations applicable to the shares of Common Stock acquired upon Option exercise (and/or to other shares of Common Stock, if any, held by the Optionee during the term of such agreement), the terms of which shall be determined by the Board in its discretion.
Section 1.18 Non-Qualified Stock Option shall mean an Option which is not an incentive stock option within the meaning of Section 422 of the Code.
Section 1.19 Officer shall mean an officer of the Company, as defined in Rule 16a- l(f) under the Exchange Act, as such Rule may be amended from time to time.
Section 1.20 Option shall mean an option granted under the Plan to purchase Common Stock.
Section 1.21 Optionee shall mean an Independent Director to whom an Option is granted under the Plan.
Section 1.22 Person shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
Section 1.23 Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC, and CVC Beacon LLC.
Section 1.24 Rule 16b-3 shall mean Rule 16b-3 promulgated under the Exchange Act, as such Rule may be amended from time to time.
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Section 1.25 Securities Act shall mean the Securities Act of 1933, as amended.
Section 1.26 Stock Option Agreement shall have the meaning set forth in Section 4.1.
Section 1.27 Stockholders Agreement shall mean that certain Stockholders Agreement by and among the Company and the Principal Stockholders, dated as of September 30, 2011, as may be amended from time to time.
Section 1.28 Subsidiary of any entity shall mean any corporation in an unbroken chain of corporations beginning with such entity if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
Section 1.29 Termination of Directorship shall mean the time when an Optionee ceases to be a Director for any reason, including but not by way of limitation, a termination by resignation, failure to be elected or appointed, death or retirement. The Board, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Directorship.
ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1 Shares Subject to Plan . The shares of stock subject to Options shall be shares of Common Stock. Subject to Section 7.1, the aggregate number of such shares which may be issued upon exercise of Options shall not exceed 25,000 shares of Common Stock, which, for the avoidance of doubt, consist of 25,000 shares of Class A Stock and 25,000 shares of Class B Stock as of the date of adoption of the Plan.
Section 2.2 Unexercised Options . If any Option (or portion thereof) expires or is canceled without having been fully exercised, the number of shares of Common Stock subject to such Option (or portion thereof), but as to which such Option was not exercised prior to its expiration or cancellation, may again be optioned hereunder, subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
Section 3.1 Eligibility . Any Independent Director shall be eligible to be granted Options.
Section 3.2 Form of Stock Options . All Options granted under the Plan shall be Non-Qualified Stock Options.
Section 3.3 Granting of Options to Independent Directors
(a) The Board may from time to time:
(i) Select from among the Independent Directors (including those to
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whom Options have previously been granted under the Plan) such of them as in its opinion should be granted Options;
(ii) Determine the number of shares of Common Stock to be subject to such Options granted to such selected Independent Directors; and
(iii) Determine the terms and conditions of such Options, consistent with the Plan.
(b) Upon the selection of an Independent Director to be granted an Option pursuant to Section 3.3(a), the Board shall instruct the corporate secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Board may require as a condition to the grant of an Option to an Independent Director that the Independent Director surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Board deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1 Stock Option Agreement . Each Option shall be evidenced by a written stock option agreement ( Stock Option Agreement ), which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Board shall determine, consistent with the Plan.
Section 4.2 Exercisability of Options
(a) Each Option shall become exercisable according to the terms of the applicable Stock Option Agreement; provided , however , that by a resolution adopted after an Option is granted the Board may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or any portion thereof may be exercised.
(b) Except as otherwise provided in the applicable Stock Option Agreement, no portion of an Option which is unexercisable at Termination of Directorship shall thereafter become exercisable.
Section 4.3 Option Price . The price of the shares subject to each Option shall be set by the Board.
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Section 4.4 Expiration of Options . No Option may be exercised to any extent by anyone after the expiration of ten years from the date the Option was granted (or such earlier date as may be set forth in any applicable Stock Option Agreement).
Section 4.5 At-Will Engagement . Nothing in the Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue as an Independent Director to the Company or any Subsidiary thereof, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary thereof, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Optionee and the Company or any Subsidiary thereof.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1 Person Eligible to Exercise . During the lifetime of the Optionee, only he or she may exercise an Option (or any portion thereof); provided , however , that the Optionees Eligible Representative may exercise such Optionees Option during the period of his or her disability. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his or her Eligible Representative.
Section 5.2 Partial Exercise . At any time and from time to time prior to the time when the Option becomes unexercisable under the Plan or the applicable Stock Option Agreement, the exercisable portion of an Option may be exercised in whole or in part; provided , however , that the Company shall not be required to issue fractional shares and the Board may, by the terms of the Stock Option Agreement, require any partial exercise to exceed a specified minimum number of shares. For the avoidance of doubt, prior to the effectiveness of the actions set forth in Section 9.01 of the Stockholders Agreement, the exercise of any Option must be with respect to the same number of shares of Class A Stock and Class B Stock and any notice of exercise purporting to apply with respect to a different number of shares of Class A Stock and Class B Stock shall not be effective.
Section 5.3 Manner of Exercise . An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the corporate secretary of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or his or her Eligible Representative stating that such Option or portion is exercised, and specifically stating the number of shares with respect to which the Option is being exercised;
(b) A copy of the Management Stockholders Agreement signed by the Optionee or Eligible Representative, as applicable;
(c) Full payment for the shares with respect to which such Option or portion is thereby exercised:
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(i) In cash, by certified or bank cashier check, or by wire transfer; or
(ii) With the consent of the Board, (A) shares of Common Stock which have been owned by the Optionee for at least six months (or such other time period as may be determined by the Board), duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate Option price of the shares with respect to which such Option or portion is exercised; (B) shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised; (C) following an Initial Public Offering and pursuant to any policies and procedures adopted by the Board, delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; or (D) any combination of the consideration listed in this Section 5.3(c) or any other property of any kind which is deemed to constitute good and valuable consideration by the Board;
(d) The payment to the Company (in cash, by certified or bank cashier check, by wire transfer or by any other means of payment approved by the Board) of all amounts necessary to satisfy any and all federal, state and local tax withholding requirements arising in connection with the exercise of the Option; provided that the Board may, in its sole discretion, allow the Optionee to satisfy any withholding tax obligations arising in connection with the exercise of any Option under the Plan by electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined;
(e) Such representations and documents as the Board deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act, Exchange Act and any other federal or state securities laws or regulations. The Board may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and
(f) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.
Section 5.4 Conditions to Issuance of Stock Certificates . The shares of Common Stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. A certificate of shares will be delivered to the Optionee at the Companys principal place of business within thirty days of receipt by the Company of the written notice and payment, unless an earlier date is agreed upon. Notwithstanding the above, the Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:
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(a) The admission of such shares to listing on any and all stock exchanges on which such class of stock is then listed;
(b) The execution by the Optionee and delivery to the Company of the Management Stockholders Agreement;
(c) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Board shall, in its sole discretion, deem necessary or advisable;
(d) The obtaining of any approval or other clearance from any state or federal governmental agency which the Board shall, in its sole discretion, determine to be necessary or advisable; and
(e) The payment to the Company of all amounts which it is required to withhold, if any, under federal, state or local law in connection with the exercise of the Option.
Section 5.5 Rights as Stockholders . The holder of an Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until such holder has signed the Management Stockholders Agreement and certificates representing such shares have been issued by the Company to such holder.
Section 5.6 Transfer Restrictions . Shares acquired upon exercise of an Option shall be subject to the terms and conditions of the Management Stockholders Agreement. In addition, the Board, in its sole discretion, may impose further restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares.
ARTICLE VI.
ADMINISTRATION
Section 6.1 Administration . The full Board shall administer the Plan, except with respect to matters which, under Rule 16b-3 or any other applicable law (or any regulations or rules issued thereunder), are required to be determined by a committee or other Person(s).
Section 6.2 Duties and Powers of the Board . It shall be the duty of the Board to conduct the general administration of the Plan in accordance with its provisions. The Board shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All determinations and decisions made by the Board under any provision of the Plan or of any Option granted thereunder shall be final, conclusive and binding on all persons.
Section 6.3 Professional Assistance, Good Faith Actions . All expenses and liabilities incurred by the members of the Board in connection with the administration of the Plan shall be
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borne by the Company. The Board may employ or engage attorneys, consultants, accountants, appraisers, brokers or other persons. The Board, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Board in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Board shall be fully protected by the Company in respect to any such action, determination or interpretation.
ARTICLE VII.
OTHER PROVISIONS
Section 7.1 Changes in Common Stock; Disposition of Assets and Corporate Events
(a) In the event of any stock split, spin-off, share combination, reclassification, recapitalization, liquidation, dissolution, reorganization, merger, Change in Control, payment of a dividend or distribution (other than a cash dividend paid as part of a regular dividend program) or other similar transaction or occurrence (including an Equity Restructuring) which affects the equity securities of the Company or the value thereof, the Board shall (i) adjust the number and kind of shares subject to the Plan and available for or covered by Options, (ii) adjust the exercise prices related to outstanding Options, and/or (iii) take such other action (including, without limitation providing for payment of a cash amount to holders of outstanding Options and adjusting performance targets, if any), in each case as it deems reasonably necessary to address, on an equitable basis, the effect of the applicable corporate event on the Plan and any outstanding Options, without adverse tax consequences under Section 409A of the Code.
(b) In the event of a Change in Control: (i) if provided in the applicable Stock Option Agreement or otherwise determined by the Board in its sole discretion, any outstanding Options then held by Optionees which are unexercisable or otherwise unvested shall automatically be deemed exercisable or otherwise vested as of immediately prior to such Change in Control and (ii) the Board may, to the extent determined by the Board to be permitted under Section 409A of the Code, but shall not be obligated to: (A) cancel outstanding Options for a payment equal to the excess, if any, of the value of the consideration to be paid in the Change in Control transaction to holders of the same number of shares of Common Stock subject to such Options (or, if no consideration is paid in any such transaction, the Fair Market Value of the Common Stock subject to such Options) over the aggregate exercise price of such Options (and, for the avoidance of doubt, any Options having an exercise price equal to or greater than the consideration to be paid in the Change in Control may be cancelled without payment in respect thereof); (B) provide for the issuance of substitute awards that will preserve in no less favorable a manner the otherwise applicable terms of any affected Options previously granted hereunder, as determined by the Board in its sole discretion; or (C) provide that for a period of at least ten business days prior to the Change in Control, Options shall be exercisable as to all Shares subject thereto (where, for the avoidance of doubt, an Optionee shall have the ability to request that such shares be withheld to satisfy the payment of the exercise price of such Options and/or to satisfy any tax withholding obligations that the Optionee may incur as a result of such exercise) and
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that, upon the occurrence of the Change in Control, such Options shall terminate and be of no further force and effect.
Section 7.2 Options Not Transferable . No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.2 shall prevent transfers by will or by the applicable laws of descent and distribution.
Section 7.3 Amendment, Suspension or Termination of the Plan . The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board. Except as provided by Section 7.1, neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, alter or impair any rights or obligations under any Option theretofore granted. No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after the expiration of ten years from the date the Plan is adopted by the Board.
Section 7.4 Effect of Plan Upon Other Option and Compensation Plans . The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in this Plan shall be construed to limit the right of the Company or any Affiliate (a) to establish any other forms of incentives or compensation for directors, employees or consultants of the Company or any Affiliate; or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.
Section 7.5 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.
Section 7.6 Conformity to Securities Laws . The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder to the extent the Company or any Optionee is subject to the provisions thereof. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 7.7 Governing Law . To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of
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law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 7.8 Severability . In the event any portion of the Plan or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
Section 7.9 Section 409A . To the extent applicable, the Plan and Stock Option Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of the Plan to the contrary, in the event that the Board determines that any Option may be subject to Section 409A of the Code, the Board may adopt such amendments to the Plan and the applicable Stock Option Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A of the Code. Notwithstanding anything herein to the contrary, no provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from any Optionee or other Person to the Company or any of its Affiliates, employees or agents.
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I hereby certify that the foregoing Plan was duly adopted, as amended, by the Board as of April 13, 2012.
Executed as of April 13, 2012.
/s/ Lon F. Povich | ||
Officer Name: | Lon F. Povich | |
Officer Title: | EVP, General Counsel and Secretary |
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Exhibit 10.14(a)
AMENDMENT TO THE
2012 DIRECTOR STOCK OPTION PLAN
OF
BJS WHOLESALE CLUB HOLDINGS, INC.
THIS AMENDMENT TO THE 2012 DIRECTOR STOCK OPTION PLAN OF BJS WHOLESALE CLUB HOLDINGS, INC. (this Amendment ), dated as of June 14, 2018, is made and adopted by BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Plan (as defined below). This Amendment shall become effective upon the consummation of an initial public offering of the Companys common stock and if such an initial public offering does not occur on or prior to December 31, 2018 this Amendment shall be void ab initio.
RECITALS
WHEREAS, the Company maintains the 2012 Director Stock Option Plan of Beacon Holding Inc. (the Plan );
WHEREAS, as of February 23, 2018, Beacon Holding Inc. was renamed BJs Wholesale Club Holdings, Inc.;
WHEREAS, in connection with the Companys initial public offering the Company intends to adopt the BJs Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the 2018 Plan ) which 2018 Plan will become effective on the day immediately prior to the Public Trading Date (as defined in the 2018 Plan) (the Effective Date );
WHEREAS, the Company desires to amend the Plan as set forth herein; and
WHEREAS, pursuant to Section 7.3 of the Plan, the Plan may be amended at any time and from time to time by the Board.
NOW, THEREFORE, BE IT RESOLVED, that the Plan shall be amended as follows:
1. |
Each reference to Beacon Holding Inc. (including, without limitation in the name of the Plan) shall be amended to BJs Wholesale Club Holdings, Inc.. |
2. |
Section 2.2 shall be deleted in its entirety and replaced with the following: |
Section 2.2 Share Counting . If any Option (or portion thereof) expires or is canceled without having been fully exercised, the number of shares of Common Stock subject to such Option (or portion thereof), but as to which such Option was not exercised prior to its expiration or cancellation, may again be optioned hereunder, subject to the limitations of Section 2.1. In addition, (i) shares of Common Stock tendered by an Optionee or withheld by the Company in payment of the exercise price of an Option and (ii) shares of Common Stock tendered by an Optionee or withheld by the Company to satisfy any tax withholding obligation with respect to an Option may again be optioned hereunder.
3. |
A new Section 3.4 shall be added to the Plan which states: |
Section 3.4 No Further Grants . Notwithstanding anything to the contrary herein, no further grants shall be made pursuant to the Plan on or following the Effective Date (and subject to the occurrence of the Public Trading Date). Any shares of Common Stock which, as of the Effective Date, are available for issuance under the Plan (including, without limitation, shares of Common Stock available pursuant to Section 2.2 hereof), and any shares of Common Stock that are subject to awards under the Plan which are forfeited or lapse unexercised, shall be available under the 2018 Plan to the extent provided in Section 3.1 thereof.
4. |
Except as set forth herein, the Plan shall remain in full force and effect following the date of this Amendment. |
[signature page follows]
I hereby certify that the foregoing Amendment was adopted by the Board of Directors of BJs Wholesale Club Holdings, Inc. as of June 14, 2018.
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Executed as of June 14, 2018.
By: |
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Officer Name: | ||
Officer Title: |
Exhibit 10.15
EXECUTION VERSION
NON-QUALIFIED STOCK OPTION AGREEMENT
OF
BEACON HOLDING INC.
THIS AGREEMENT (the Agreement ) is entered into as of [ ] (the Grant Date ) by and between Beacon Holding Inc., a Delaware corporation (the Company ) and [ ], a director of the Company or one of its Subsidiaries (hereinafter referred to as the Optionee ).
WHEREAS, the Board of Directors of the Company has approved the 2012 Director Stock Option Plan of Beacon Holding Inc. (as it may be amended from time to time, the Plan ), the terms of which are hereby incorporated by reference and made a part of this Agreement;
WHEREAS, the Board of Directors of the Company has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or one of its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; and
WHEREAS, the Optionee has entered into a Management Stockholders Agreement with the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms used in this Agreement and not defined below shall have the meaning given such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.
Section 1.1 Cause shall mean the Optionees failure to substantially perform the Optionees duties as reasonably determined by the Board (other than as a result of the Optionees Disability); materially dishonest statements or acts of the Optionee with respect to the Company or any of its Subsidiaries or Affiliates; the commission by the Optionee of an act constituting a felony under the laws of the United States or any state thereof; gross negligence, willful misconduct or insubordination of the Optionee with respect to the Company or any of its Subsidiaries or Affiliates; or any other act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its Subsidiaries or Affiliates.
Section 1.2 Company shall have the meaning set forth in the preamble hereto.
Section 1.3 Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
Section 1.4 Fair Market Value shall have the meaning set forth in the Plan; provided that, if Common Stock is not publicly traded on an exchange and not quoted on a quotation system, Fair Market Value shall be determined in accordance with (and is subject to disagreement procedures set forth in) the Management Stockholders Agreement.
Section 1.5 Grant Date shall have the meaning set forth in the preamble hereto.
Section 1.6 Option shall mean the non-qualified stock option to purchase Common Stock granted under this Agreement.
Section 1.7 Optionee shall have the meaning set forth in the preamble hereto.
Section 1.8 Plan shall have the meaning set forth in the Recitals hereto.
ARTICLE II.
GRANT OF OPTION
Section 2.1 Grant of Option . In consideration of the Optionees agreement to enter into or remain in a service relationship with the Company or one of its Subsidiaries, and for other good and valuable consideration, as of the Grant Date, the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of [ ] shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement.
Section 2.2 Option Subject to Plan . The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.
Section 2.3 Option Price . The purchase price of the shares of Common Stock covered by the Option shall be $[ ] per share (without commission or other charge).
ARTICLE III.
EXERCISABILITY
Section 3.1 Commencement of Exercisability .
Section 3.2 Duration of Exercisability . The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable.
Section 3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after, and shall expire on, the first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
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(b) Except for such longer period as the Board may otherwise approve, upon the Optionees Termination of Directorship for any reason other than (i) termination by the Company for Cause or (ii) due to the Optionees death or Disability, the 90th day following the date of such Termination of Directorship; or
(c) Notwithstanding the provisions of Section 3.1, in the event of the Optionees Termination of Directorship by the Company for Cause, the Optionee shall, immediately prior to such Termination of Directorship (and subject to such Termination of Directorship), forfeit the Option, whether vested or unvested; or
(d) In the case of a Termination of Directorship due to the Optionees death or Disability, the expiration of one year from the date of the Optionees Termination of Directorship.
Section 3.4 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than 10 shares of Common Stock and shall be for whole shares of Common Stock only.
Section 3.5 Exercise of Option . The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including, without limitation, the provisions of Article V of the Plan; provided that, with respect to the Option covered by this Agreement: (a) payment for the shares with respect to which the Option is exercised may be made in the form of shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised and (b) payment of any withholding tax obligations arising in connection with the exercise of the Option may be made by the Optionee electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined.
ARTICLE IV.
CONFIDENTIALITY
Section 4.1 Obligation to Maintain Confidentiality . Optionee acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company or any of its Subsidiaries or Affiliates obtained by Optionee while in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) ( Confidential Information ) are the property of the Company or such Subsidiaries or Affiliates, including information concerning acquisition opportunities in or reasonably related to the Companys, or such Subsidiaries or Affiliates business or industry of which Optionee becomes aware during the period of Optionees service. Therefore, Optionee agrees that he or she will not disclose to any unauthorized person, group or entity or use for Optionees own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees service with the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. Optionee shall use reasonable best efforts to deliver to
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the Company on the date of his or her Termination of Directorship, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information or the business of the Company and its Subsidiaries and Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which Optionee may then possess or have under his or her control, but excluding financial information of the Company relating to Optionees ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
Section 4.2 Third Party Information . Optionee understands that the Company and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Companys and its Subsidiaries and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Optionees service to the Company or its Subsidiaries or Affiliates and thereafter, and without in any way limiting the provisions of Section 4.1 above, Optionee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company or its Subsidiaries and Affiliates who need to know such information in connection with their work for the Company or its Subsidiaries and Affiliates) or use, except in connection with Optionees work for the Company or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Optionees acts or omissions to act, (b) was known to Optionee prior to Optionees service to the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
ARTICLE V.
OTHER PROVISIONS
Section 5.1 Not a Contract of Engagement . Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue providing services to, the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without Cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Optionee.
Section 5.2 Shares Subject to Plan and Management Stockholders Agreement; Entire Agreement . The Optionee acknowledges that any shares acquired upon exercise of the Option are subject to the terms of the Plan and the Management Stockholders Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement (together with the Plan and the Management Stockholders Agreement) shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
Section 5.3 Construction . This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
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Section 5.4 Conformity to Securities Laws . The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.5 Amendment, Suspension and Termination . The Option may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board, provided that, except as provided by Section 7.1 of the Plan, none of the amendment, suspension or termination of this Agreement shall, without the consent of the Optionee, alter or impair any rights or obligations under the Option.
Section 5.6 Section 409A . To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that the Board determines that this Option may be subject to Section 409A of the Code, the Board may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under such Section 409A of the Code. Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from the Optionee or other Person to the Company or any of its Affiliates, employees or agents.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written.
BEACON HOLDING INC. |
By: |
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Its: |
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Signature Page to Non-Qualified Stock Option Agreement
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[Name] |
Residence Address: |
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Optionees Social Security Number: |
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Signature Page to Non-Qualified Stock Option Agreement
Exhibit 10.16
BJS WHOLESALE CLUB HOLDINGS, INC.
2018 INCENTIVE AWARD PLAN
ARTICLE 1.
PURPOSE
The purpose of the BJs Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (as it may be amended or restated from time to time, the Plan ) is to promote the success and enhance the value of BJs Wholesale Club Holdings, Inc. (the Company ) by linking the individual interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Companys operation is largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1 Administrator shall mean the entity that conducts the general administration of the Plan as provided in Article 11. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 11.6, or as to which the Board has assumed, the term Administrator shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.2 Affiliate shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by, or under common control with, such person where control shall have the meaning given such term under Rule 405 of the Securities Act.
2.3 Applicable Accounting Standards shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Companys financial statements under United States federal securities laws from time to time.
2.4 Applicable Law shall mean any applicable law, including without limitation: (a) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (b) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state, local or foreign; and (c) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
2.5 Automatic Exercise Date shall mean, with respect to an Option or a Stock Appreciation Right, the last business day of the applicable Option Term or Stock Appreciation Right Term that was initially established by the Administrator for such Option or Stock Appreciation Right ( e.g. , the last business day prior to the tenth anniversary of the date of grant of such Option or Stock Appreciation Right if the Option or Stock Appreciation Right initially had a ten-year Option Term or Stock Appreciation Right Term, as applicable).
2.6 Award shall mean an Option, a Stock Appreciation Right, a Restricted Stock award, a Restricted Stock Unit award, an Other Stock or Cash Based Award or a Dividend Equivalent award, which may be awarded or granted under the Plan.
2.7 Award Agreement shall mean any written notice, agreement, terms and conditions, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine consistent with the Plan.
2.8 Board shall mean the Board of Directors of the Company.
2.9 Change in Control shall mean and includes each of the following:
(a) the sale of all or substantially all of the assets of the Company to any other person (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries);
(b) a change in beneficial ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Companys securities outstanding immediately after such acquisition;
(c) the Incumbent Directors cease for any reason to constitute a majority of the Board; or
(d) the date which is 10 business days prior to the completion of a liquidation or dissolution of the Company.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a change in control event, as defined in Treasury Regulation Section 1.409A-3(i)(5).
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The Administrator shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a change in control event as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
2.10 Code shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and official guidance promulgated thereunder, whether issued prior or subsequent to the grant of any Award.
2.11 Committee shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board or the Compensation Committee of the Board described in Article 11 hereof.
2.12 Common Stock shall mean the common stock of the Company, par value $0.01 per share.
2.13 Company shall have the meaning set forth in Article 1.
2.14 Consultant shall mean any consultant or adviser engaged to provide services to the Company or any Subsidiary who qualifies as a consultant or advisor under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement.
2.15 Director shall mean a member of the Board, as constituted from time to time.
2.16 Director Limit shall have the meaning set forth in Section 4.6.
2.17 Dividend Equivalent shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 9.2.
2.18 DRO shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
2.19 Effective Date shall mean the day prior to the Public Trading Date.
2.20 Eligible Individual shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Administrator.
2.21 Employee shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code and the Treasury Regulations thereunder) of the Company or of any Subsidiary.
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2.22 Equity Restructuring shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per-share value of the Common Stock underlying outstanding Awards.
2.23 Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.24 Expiration Date shall have the meaning given to such term in Section 12.1(c).
2.25 Fair Market Value shall mean, as of any given date, the value of a Share determined as follows:
(a) If the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Capital Market, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(b) If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(c) If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.
Notwithstanding the foregoing, with respect to any Award granted after the effectiveness of the Companys registration statement relating to its initial public offering and prior to the Public Trading Date, the Fair Market Value shall mean the initial public offering price of a Share as set forth in the Companys final prospectus relating to its initial public offering filed with the Securities and Exchange Commission.
2.26 Greater Than 10% Stockholder shall mean an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation thereof (as defined in Section 424(e) of the Code).
2.27 Holder shall mean a person who has been granted an Award.
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2.28 Incentive Stock Option shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.
2.29 Incumbent Directors shall mean for any period of 12 consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.8(a) or 2.8(b)) whose election or nomination for election to the Board was approved by a vote of at least a majority (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) of the Directors then still in office who either were Directors at the beginning of the 12-month period or whose election or nomination for election was previously so approved. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.
2.30 Non-Employee Director shall mean a Director of the Company who is not an Employee.
2.31 Non-Employee Director Equity Compensation Policy shall have the meaning set forth in Section 4.6.
2.32 Non-Qualified Stock Option shall mean an Option that is not an Incentive Stock Option or which is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.
2.33 Option shall mean a right to purchase Shares at a specified exercise price, granted under Article 5. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided , however , that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.
2.34 Option Term shall have the meaning set forth in Section 5.4.
2.35 Organizational Documents shall mean, collectively, (a) the Companys articles of incorporation, certificate of incorporation, bylaws or other similar organizational documents relating to the creation and governance of the Company, and (b) the Committees charter or other similar organizational documentation relating to the creation and governance of the Committee.
2.36 Other Stock or Cash Based Award shall mean a cash payment, cash bonus award, stock payment, stock bonus award, performance award or incentive award that is paid in cash, Shares or a combination of both, awarded under Section 9.1, which may include, without limitation, deferred stock, deferred stock units, performance awards, retainers, committee fees, and meeting-based fees.
2.37 Permitted Transferee shall mean, with respect to a Holder, any family member of the Holder, as defined in the General Instructions to Form S-8 Registration Statement under the Securities Act (or any successor form thereto), or any other transferee specifically approved by the Administrator after taking into account Applicable Law.
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2.38 Plan shall have the meaning set forth in Article 1.
2.39 Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC, and CVC Beacon LP (f/k/a CVC Beacon LLC).
2.40 Prior Plans shall mean, collectively, the following plans of the Company: Fourth Amended and Restated 2011 Stock Option Plan of the Company and the 2012 Director Stock Option Plan of the Company, in each case as such plan may be amended from time to time.
2.41 Program shall mean any program adopted by the Administrator pursuant to the Plan containing the terms and conditions intended to govern a specified type of Award granted under the Plan and pursuant to which such type of Award may be granted under the Plan.
2.42 Public Trading Date shall mean the first date upon which Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.
2.43 Restricted Stock shall mean Common Stock awarded under Article 7 that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.
2.44 Restricted Stock Units shall mean the right to receive Shares awarded under Article 8.
2.45 Section 409A shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including, without limitation, any such regulations or other guidance that may be issued after the Effective Date.
2.46 Securities Act shall mean the Securities Act of 1933, as amended.
2.47 Shares shall mean shares of Common Stock.
2.48 Stock Appreciation Right shall mean an Award entitling the Holder (or other person entitled to exercise pursuant to the Plan) to exercise all or a specified portion thereof (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of such Award from the Fair Market Value on the date of exercise of such Award by the number of Shares with respect to which such Award shall have been exercised, subject to any limitations the Administrator may impose.
2.49 SAR Term shall have the meaning set forth in Section 5.4.
2.50 Subsidiary shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
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2.51 Substitute Award shall mean an Award granted under the Plan in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, in any case, upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity; provided , however , that in no event shall the term Substitute Award be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.52 Termination of Service shall mean:
(a) As to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Subsidiary.
(b) As to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Subsidiary.
(c) As to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Subsidiary.
The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, whether a Termination of Service has occurred, whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service; provided , however , that, with respect to Incentive Stock Options, unless the Administrator otherwise provides in the terms of any Program, Award Agreement or otherwise, or as otherwise required by Applicable Law, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then-applicable regulations and revenue rulings under said Section. For purposes of the Plan, a Holders employee-employer relationship or consultancy relations shall be deemed to be terminated in the event that the Subsidiary employing or contracting with such Holder ceases to remain a Subsidiary following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).
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ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares .
(a) Subject to Sections 3.1(b) and 12.2 the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan is the sum of: (i) 1,737,527 Shares and (ii) any Shares which as of the Effective Date are available for issuance under any of the Prior Plans, or are subject to awards under the Prior Plans which are forfeited or lapse unexercised and which following the Effective Date are not issued under the Prior Plans; provided , however , no more than 1,878,294 Shares may be issued upon the exercise of Incentive Stock Options. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.
(b) If any Shares subject to an Award or Prior Plan award are forfeited or expire, are converted to shares of another Person in connection with a recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event, or such Award or Prior Plan award is settled for cash (in whole or in part) (including Shares repurchased by the Company under Section 7.4 at the same price paid by the Holder), the Shares subject to such Award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future grants of Awards under the Plan. Additionally, the following Shares will be added to the Shares authorized for grant under Section 3.1(a) and shall be available for future grants of Awards: (i) Shares tendered by a Holder or withheld by the Company in payment of the exercise price of an Option or any stock option granted under a Prior Plan and (ii) Shares tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to an Award or any stock option granted under a Prior Plan. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 3.1(a) and shall not be available for future grants of Awards: (i) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof and (ii) Shares purchased on the open market by the Company with the cash proceeds received from the exercise of Options or stock options granted under a Prior Plan. Any Shares repurchased by the Company under Section 7.4 at the same price paid by the Holder so that such Shares are returned to the Company shall again be available for Awards. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the Shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan, except as may be required by reason of Section 422 of the Code. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the
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exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available Shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Subsidiaries immediately prior to such acquisition or combination.
ARTICLE 4.
GRANTING OF AWARDS
4.1 Participation . The Administrator may, from time to time, select from among all Eligible Individuals, those to whom an Award shall be granted and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. Except for any Non-Employee Directors right to Awards that may be required pursuant to the Non-Employee Director Equity Compensation Policy as described in Section 4.6, no Eligible Individual or other Person shall have any right to be granted an Award pursuant to the Plan and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Holders or any other persons uniformly. Participation by each Holder in the Plan shall be voluntary and nothing in the Plan or any Program shall be construed as mandating that any Eligible Individual or other Person shall participate in the Plan.
4.2 Award Agreement . Each Award shall be evidenced by an Award Agreement that sets forth the terms, conditions and limitations for such Award as determined by the Administrator in its sole discretion (consistent with the requirements of the Plan and any applicable Program). Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.
4.3 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.4 At-Will Service . Nothing in the Plan or in any Program or Award Agreement hereunder shall confer upon any Holder any right to continue in the employ of, or as a Director or Consultant for, the Company or any Subsidiary, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Holder and the Company or any Subsidiary.
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4.5 Foreign Holders . Notwithstanding any provision of the Plan or applicable Program to the contrary, in order to comply with the laws in countries other than the United States in which the Company and its Subsidiaries operate or have Employees, Non-Employee Directors or Consultants, or in order to comply with the requirements of any foreign securities exchange or other Applicable Law, the Administrator, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries shall be covered by the Plan; (b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with Applicable Law (including, without limitation, applicable foreign laws or listing requirements of any foreign securities exchange); (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable; provided , however , that no such subplans and/or modifications shall increase the share limitation contained in Section 3.1 or the Director Limit; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any foreign securities exchange.
4.6 Non-Employee Director Awards .
(a) Non-Employee Director Equity Compensation Policy . The Administrator, in its sole discretion, may provide that Awards granted to Non-Employee Directors shall be granted pursuant to a written nondiscretionary formula established by the Administrator (the Non-Employee Director Equity Compensation Policy ), subject to the limitations of the Plan. The Non-Employee Director Equity Compensation Policy shall set forth the type of Award(s) to be granted to Non-Employee Directors, the number of Shares to be subject to Non-Employee Director Awards, the conditions on which such Awards shall be granted, become exercisable and/or payable and expire, and such other terms and conditions as the Administrator shall determine in its sole discretion. The Non-Employee Director Equity Compensation Policy may be modified by the Administrator from time to time in its sole discretion.
(b) Director Limit . Notwithstanding any provision to the contrary in the Plan or in the Non-Employee Director Equity Compensation Policy, the sum of the grant date fair value of equity-based Awards and the amount of any cash-based Awards granted to a Non-Employee Director during any calendar year shall not exceed $750,000 (the Director Limit ).
ARTICLE 5.
GRANTING OF OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 Granting of Options and Stock Appreciation Rights to Eligible Individuals . The Administrator is authorized to grant Options and Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine, which shall not be inconsistent with the Plan.
5.2 Qualification of Incentive Stock Options . The Administrator may grant Options intended to qualify as Incentive Stock Options only to employees of the Company, any of the Companys present or future parent corporations or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are
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eligible to receive Incentive Stock Options under the Code. No person who qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. To the extent that the aggregate fair market value of stock with respect to which incentive stock options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any parent corporation or subsidiary corporation thereof (as defined in Section 424(e) and 424(f) of the Code, respectively), exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the immediately preceding sentence shall be applied by taking Options and other incentive stock options into account in the order in which they were granted and the fair market value of stock shall be determined as of the time the respective options were granted. Any interpretations and rules under the Plan with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. Neither the Company nor the Administrator shall have any liability to a Holder, or any other Person, (a) if an Option (or any part thereof) which is intended to qualify as an Incentive Stock Option fails to qualify as an Incentive Stock Option or (b) for any action or omission by the Company or the Administrator that causes an Option not to qualify as an Incentive Stock Option, including without limitation, the conversion of an Incentive Stock Option to a Non-Qualified Stock Option or the grant of an Option intended as an Incentive Stock Option that fails to satisfy the requirements under the Code applicable to an Incentive Stock Option.
5.3 Option and Stock Appreciation Right Exercise Price . The exercise price per Share subject to each Option and Stock Appreciation Right shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option or Stock Appreciation Right, as applicable, is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). Notwithstanding the foregoing, in the case of an Option or Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Section 424 and 409A of the Code.
5.4 Option and SAR Term . The term of each Option (the Option Term ) and the term of each Stock Appreciation Right (the SAR Term ) shall be set by the Administrator in its sole discretion; provided , however , that the Option Term or SAR Term, as applicable, shall not be more than (a) ten (10) years from the date the Option or Stock Appreciation Right, as applicable, is granted to an Eligible Individual (other than, in the case of Incentive Stock Options, a Greater Than 10% Stockholder), or (b) five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. Except as limited by the requirements of Section 409A or Section 422 of the Code and regulations and rulings thereunder or the first sentence of this Section 5.4 and without limiting the Companys rights under Section 10.7, the Administrator may extend the Option Term of any outstanding Option or the SAR Term of any outstanding Stock Appreciation Right, and may extend the time period during which vested Options or Stock Appreciation Rights may be exercised, in connection with any Termination of Service of the Holder or otherwise, and may amend, subject to Section 10.7 and 12.1, any other term or condition of such Option or Stock Appreciation Right relating to such Termination of Service of the Holder or otherwise.
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5.5 Option and SAR Vesting . The period during which the right to exercise, in whole or in part, an Option or Stock Appreciation Right vests in the Holder shall be set by the Administrator and set forth in the applicable Award Agreement. Unless otherwise determined by the Administrator in the Award Agreement, the applicable Program or by action of the Administrator following the grant of the Option or Stock Appreciation Right, (a) no portion of an Option or Stock Appreciation Right which is unexercisable at a Holders Termination of Service shall thereafter become exercisable and (b) the portion of an Option or Stock Appreciation Right that is unexercisable at a Holders Termination of Service shall automatically expire thirty (30) days following such Termination of Service.
5.6 Substitution of Stock Appreciation Rights; Early Exercise of Options . The Administrator may provide in the applicable Program or Award Agreement evidencing the grant of an Option that the Administrator, in its sole discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option; provided that such Stock Appreciation Right shall be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable, and shall also have the same exercise price, vesting schedule and remaining term as the substituted Option. The Administrator may provide in the terms of an Award Agreement that the Holder may exercise an Option in whole or in part prior to the full vesting of the Option in exchange for unvested shares of Restricted Stock with respect to any unvested portion of the Option so exercised. Shares of Restricted Stock acquired upon the exercise of any unvested portion of an Option shall be subject to such terms and conditions as the Administrator shall determine.
ARTICLE 6.
EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 Exercise and Payment . An exercisable Option or Stock Appreciation Right may be exercised in whole or in part. However, an Option or Stock Appreciation Right shall not be exercisable with respect to fractional Shares and the Administrator may require that, by the terms of the Option or Stock Appreciation Right, a partial exercise must be with respect to a minimum number of Shares. Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this Article 6 shall be in cash, Shares (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Administrator.
6.2 Manner of Exercise . Except as set forth in Section 6.3, all or a portion of an exercisable Option or Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, the stock plan administrator of the Company or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
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(a) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option or Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed or otherwise acknowledged electronically by the Holder or other person then entitled to exercise the Option or Stock Appreciation Right or such portion thereof;
(b) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with Applicable Law.
(c) In the event that the Option shall be exercised pursuant to Section 10.3 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option or Stock Appreciation Right, as determined in the sole discretion of the Administrator; and
(d) Full payment of the exercise price and applicable withholding taxes for the Shares with respect to which the Option or Stock Appreciation Right, or portion thereof, is exercised, in a manner permitted by the Administrator in accordance with Sections 10.1 and 10.2.
6.3 Expiration of Option Term or SAR Term: Automatic Exercise of In-The-Money Options and Stock Appreciation Rights . Unless otherwise provided by the Administrator in an Award Agreement or otherwise or as otherwise directed by an Option or Stock Appreciation Rights Holder in writing to the Company, each vested and exercisable Option and Stock Appreciation Right outstanding on the Automatic Exercise Date with an exercise price per Share that is less than the Fair Market Value per Share as of such date shall automatically and without further action by the Option or Stock Appreciation Rights Holder or the Company be exercised on the Automatic Exercise Date. In the sole discretion of the Administrator, payment of the exercise price of any such Option shall be made pursuant to Section 10.1(b) or 10.1(c) and the Company or any Subsidiary shall be entitled to deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 10.2. Unless otherwise determined by the Administrator, this Section 6.3 shall not apply to an Option or Stock Appreciation Right if the Holder of such Option or Stock Appreciation Right incurs a Termination of Service on or before the Automatic Exercise Date. For the avoidance of doubt, no Option or Stock Appreciation Right with an exercise price per Share that is equal to or greater than the Fair Market Value per Share on the Automatic Exercise Date shall be exercised pursuant to this Section 6.3.
6.4 Notification Regarding Disposition . The Holder shall give the Company prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the date of transfer of such Shares to such Holder. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Holder in such disposition or other transfer.
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ARTICLE 7.
AWARD OF RESTRICTED STOCK
7.1 Award of Restricted Stock . The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which terms and conditions shall not be inconsistent with the Plan or any applicable Program, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock; provided , however , that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock to the extent required by Applicable Law.
7.2 Rights as Stockholders . Subject to Section 7.4, upon issuance of Restricted Stock, the Holder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said Shares, subject to the restrictions in the Plan, any applicable Program and/or the applicable Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares to the extent such dividends and other distributions have a record date that is on or after the date on which the Holder to whom such Restricted Stock are granted becomes the record holder of such Restricted Stock; provided , however , that, in the sole discretion of the Administrator, any extraordinary distributions with respect to the Shares may be subject to the restrictions set forth in Section 8.3. In addition, with respect to a share of Restricted Stock with performance-based vesting, dividends which are paid prior to vesting shall only be paid out to the Holder to the extent that the performance-based vesting conditions are subsequently satisfied and the share of Restricted Stock vests.
7.3 Restrictions . All shares of Restricted Stock (including any shares received by Holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall be subject to such restrictions and vesting requirements as the Administrator shall provide in the applicable Program or Award Agreement. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the applicable Program or Award Agreement.
7.4 Repurchase or Forfeiture of Restricted Stock . Except as otherwise determined by the Administrator, if no price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Holders rights in unvested Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration on the date of such Termination of Service. If a price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Company shall have the right to repurchase from the Holder the unvested Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Holder for such Restricted Stock or such other amount as may be specified in the applicable Program or Award Agreement. Notwithstanding the foregoing, the Administrator, in its
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sole discretion, may provide that upon certain events, including, without limitation, a Change in Control, the Holders death, retirement or disability or any other specified Termination of Service or any other event, the Holders rights in unvested Restricted Stock then subject to restrictions shall not lapse, such Restricted Stock shall vest and cease to be forfeitable and, if applicable, the Company shall cease to have a right of repurchase.
7.5 Section 83(b) Election . If a Holder makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof of the timely filing thereof with the Internal Revenue Service.
ARTICLE 8.
AWARD OF RESTRICTED STOCK UNITS
8.1 Grant of Restricted Stock Units . The Administrator is authorized to grant Awards of Restricted Stock Units to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator.
8.2 Term . Except as otherwise provided herein, the term of a Restricted Stock Unit award shall be set by the Administrator in its sole discretion.
8.3 Purchase Price . The Administrator shall specify the purchase price, if any, to be paid by the Holder to the Company with respect to any Restricted Stock Unit award; provided , however , that the value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.
8.4 Vesting of Restricted Stock Units . At the time of grant, the Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without limitation, vesting based upon the Holders duration of service to the Company or any Subsidiary, Company performance, individual performance or other specific criteria, in each case on a specified date or dates or over any period or periods, as determined by the Administrator.
8.5 Maturity and Payment . At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Stock Units, which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Holder (if permitted by the applicable Award Agreement); provided that, except as otherwise determined by the Administrator, and subject to compliance with Section 409A, in no event shall the maturity date relating to each Restricted Stock Unit occur following the later of (a) the 15 th day of the third month following the end of the calendar year in which the applicable portion of the Restricted Stock Unit vests; and (b) the 15 th day of the third month following the end of the Companys fiscal year in which the applicable portion of the Restricted Stock Unit vests. On the maturity date, the Company shall, in accordance with the applicable Award Agreement and subject to Section 10.4(f), transfer to the Holder one unrestricted, fully transferable Share for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited, or in the sole discretion of the Administrator, an amount in cash equal to the Fair Market Value of such Shares on the maturity date or a combination of cash and Common Stock as determined by the Administrator.
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8.6 Payment upon Termination of Service . An Award of Restricted Stock Units shall only be payable while the Holder is an Employee, a Consultant or a member of the Board, as applicable; provided , however , that the Administrator, in its sole discretion, may provide (in an Award Agreement or otherwise) that a Restricted Stock Unit award may be paid subsequent to a Termination of Service in certain events, including a Change in Control, the Holders death, retirement or disability or any other specified Termination of Service.
ARTICLE 9.
AWARD OF OTHER STOCK OR CASH BASED AWARDS AND DIVIDEND EQUIVALENTS
9.1 Other Stock or Cash Based Awards . The Administrator is authorized to grant Other Stock or Cash Based Awards, including awards entitling a Holder to receive Shares or cash to be delivered immediately or in the future, to any Eligible Individual. Subject to the provisions of the Plan and any applicable Program, the Administrator shall determine the terms and conditions of each Other Stock or Cash Based Award, including the term of the Award, any exercise or purchase price, performance goals, transfer restrictions, vesting conditions and other terms and conditions applicable thereto, which shall be set forth in the applicable Award Agreement. Other Stock or Cash Based Awards may be paid in cash, Shares, or a combination of cash and Shares, as determined by the Administrator, and may be available as a form of payment in the settlement of other Awards granted under the Plan, as stand-alone payments, as a part of a bonus, deferred bonus, deferred compensation or other arrangement, and/or as payment in lieu of compensation to which an Eligible Individual is otherwise entitled.
9.2 Dividend Equivalents . Dividend Equivalents may be granted by the Administrator, either alone or in tandem with another Award, based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date the Dividend Equivalents are granted to a Holder and the date such Dividend Equivalents terminate or expire, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such restrictions and limitations as may be determined by the Administrator; provided that Dividend Equivalents with respect to an unvested Award shall only be paid out to the Holder to the extent that the vesting conditions are subsequently satisfied and the Award vests.
ARTICLE 10.
ADDITIONAL TERMS OF AWARDS
10.1 Payment . The Administrator shall determine the method or methods by which payments by any Holder with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise of the Award) or Shares held for such minimum period of time as may be established by the Administrator, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c)
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delivery of a written or electronic notice that the Holder has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided that payment of such proceeds is then made to the Company upon settlement of such sale, (d) other form of legal consideration acceptable to the Administrator in its sole discretion, or (e) any combination of the above permitted forms of payment. Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an executive officer of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
10.2 Tax Withholding . The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holders FICA, employment tax or other social security contribution obligation) required by law to be withheld with respect to any taxable event concerning a Holder arising as a result of the Plan or any Award. The Administrator may, in its sole discretion and in satisfaction of the foregoing requirement, or in satisfaction of such additional withholding obligations as a Holder may have elected, allow a Holder to satisfy such obligations by any payment means described in Section 10.1 hereof, including without limitation, by allowing such Holder to elect to have the Company or any Subsidiary withhold Shares otherwise issuable under an Award (or allow the surrender of Shares). The number of Shares that may be so withheld or surrendered shall be no greater than the number of Shares that have a fair market value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the maximum statutory withholding rates in such Holders applicable jurisdiction for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income. The Administrator shall determine the fair market value of the Shares, consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of Shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.
10.3 Transferability of Awards .
(a) Except as otherwise provided in Sections 10.3(b) and 10.3(c):
(i) No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than (A) by will or the laws of descent and distribution or (B) subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed;
(ii) No Award or interest or right therein shall be liable for or otherwise subject to the debts, contracts or engagements of the Holder or the Holders successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary
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or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed, and any attempted disposition of an Award prior to satisfaction of these conditions shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 10.3(a)(i); and
(iii) During the lifetime of the Holder, only the Holder may exercise any exercisable portion of an Award granted to such Holder under the Plan, unless it has been disposed of pursuant to a DRO. After the death of the Holder, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Program or Award Agreement, be exercised by the Holders personal representative or by any person empowered to do so under the deceased Holders will or under the then-applicable laws of descent and distribution.
(b) Notwithstanding Section 10.3(a), the Administrator, in its sole discretion, may determine to permit a Holder or a Permitted Transferee of such Holder to transfer an Award other than an Incentive Stock Option (unless such Incentive Stock Option is intended to become a Nonqualified Stock Option) to any one or more Permitted Transferees of such Holder, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than (A) to another Permitted Transferee of the applicable Holder or (B) by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award to any Person other than another Permitted Transferee of the applicable Holder); and (iii) the Holder (or transferring Permitted Transferee) and the receiving Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under Applicable Law and (C) evidence the transfer. In addition, and further notwithstanding Section 10.3(a), hereof, the Administrator, in its sole discretion, may determine to permit a Holder to transfer Incentive Stock Options to a trust that constitutes a Permitted Transferee if, under Section 671 of the Code and other Applicable Law, the Holder is considered the sole beneficial owner of the Incentive Stock Option while it is held in the trust.
(c) Notwithstanding Section 10.3(a), a Holder may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Holder and to receive any distribution with respect to any Award upon the Holders death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Program or Award Agreement applicable to the Holder and any additional restrictions deemed necessary or appropriate by the Administrator. If the Holder is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Holders spouse or domestic partner, as applicable, as the Holders beneficiary with respect to more than 50% of the Holders interest in the Award shall not be effective without the prior written or electronic consent of the Holders spouse or domestic partner. If no beneficiary has been designated or survives the Holder, payment shall be made to the person entitled thereto pursuant to the Holders will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time; provided that the change or revocation is delivered in writing to the Administrator prior to the Holders death.
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10.4 Conditions to Issuance of Shares .
(a) The Administrator shall determine the methods by which Shares shall be delivered or deemed to be delivered to Holders. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel, that the issuance of such Shares is in compliance with Applicable Law and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Administrator may require that a Holder make such reasonable covenants, agreements and representations as the Administrator, in its sole discretion, deems advisable in order to comply with Applicable Law.
(b) All share certificates delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with Applicable Law. The Administrator may place legends on any share certificate or book entry to reference restrictions applicable to the Shares (including, without limitation, restrictions applicable to Restricted Stock).
(c) The Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.
(d) No fractional Shares shall be issued and the Administrator, in its sole discretion, shall determine whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding down.
(e) The Company, in its sole discretion, may (i) retain physical possession of any stock certificate evidencing Shares until any restrictions thereon shall have lapsed and/or (ii) require that the stock certificates evidencing such Shares be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Holder deliver a stock power, endorsed in blank, relating to such Shares.
(f) Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by Applicable Law, the Company shall not deliver to any Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
10.5 Forfeiture and Claw-Back Provisions . All Awards (including any proceeds, gains or other economic benefit actually or constructively received by a Holder upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award and any payments of a portion of an incentive-based bonus pool allocated to a Holder) shall be subject to
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the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with the requirements of Applicable Law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, whether or not such claw-back policy was in place at the time of grant of an Award, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.
10.6 Prohibition on Repricing . Subject to Section 12.2, the Administrator shall not, without the approval of the stockholders of the Company, (a) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per Share, or (b) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per Share exceeds the Fair Market Value of the underlying Shares. Furthermore, for purposes of this Section 10.6, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price per Share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per Share that is less than the exercise price per Share of the original Options or Stock Appreciation Rights without the approval of the stockholders of the Company.
10.7 Amendment of Awards . Subject to Applicable Law, the Administrator may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or settlement, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Holders consent to such action shall be required unless (a) the Administrator determines that the action, taking into account any related action, would not adversely affect the Holder, or (b) the change is otherwise permitted under the Plan (including, without limitation, under Section 12.2 or 12.10).
10.8 Data Privacy . As a condition of receipt of any Award, each Holder explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section 10.8 by and among, as applicable, the Company and its Subsidiaries for the exclusive purpose of implementing, administering and managing the Holders participation in the Plan. The Company and its Subsidiaries may hold certain personal information about a Holder, including but not limited to, the Holders name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), any shares of stock held in the Company or any of its Subsidiaries, details of all Awards, in each case, for the purpose of implementing, managing and administering the Plan and Awards (the Data ). The Company and its Subsidiaries may transfer the Data amongst themselves as necessary for the purpose of implementation, administration and management of a Holders participation in the Plan, and the Company and its Subsidiaries may each further transfer the Data to any third parties assisting the Company and its Subsidiaries in the implementation, administration and management of the Plan. These recipients may be located in the Holders country, or elsewhere, and the Holders country may have different data privacy laws and protections than the recipients country. Through acceptance of an Award, each Holder authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form,
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for the purposes of implementing, administering and managing the Holders participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or any of its Subsidiaries or the Holder may elect to deposit any Shares. The Data related to a Holder will be held only as long as is necessary to implement, administer, and manage the Holders participation in the Plan. A Holder may, at any time, view the Data held by the Company with respect to such Holder, request additional information about the storage and processing of the Data with respect to such Holder, recommend any necessary corrections to the Data with respect to the Holder or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his or her local human resources representative. The Company may cancel the Holders ability to participate in the Plan and, in the Administrators discretion, the Holder may forfeit any outstanding Awards if the Holder refuses or withdraws his or her consents as described herein. For more information on the consequences of refusal to consent or withdrawal of consent, Holders may contact their local human resources representative.
ARTICLE 11.
ADMINISTRATION
11.1 Administrator . The Committee shall administer the Plan (except as otherwise permitted herein). To the extent necessary to comply with Rule 16b-3 of the Exchange Act, the Committee shall take all action with respect to Awards, and the individuals taking such action shall consist solely of two or more Non-Employee Directors, each of whom is intended to qualify as both a non-employee director as defined by Rule 16b-3 of the Exchange Act or any successor rule. Notwithstanding the foregoing, any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 11.1 or the Organizational Documents. Except as may otherwise be provided in the Organizational Documents or as otherwise required by Applicable Law, (a) appointment of Committee members shall be effective upon acceptance of appointment, (b) Committee members may resign at any time by delivering written or electronic notice to the Board and (c) vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (i) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors and, with respect to such Awards, the term Administrator as used in the Plan shall be deemed to refer to the Board and (ii) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 11.6.
11.2 Duties and Powers of Administrator . It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan, all Programs and Award Agreements, and to adopt such rules for the administration, interpretation and application of the Plan and any Program as are not inconsistent with the Plan, to interpret, amend or revoke any such rules and to amend the Plan or any Program or Award Agreement; provided that the rights or obligations of the Holder of the Award that is the subject of any such Program or Award Agreement are not adversely affected by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 10.5 or Section 12.10. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee in its capacity as the Administrator under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or any successor rule, or any regulations or rules issued thereunder, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee.
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11.3 Action by the Administrator . Unless otherwise established by the Board, set forth in any Organizational Documents or as required by Applicable Law, a majority of the Administrator shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Administrator in lieu of a meeting, shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Companys independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
11.4 Authority of Administrator . Subject to the Organizational Documents, any specific designation in the Plan and Applicable Law, the Administrator has the exclusive power, authority and sole discretion to:
(a) Designate Eligible Individuals to receive Awards;
(b) Determine the type or types of Awards to be granted to each Eligible Individual (including, without limitation, any Awards granted in tandem with another Award granted pursuant to the Plan);
(c) Determine the number of Awards to be granted and the number of Shares to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and claw-back and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
(e) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be identical for each Holder;
(g) Decide all other matters that must be determined in connection with an Award;
(h) Establish, adopt, or revise any Programs, rules and regulations as it may deem necessary or advisable to administer the Plan;
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(i) Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement;
(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan; and
(k) Accelerate wholly or partially the vesting or lapse of restrictions of any Award or portion thereof at any time after the grant of an Award, subject to whatever terms and conditions it selects and Section 12.2.
11.5 Decisions Binding . The Administrators interpretation of the Plan, any Awards granted pursuant to the Plan, any Program or any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding and conclusive on all Persons.
11.6 Delegation of Authority . The Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Article 11; provided , however , that in no event shall an officer of the Company be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, or (b) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided , further , that any delegation of administrative authority shall only be permitted to the extent it is permissible under any Organizational Documents and Applicable Law. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation or that are otherwise included in the applicable Organizational Documents, and the Board or Committee, as applicable, may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 11.6 shall serve in such capacity at the pleasure of the Board or the Committee, as applicable, and the Board or the Committee may abolish any committee at any time and re-vest in itself any previously delegated authority.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1 Amendment, Suspension or Termination of the Plan .
(a) Except as otherwise provided in Section 12.1(b), the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board; provided that, except as provided in Section 10.5 and Section 12.10, no amendment, suspension or termination of the Plan shall, without the consent of the Holder, adversely affect any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides.
(b) Notwithstanding Section 12.1(a), the Board may not, except as provided in Section 12.2, take any of the following actions without approval of the Companys stockholders given within twelve (12) months before or after such action: (i) increase the limit imposed in Section 3.1 on the maximum number of Shares which may be issued under the Plan, (ii) reduce the price per share of any outstanding Option or Stock Appreciation Right granted under the Plan or take any action prohibited under Section 10.6, or (iii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award in violation of Section 10.6.
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(c) No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and notwithstanding anything herein to the contrary, in no event may any Award be granted under the Plan after the tenth (10 th ) anniversary of the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Companys stockholders (such anniversary, the Expiration Date ). Any Awards that are outstanding on the Expiration Date shall remain in force according to the terms of the Plan, the applicable Program and the applicable Award Agreement.
12.2 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events .
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Companys stock or the share price of the Companys stock other than an Equity Restructuring, the Administrator may make equitable adjustments, if any, to reflect such change with respect to: (i) the aggregate number and kind of Shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of Shares which may be issued under the Plan); (ii) the number and kind of Shares (or other securities or property) subject to outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iv) the grant or exercise price per share for any outstanding Awards under the Plan; and (v) the number and kind of Shares (or other securities or property) for which automatic grants are subsequently to be made to new and continuing Non-Employee Directors pursuant to any Non-Employee Director Equity Compensation Policy adopted in accordance with Section 4.6.
(b) In the event of any transaction or event described in Section 12.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any Subsidiary of the Company, or the financial statements of the Company or any Subsidiary, or of changes in Applicable Law or Applicable Accounting Standards, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate and equitable in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in Applicable Law or Applicable Accounting Standards:
(i) To provide for the termination of any such Award in exchange for an amount of cash and/or other property with a value equal to the amount that would have been attained upon the exercise of such Award or realization of the Holders rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 12.2 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Holders rights, then such Award may be terminated by the Company without payment);
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(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, in all cases, as determined by the Administrator;
(iii) To make adjustments in the number and type of Shares of the Companys stock (or other securities or property) subject to outstanding Awards, and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;
(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Program or Award Agreement;
(v) To replace such Award with other rights or property selected by the Administrator; and/or
(vi) To provide that the Award cannot vest, be exercised or become payable after such event.
(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 12.2(a) and 12.2(b):
(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted (and the adjustments provided under this Section 12.2(c)(i) shall be nondiscretionary and shall be final and binding on the affected Holder and the Company); and/or
(ii) The Administrator shall make such equitable adjustments, if any, as the Administrator, in its sole discretion, may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of Shares that may be issued under the Plan (including, but not limited to, adjustments of the limitation in Section 3.1 on the maximum number and kind of Shares which may be issued under the Plan).
(d) Notwithstanding any other provision of the Plan, in the event of a Change in Control, unless the Administrator elects to (i) terminate an Award in exchange for cash, rights or property, or (ii) cause an Award to become fully exercisable and no longer subject to any forfeiture restrictions prior to the consummation of a Change in Control, pursuant to Section 12.2, (A) such Award (other than any portion subject to performance-based vesting) shall continue in effect or be assumed or an equivalent Award substituted by the successor corporation or a parent or subsidiary of the successor corporation and (B) the portion of such Award subject to performance-based vesting shall be subject to the terms and conditions of the applicable Award Agreement and, in the absence of applicable terms and conditions, the Administrators discretion. In the event an Award continues in effect or is assumed or an equivalent Award substituted, and a
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Holder incurs a Termination of Service without cause (as such term is defined in the sole discretion of the Administrator, or as set forth in the Award Agreement relating to such Award) upon or within twenty-four (24) months following the Change in Control, then such Holder shall be fully vested in such continued, assumed or substituted Award.
(e) In the event that the successor corporation in a Change in Control refuses to assume or substitute for an Award (other than any portion subject to performance-based vesting), the Administrator may cause (i) any or all of such Award (or portion thereof) to terminate in exchange for cash, rights or other property pursuant to Section 12.2(b)(i) or (ii) any or all of such Award (or portion thereof) to become fully exercisable immediately prior to the consummation of such transaction and all forfeiture restrictions on any or all of such Award to lapse. If any such Award is exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator shall notify the Holder that such Award shall be fully exercisable for a period of fifteen (15) days from the date of such notice, contingent upon the occurrence of the Change in Control, and such Award shall terminate upon the expiration of such period.
(f) For the purposes of this Section 12.2, an Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided , however , that if such consideration received in the Change in Control was not solely common stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each Share subject to an Award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per-share consideration received by holders of Common Stock in the Change in Control.
(g) The Administrator, in its sole discretion, may include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.
(h) Unless otherwise determined by the Administrator, no adjustment or action described in this Section 12.2 or in any other provision of the Plan shall be authorized to the extent it would (i) cause the Plan to violate Section 422(b)(1) of the Code, (ii) result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 of the Exchange Act, or (iii) cause an Award to fail to be exempt from or comply with Section 409A.
(i) The existence of the Plan, any Program, any Award Agreement and/or the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Companys capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
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(j) In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Administrator, in its sole discretion, may refuse to permit the exercise of any Award during a period of up to thirty (30) days prior to the consummation of any such transaction; provided that, the Administrator provides Participants with advance notice of such restriction to the extent the Award would otherwise expire during such period.
12.3 Approval of Plan by Stockholders . The Plan shall be submitted for the approval of the Companys stockholders within twelve (12) months after the date of the Boards initial adoption of the Plan.
12.4 No Stockholders Rights . Except as otherwise provided herein or in an applicable Program or Award Agreement, a Holder shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Holder becomes the record owner of such Shares.
12.5 Paperless Administration . In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.
12.6 Effect of Plan upon Other Compensation Plans . The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company or any Subsidiary: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary, or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.
12.7 Compliance with Laws . The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all Applicable Law (including but not limited to state, federal and foreign securities law and margin requirements), and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all Applicable Law. The Administrator, in its sole discretion, may take whatever actions it deems
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necessary or appropriate to effect compliance with Applicable Law, including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars. Notwithstanding anything to the contrary herein, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate Applicable Law. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to Applicable Law.
12.8 Titles and Headings, References to Sections of the Code or Exchange Act . The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.
12.9 Governing Law . The Plan and any Programs and Award Agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.
12.10 Section 409A . To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A, the Plan, the Program pursuant to which such Award is granted and the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A. In that regard, to the extent any Award under the Plan or any other compensatory plan or arrangement of the Company or any of its Subsidiaries is subject to Section 409A, and such Award or other amount is payable on account of a Participants Termination of Service (or any similarly defined term), then (a) such Award or amount shall only be paid to the extent such Termination of Service qualifies as a separation from service as defined in Section 409A, and (b) if such Award or amount is payable to a specified employee as defined in Section 409A then to the extent required in order to avoid a prohibited distribution under Section 409A, such Award or other compensatory payment shall not be payable prior to the earlier of (i) the expiration of the six-month period measured from the date of the Participants Termination of Service, or (ii) the date of the Participants death. To the extent applicable, the Plan, the Program and any Award Agreements shall be interpreted in accordance with Section 409A. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Administrator determines that any Award may be subject to Section 409A, the Administrator may (but is not obligated to), without a Holders consent, adopt such amendments to the Plan and the applicable Program and Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (A) exempt the Award from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (B) comply with the requirements of Section 409A and thereby avoid the application of any penalty taxes under Section 409A. The Company makes no representations or warranties as to the tax treatment of any Award under Section 409A or otherwise. The Company shall have no obligation under this Section 12.10 or otherwise to take any action (whether or not described herein) to avoid the imposition of taxes, penalties or interest under Section 409A with respect to any Award and shall have no liability to any Holder or any other person if any Award, compensation or other benefits under the Plan are determined to constitute non-compliant, nonqualified deferred compensation subject to the imposition of taxes, penalties and/or interest under Section 409A.
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12.11 Unfunded Status of Awards . The Plan is intended to be an unfunded plan for incentive compensation. With respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Holder any rights that are greater than those of a general creditor of the Company or any Subsidiary.
12.12 Indemnification . To the extent permitted under Applicable Law and the Organizational Documents, each member of the Administrator shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Organizational Documents, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
12.13 Limitation Period For Claims . Any person who believes he or she is being denied any benefit or right under the Plan shall make a claim in respect of such denial by filing a written notice with the Administrator stating in reasonable detail the nature of the claim and the requested relief therefor. Such notice must be delivered to the Administrator within forty-five (45) days of the later of the payment date of the award or the specific event giving rise to the claim, and untimely claims shall be barred and will not be considered. The Administrator will notify the Participant of its decision in writing as soon as administratively practicable. Timely claims not responded to by the Administrator in writing within ninety (90) days of the date the written claim is delivered to the Administrator shall be deemed denied. The Administrators decision on any claim is final, conclusive and binding on all persons. No lawsuit relating to the Plan may be filed before a written claim is filed with the Administrator and is denied or deemed denied, and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
12.14 Relationship to other Benefits . No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
12.15 Expenses . The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.
12.16 Section 162(m) Reliance Period . To the maximum extent permitted under Section 162(m) of the Code and Applicable Law, Awards under this Plan shall not be subject to the deduction limit set forth in U.S. Treasury Regulation 1.162-27(b) pursuant to Section 162(m) of the Code and the rules and regulations promulgated thereunder, to the extent such Awards may qualify for any post-public offering reliance period deduction limit exception set forth in U.S. Treasury Regulation 1.162-27(f) (or any successor thereto), and the Plan and Award Agreements shall be interpreted accordingly.
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* * * * *
I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of BJs Wholesale Club Holdings, Inc. on June 12, 2018.
* * * * *
I hereby certify that the foregoing Plan was approved by the stockholders of BJs Wholesale Club Holdings, Inc. on June 12, 2018.
Executed on this 12 day of June, 2018.
Corporate Secretary |
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Exhibit 10.17
BJS WHOLESALE CLUB HOLDINGS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I.
PURPOSE
The purposes of this BJs Wholesale Club Holdings, Inc. Employee Stock Purchase Plan (as it may be amended or restated from time to time, the Plan ) are to assist Eligible Employees of BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), and its Designated Subsidiaries in acquiring a stock ownership interest in the Company pursuant to a plan which is intended to qualify as an employee stock purchase plan within the meaning of Section 423(b) of the Code, and to help Eligible Employees provide for their future security and to encourage them to remain in the employment of the Company and its Designated Subsidiaries.
ARTICLE II.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates. Masculine, feminine and neuter pronouns are used interchangeably and each comprehends the others.
2.1 Administrator shall mean the entity that conducts the general administration of the Plan as provided in Article XI. The term Administrator shall refer to the Committee unless the Board has assumed the authority for administration of the Plan as provided in Article XI.
2.2 Affiliate shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by, or under common control with, such person where control shall have the meaning given such term under Rule 405 of the Securities Act.
2.3 Applicable Law shall mean the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where rights under this Plan are granted.
2.4 Board shall mean the Board of Directors of the Company.
2.5 Change in Control shall mean and include each of the following:
(a) the sale of all or substantially all of the assets of the Company to any other person (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries);
(b) a change in beneficial ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Common Stock or other securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, the Principal Stockholders or any of their Affiliates, or any employee benefit plan maintained by the Company or any of its Subsidiaries), directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Companys securities outstanding immediately after such acquisition;
(c) During any period of twelve consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (b)) whose election by the Board or nomination for election by the Companys stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the twelve-month period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;
(d) or the date which is 10 business days prior to the completion of a liquidation or dissolution of the Company.
The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto.
2.6 Code shall mean the Internal Revenue Code of 1986, as amended and the regulations issued thereunder.
2.7 Common Stock shall mean the common stock of the Company and such other securities of the Company that may be substituted therefor pursuant to Article VIII.
2.8 Company shall mean BJs Wholesale Club Holdings, Inc., a Delaware corporation.
2.9 Compensation of an Eligible Employee shall mean the gross base salary or base hourly wage, as applicable, received by such Eligible Employee as compensation for services to the Company or any Designated Subsidiary, and shall not include prior week adjustment and overtime payments, vacation pay, holiday pay, jury duty pay, funeral leave pay, military leave pay, commissions, incentive compensation, one-time bonuses (e.g., retention or sign on bonuses), education or tuition reimbursements, travel expenses, business and moving reimbursements, income received in connection with any stock options, stock appreciation rights, restricted stock, restricted stock units or other compensatory equity awards, fringe benefits, other special payments and all contributions made by the Company or any Designated Subsidiary for the Employees benefit under any employee benefit plan now or hereafter established.
2.10 Designated Subsidiary shall mean any Subsidiary designated by the Administrator in accordance with Section 11.3(b).
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2.11 Effectiv e Date shall mean the day prior to the Public Trading Date, provided that the Board has adopted the Plan prior to or on such date.
2.12 Eligible Employee shall mean an Employee who does not, immediately after any rights under this Plan are granted, own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of Common Stock and other stock of the Company, a Parent or a Subsidiary (as determined under Section 423(b)(3) of the Code). For purposes of the foregoing sentence, the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and stock that an Employee may purchase under outstanding options shall be treated as stock owned by the Employee; provided , however , that the Administrator may provide in an Offering Document that an Employee shall not be eligible to participate in an Offering Period if: (i) such Employee is a highly compensated employee within the meaning of Section 423(b)(4)(D) of the Code, or is such a highly compensated employee that is subject to the disclosure requirements of Section 16(a) of the Exchange Act, (ii) such Employee has not met a service requirement designated by the Administrator pursuant to Section 423(b)(4)(A) of the Code (which service requirement may not exceed two years), (iii) such Employees customary employment is for twenty hours or less per week, (iv) such Employees customary employment is for less than five months in any calendar year and/or (v) such Employee is a citizen or resident of a foreign jurisdiction and the grant of a right to purchase Common Stock under the Plan to such Employee would be prohibited under the laws of such foreign jurisdiction or the grant of a right to purchase Common Stock under the Plan to such Employee in compliance with the laws of such foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code, as determined by the Administrator in its sole discretion; provided , further , that any exclusion in clauses (i), (ii), (iii), (iv) or (v) shall be applied in an identical manner under each Offering Period to all Employees, in accordance with Treasury Regulation Section 1.423-2(e).
2.13 Employee shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Designated Subsidiary. Employee shall not include any director of the Company or a Designated Subsidiary who does not render services to the Company or a Designated Subsidiary as an employee within the meaning of Section 3401(c) of the Code. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or Designated Subsidiary and meeting the requirements of Treasury Regulation Section 1.421-1(h)(2). Where the period of leave exceeds three months and the individuals right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the first day immediately following such three-month period.
2.14 Enrollment Date shall mean the first Trading Day of each Offering Period.
2.15 Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.16 Fair Market Value means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during
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which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.
2.17 Offering Document shall have the meaning given to such term in Section 4.1.
2.18 Offering Period shall have the meaning given to such term in Section 4.1.
2.19 Parent shall mean any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if, at the time of the determination, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
2.20 Participant shall mean any Eligible Employee who has executed a subscription agreement and been granted rights to purchase Common Stock pursuant to the Plan.
2.21 Plan shall mean this BJs Wholesale Club Holdings, Inc. Employee Stock Purchase Plan, as it may be amended from time to time.
2.22 Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., Beacon Coinvest LLC, and CVC Beacon LP (f/k/a CVC Beacon LLC).
2.23 Public Trading Date shall mean the first date upon which the Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system, or, if earlier, the date on which the Company becomes a publically held corporation for purposes of Treasury Regulation Section 1.162-27(c)(1).
2.24 Purchase Date shall mean the last Trading Day of each Purchase Period.
2.25 Purchase Period shall refer to one or more periods within an Offering Period, as designated in the applicable Offering Document; provided , however , that, in the event no purchase period is designated by the Administrator in the applicable Offering Document, the purchase period for each Offering Period covered by such Offering Document shall be the same as the applicable Offering Period.
2.26 Purchase Price shall mean the purchase price designated by the Administrator in the applicable Offering Document (which purchase price shall not be less than 85% of the Fair Market Value of a Share on the Enrollment Date or on the Purchase Date, whichever is lower); provided , however , that, in the event no purchase price is designated by the Administrator in the applicable Offering Document, the purchase price for the Offering Periods covered by such Offering Document shall be 85% of the Fair Market Value of a Share on the Enrollment Date or on the Purchase Date, whichever is lower; provided , further , that the Purchase Price may be adjusted by the Administrator pursuant to Article VIII and shall not be less than the par value of a Share.
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2.27 Securities Act shall mean the Securities Act of 1933, as amended.
2.28 Share shall mean a share of Common Stock.
2.29 Subsidiary shall mean any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of the determination, each of the corporations other than the last corporation in an unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; provided , however, that a limited liability company or partnership may be treated as a Subsidiary to the extent either (a) such entity is treated as a disregarded entity under Treasury Regulation Section 301.7701-3(a) by reason of the Company or any other Subsidiary that is a corporation being the sole owner of such entity, or (b) such entity elects to be classified as a corporation under Treasury Regulation Section 301.7701-3(a) and such entity would otherwise qualify as a Subsidiary.
2.30 Trading Day shall mean a day on which national stock exchanges in the United States are open for trading.
ARTICLE III.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares . Subject to Article VIII, the aggregate number of Shares that may be issued pursuant to rights granted under the Plan shall be 139,002 Shares. In addition to the foregoing, subject to Article VIII, on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of Shares available for issuance under the Plan shall be increased by that number of Shares equal to the least of (a) 69,501 Shares, (b) 0.5% of the Shares outstanding (on an as converted basis) on the final day of the immediately preceding fiscal year and (c) such smaller number of Shares as determined by the Board. If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right shall again become available for issuance under the Plan. Notwithstanding anything in this Section 3.1 to the contrary, the number of Shares that may be issued or transferred pursuant to the rights granted under the Plan shall not exceed an aggregate of 834,012 Shares, subject to Article 8.
3.2 Stock Distributed . Any Common Stock distributed pursuant to the Plan may consist, in whole or in part, of authorized and unissued Common Stock, treasury stock or Common Stock purchased on the open market.
ARTICLE IV.
OFFERING PERIODS; OFFERING DOCUMENTS; PURCHASE DATES
4.1 Offering Periods . The Administrator may from time to time grant or provide for the grant of rights to purchase Common Stock under the Plan to Eligible Employees during one or more periods (each, an Offering Period ) selected by the Administrator. The terms and conditions applicable to each Offering Period shall be set forth in an Offering Document adopted by the
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Administrator, which Offering Document shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate and shall be incorporated by reference into and made part of the Plan and shall be attached hereto as part of the Plan. The provisions of separate Offering Periods under the Plan need not be identical.
4.2 Offering Documents . Each Offering Document with respect to an Offering Period shall specify (through incorporation of the provisions of this Plan by reference or otherwise):
(a) the length of the Offering Period, which period shall not exceed twenty-seven months;
(b) the maximum number of Shares that may be purchased by any Eligible Employee during such Offering Period, which, in the absence of a contrary designation by the Administrator, shall be 2,000 Shares; and
(c) such other provisions as the Administrator determines are appropriate, subject to the Plan.
ARTICLE V.
ELIGIBILITY AND PARTICIPATION
5.1 Eligibility . Any Eligible Employee who shall be employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of this Article V and the limitations imposed by Section 423(b) of the Code.
5.2 Enrollment in Plan .
(a) Except as otherwise set forth in an Offering Document or determined by the Administrator, an Eligible Employee may become a Participant in the Plan for an Offering Period by delivering a subscription agreement to the Company by such time prior to the Enrollment Date for such Offering Period (or such other date specified in the Offering Document) designated by the Administrator and in such form as the Company provides.
(b) Each subscription agreement shall designate a whole percentage of such Eligible Employees Compensation to be withheld by the Company or the Designated Subsidiary employing such Eligible Employee on each payday during the Offering Period as payroll deductions under the Plan. The designated percentage may not be less than 1% and may not be more than the maximum percentage specified by the Administrator in the applicable Offering Document (which percentage shall be 15% in the absence of any such designation) as payroll deductions. The payroll deductions made for each Participant shall be credited to an account for such Participant under the Plan and shall be deposited with the general funds of the Company.
(c) A Participant may increase or decrease the percentage of Compensation designated in his or her subscription agreement, subject to the limits of this Section 5.2, or may suspend his or her payroll deductions, at any time during an Offering Period; provided , however , that the Administrator may limit the number of changes a Participant may make to his or her payroll deduction elections during each Offering Period in the applicable Offering Document (and in the
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absence of any specific designation by the Administrator, a Participant shall be allowed one change to his or her payroll deduction elections during each Offering Period). Any such change or suspension of payroll deductions shall be effective with the first full payroll period following five business days after the Companys receipt of the new subscription agreement (or such shorter or longer period as may be specified by the Administrator in the applicable Offering Document). In the event a Participant suspends his or her payroll deductions, such Participants cumulative payroll deductions prior to the suspension shall remain in his or her account and shall be applied to the purchase of Shares on the next occurring Purchase Date and shall not be paid to such Participant unless he or she withdraws from participation in the Plan pursuant to Article VII.
(d) Except as otherwise set forth in an Offering Document or determined by the Administrator, a Participant may participate in the Plan only by means of payroll deduction and may not make contributions by lump sum payment for any Offering Period.
5.3 Payroll Deductions . Except as otherwise provided in the applicable Offering Document, payroll deductions for a Participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which the Participants authorization is applicable, unless sooner terminated by the Participant as provided in Article VII or suspended by the Participant or the Administrator as provided in Section 5.2 and Section 5.6, respectively.
5.4 Effect of Enrollment . A Participants completion of a subscription agreement will enroll such Participant in the Plan for each subsequent Offering Period on the terms contained therein until the Participant either submits a new subscription agreement, withdraws from participation under the Plan as provided in Article VII or otherwise becomes ineligible to participate in the Plan.
5.5 Limitation on Purchase of Common Stock . An Eligible Employee may be granted rights under the Plan only if such rights, together with any other rights granted to such Eligible Employee under employee stock purchase plans of the Company, any Parent or any Subsidiary, as specified by Section 423(b)(8) of the Code, do not permit such employees rights to purchase stock of the Company or any Parent or Subsidiary to accrue at a rate that exceeds $25,000 of the fair market value of such stock (determined as of the first day of the Offering Period during which such rights are granted) for each calendar year in which such rights are outstanding at any time. This limitation shall be applied in accordance with Section 423(b)(8) of the Code.
5.6 Decrease or Suspension of Payroll Deductions . Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 5.5 or the other limitations set forth in this Plan, a Participants payroll deductions may be suspended by the Administrator at any time during an Offering Period. The balance of the amount credited to the account of each Participant that has not been applied to the purchase of Shares by reason of Section 423(b)(8) of the Code, Section 5.5 or the other limitations set forth in this Plan shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date.
5.7 Foreign Employees . In order to facilitate participation in the Plan, the Administrator may provide for such special terms applicable to Participants who are citizens or residents of a foreign jurisdiction, or who are employed by a Designated Subsidiary outside of the United States,
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as the Administrator may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Such special terms may not be more favorable than the terms of rights granted under the Plan to Eligible Employees who are residents of the United States. Moreover, the Administrator may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of this Plan as in effect for any other purpose. No such special terms, supplements, amendments or restatements shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company.
ARTICLE VI.
GRANT AND EXERCISE OF RIGHTS
6.1 Grant of Rights . On the Enrollment Date of each Offering Period, each Eligible Employee participating in such Offering Period shall be granted a right to purchase the maximum number of Shares specified under Section 4.2, subject to the limits in Section 5.5, and shall have the right to buy, on each Purchase Date during such Offering Period (at the applicable Purchase Price), such number of whole Shares as is determined by dividing (a) such Participants payroll deductions accumulated prior to such Purchase Date and retained in the Participants account as of the Purchase Date, by (b) the applicable Purchase Price (rounded down to the nearest Share). The right shall expire on the earlier of: (x) the last Purchase Date of the Offering Period, (y) last day of the Offering Period and (z) the date on which the Participant withdraws in accordance with Section 7.1 or Section 7.3.
6.2 Exercise of Rights . On each Purchase Date, each Participants accumulated payroll deductions and any other additional payments specifically provided for in the applicable Offering Document will be applied to the purchase of whole Shares, up to the maximum number of Shares permitted pursuant to the terms of the Plan and the applicable Offering Document, at the Purchase Price. No fractional Shares shall be issued upon the exercise of rights granted under the Plan, unless the Offering Document specifically provides otherwise. Any cash in lieu of fractional Shares remaining after the purchase of whole Shares upon exercise of a purchase right will be credited to a Participants account and carried forward and applied toward the purchase of whole Shares for the next following Offering Period. Shares issued pursuant to the Plan may be evidenced in such manner as the Administrator may determine and may be issued in certificated form or issued pursuant to book-entry procedures.
6.3 Pro Rata Allocation of Shares . If the Administrator determines that, on a given Purchase Date, the number of Shares with respect to which rights are to be exercised may exceed (a) the number of Shares that were available for issuance under the Plan on the Enrollment Date of the applicable Offering Period, or (b) the number of Shares available for issuance under the Plan on such Purchase Date, the Administrator may in its sole discretion provide that the Company shall make a pro rata allocation of the Shares available for purchase on such Enrollment Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants for whom rights to purchase Common Stock are to be exercised pursuant to this Article VI on such Purchase Date, and shall either (i) continue all Offering Periods then in effect, or (ii) terminate any or all Offering Periods then in effect pursuant to Article IX. The Company may make pro rata allocation of the Shares
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available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Companys stockholders subsequent to such Enrollment Date. The balance of the amount credited to the account of each Participant that has not been applied to the purchase of Shares shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date.
6.4 Withholding . At the time a Participants rights under the Plan are exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of, the Participant must make adequate provision for the Companys federal, state, or other tax withholding obligations, if any, that arise upon the exercise of the right or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the Participants compensation the amount necessary for the Company to meet applicable withholding obligations.
6.5 Conditions to Issuance of Common Stock . The Company shall not be required to issue or deliver any certificate or certificates for, or make any book entries evidencing, Shares purchased upon the exercise of rights under the Plan prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges, if any, on which the Common Stock is then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, that the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The payment to the Company of all amounts that it is required to withhold under federal, state or local law upon exercise of the rights, if any; and
(e) The lapse of such reasonable period of time following the exercise of the rights as the Administrator may from time to time establish for reasons of administrative convenience.
ARTICLE VII.
WITHDRAWAL; CESSATION OF ELIGIBILITY
7.1 Withdrawal . A Participant may withdraw all but not less than all of the payroll deductions credited to his or her account and not yet used to exercise his or her rights under the Plan at any time by giving written notice to the Company in a form acceptable to the Company no later than fifteen days prior to the end of the Offering Period. All of the Participants payroll deductions credited to his or her account during an Offering Period shall be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal and such Participants rights for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of Shares shall be made for such Offering Period. If a Participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the next Offering Period unless the Participant timely delivers to the Company a new subscription agreement.
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7.2 Future Participation . A Participants withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or a Designated Subsidiary or in subsequent Offering Periods that commence after the termination of the Offering Period from which the Participant withdraws.
7.3 Cessation of Eligibility . Upon a Participants ceasing to be an Eligible Employee for any reason, he or she shall be deemed to have elected to withdraw from the Plan pursuant to this Article VII and the payroll deductions credited to such Participants account during the Offering Period shall be paid to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 12.4, as soon as reasonably practicable, and such Participants rights for the Offering Period shall be automatically terminated.
ARTICLE VIII.
ADJUSTMENTS UPON CHANGES IN STOCK
8.1 Changes in Capitalization . Subject to Section 8.3, in the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), Change in Control, reorganization, merger, amalgamation, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, as determined by the Administrator, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any outstanding purchase rights under the Plan, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (a) the aggregate number and type of Shares (or other securities or property) that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 and the limitations established in each Offering Document pursuant to Section 4.2 on the maximum number of Shares that may be purchased); (b) the class(es) and number of Shares and price per Share subject to outstanding rights; and (c) the Purchase Price with respect to any outstanding rights.
8.2 Other Adjustments . Subject to Section 8.3, in the event of any transaction or event described in Section 8.1 or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in Applicable Law or accounting principles, the Administrator, in its discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any right under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
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(a) To provide for either (i) termination of any outstanding right in exchange for an amount of cash, if any, equal to the amount that would have been obtained upon the exercise of such right had such right been currently exercisable or (ii) the replacement of such outstanding right with other rights or property selected by the Administrator in its sole discretion;
(b) To provide that the outstanding rights under the Plan shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar rights covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(c) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding rights under the Plan and/or in the terms and conditions of outstanding rights and rights that may be granted in the future;
(d) To provide that Participants accumulated payroll deductions may be used to purchase Common Stock prior to the next occurring Purchase Date on such date as the Administrator determines in its sole discretion and the Participants rights under the ongoing Offering Period(s) shall be terminated; and
(e) To provide that all outstanding rights shall terminate without being exercised.
8.3 No Adjustment Under Certain Circumstances . No adjustment or action described in this Article VIII or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to fail to satisfy the requirements of Section 423 of the Code.
8.4 No Other Rights . Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to outstanding rights under the Plan or the Purchase Price with respect to any outstanding rights.
ARTICLE IX.
AMENDMENT, MODIFICATION AND TERMINATION
9.1 Amendment, Modification and Termination . The Administrator may amend, suspend or terminate the Plan at any time and from time to time; provided , however , that approval of the Companys stockholders shall be required to amend the Plan to: (a) increase the aggregate number, or change the type, of shares that may be sold pursuant to rights under the Plan under Section 3.1 (other than an adjustment as provided by Article VIII); (b) change the corporations or classes of corporations whose employees may be granted rights under the Plan; or (c) change the Plan in any manner that would cause the Plan to no longer be an employee stock purchase plan within the meaning of Section 423(b) of the Code.
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9.2 Certain Changes to Plan . Without stockholder consent and without regard to whether any Participant rights may be considered to have been adversely affected, to the extent permitted by Section 423 of the Code, the Administrator shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld from Compensation during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Companys processing of payroll withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participants Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion to be advisable that are consistent with the Plan.
9.3 Actions In the Event of Unfavorable Financial Accounting Consequences . In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:
(a) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;
(b) shortening any Offering Period so that the Offering Period ends on a new Purchase Date, including an Offering Period underway at the time of the Administrator action; and
(c) allocating Shares.
Such modifications or amendments shall not require stockholder approval or the consent of any Participant.
9.4 Payments Upon Termination of Plan . Upon termination of the Plan, the balance in each Participants Plan account shall be refunded as soon as practicable after such termination, without any interest thereon.
ARTICLE X.
TERM OF PLAN
The Plan shall be effective on the Effective Date. The effectiveness of the Plan shall be subject to approval of the Plan by the stockholders of the Company within twelve months following the date the Plan is first approved by the Board. No right may be granted under the Plan prior to such stockholder approval. No rights may be granted under the Plan during any period of suspension of the Plan or after termination of the Plan.
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ARTICLE XI.
ADMINISTRATION
11.1 Administrator . Unless otherwise determined by the Board, the Administrator of the Plan shall be the Compensation Committee of the Board (or another committee or a subcommittee of the Board to which the Board delegates administration of the Plan) (such committee, the Committee ). The Board may at any time vest in the Board any authority or duties for administration of the Plan.
11.2 Action by the Administrator . Unless otherwise established by the Board or in any charter of the Administrator, a majority of the Administrator shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present and, subject to Applicable Law and the Bylaws of the Company, acts approved in writing by a majority of the Administrator in lieu of a meeting, shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other Employee, the Companys independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
11.3 Authority of Administrator . The Administrator shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
(a) To determine when and how rights to purchase Common Stock shall be granted and the provisions of each offering of such rights (which need not be identical).
(b) To designate from time to time which Subsidiaries of the Company shall be Designated Subsidiaries, which designation may be made without the approval of the stockholders of the Company.
(c) To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(d) To amend, suspend or terminate the Plan as provided in Article IX.
(e) Generally, to exercise such powers and to perform such acts as the Administrator deems necessary or expedient to promote the best interests of the Company and its Subsidiaries and to carry out the intent that the Plan be treated as an employee stock purchase plan within the meaning of Section 423 of the Code.
11.4 Decisions Binding . The Administrators interpretation of the Plan, any rights granted pursuant to the Plan, any subscription agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
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ARTICLE XII.
MISCELLANEOUS
12.1 Restriction upon Assignment . A right granted under the Plan shall not be transferable other than by will or the applicable laws of descent and distribution, and is exercisable during the Participants lifetime only by the Participant. Except as provided in Section 12.4 hereof, a right under the Plan may not be exercised to any extent except by the Participant. The Company shall not recognize and shall be under no duty to recognize any assignment or alienation of the Participants interest in the Plan, the Participants rights under the Plan or any rights thereunder.
12.2 Rights as a Stockholder . With respect to Shares subject to a right granted under the Plan, a Participant shall not be deemed to be a stockholder of the Company, and the Participant shall not have any of the rights or privileges of a stockholder, until such Shares have been issued to the Participant or his or her nominee following exercise of the Participants rights under the Plan. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distribution or other rights for which the record date occurs prior to the date of such issuance, except as otherwise expressly provided herein or as determined by the Administrator.
12.3 Interest . No interest shall accrue on the payroll deductions or contributions of a Participant under the Plan.
12.4 Designation of Beneficiary .
(a) A Participant may, in the manner determined by the Administrator, file a written designation of a beneficiary who is to receive any Shares and/or cash, if any, from the Participants account under the Plan in the event of such Participants death subsequent to a Purchase Date on which the Participants rights are exercised but prior to delivery to such Participant of such Shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participants account under the Plan in the event of such Participants death prior to exercise of the Participants rights under the Plan. If the Participant is married and resides in a community property state, a designation of a person other than the Participants spouse as his or her beneficiary shall not be effective without the prior written consent of the Participants spouse.
(b) Such designation of beneficiary may be changed by the Participant at any time by written notice to the Company. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participants death, the Company shall deliver such Shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
12.5 Notices . All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
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12.6 Equal Rights and Privileges . Subject to Section 5.7, all Eligible Employees will have equal rights and privileges under this Plan so that this Plan qualifies as an employee stock purchase plan within the meaning of Section 423 of the Code. Subject to Section 5.7, any provision of this Plan that is inconsistent with Section 423 of the Code will, without further act or amendment by the Company, the Board or the Administrator, be reformed to comply with the equal rights and privileges requirement of Section 423 of the Code.
12.7 Use of Funds . All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.
12.8 Reports . Statements of account shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of Shares purchased and the remaining cash balance, if any.
12.9 No Employment Rights . Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company or any Parent or Subsidiary or affect the right of the Company or any Parent or Subsidiary to terminate the employment of any person (including any Eligible Employee or Participant) at any time, with or without cause.
12.10 Notice of Disposition of Shares . Each Participant shall give prompt notice to the Company of any disposition or other transfer of any Shares purchased upon exercise of a right under the Plan if such disposition or transfer is made within two years from the Enrollment Date of the Offering Period in which the Shares were purchased. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.
12.11 Governing Law . The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.
12.12 Electronic Forms . To the extent permitted by Applicable Law and in the discretion of the Administrator, an Eligible Employee may submit any form or notice as set forth herein by means of an electronic form approved by the Administrator. Before the commencement of an Offering Period, the Administrator shall prescribe the time limits within which any such electronic form shall be submitted to the Administrator with respect to such Offering Period in order to be a valid election.
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Exhibit 10.18
OFFERING DOCUMENT
BJ S WHOLESALE CLUB HOLDINGS, INC.
EMPLOYEE STOCK PURCHASE PLAN
This document (this Offering Document ) is hereby adopted by the Board of Directors of BJs Wholesale Club Holdings, Inc.., a Delaware corporation (the Company ), in its capacity as Administrator of the BJs Wholesale Club Holdings, Inc. Employee Stock Purchase Plan (the Plan ). This Offering Document is adopted pursuant to Article IV of the Plan and is hereby incorporated by reference into and made a part of the Plan. Defined terms used herein without definition shall have the meanings specified in the Plan, except as otherwise provided herein.
This Offering Document shall apply with respect to Offering Periods under the Plan until this Offering Document is terminated, amended or modified by the Administrator or a new Offering Document is adopted by the Administrator.
Eligibility Requirements: | Eligible Employees shall be eligible to participate, provided they meet the eligibility requirements set forth in the Plan. Notwithstanding the forgoing, an Eligible Employee (i) who is subject to the disclosure requirements of Section 16(a) of the Exchange Act, (ii) who has not completed six months of service to the Company or (iii) whose customary employment is for twenty hours or less per week, is not eligible to participate. | |
Length of Offering Periods: | Six (6) Months | |
Offering Periods to Commence on Each: | On each July 1 and January 1 following the Effective Date. | |
The first Offering Period under the Plan will commence on January 1, 2019. | ||
Purchase Dates: | The Purchase Date with respect to each Offering Period shall occur on the last Trading Day in such Offering Period, which dates are expected to be December 31 and June 30 (unless such dates are not trading days). | |
Maximum Number of Shares of Common Stock That May Be Purchased By Any Eligible Employee During an Offering Period: | 2,000 shares | |
The maximum aggregate number of shares of Common Stock that may be purchased by all Eligible Employees during an Offering Period is the total number of shares of Common Stock that are reserved for issuance under the Plan as of the Enrollment Date for such Offering Period. |
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Purchase Price: | On each Purchase Date, the purchase price for a share of Common Stock will be 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Purchase Date, whichever is lower; provided, however , that the Purchase Price may be adjusted by the Administrator pursuant to Article VIII of the Plan; provided, further , that the Purchase Price shall not be less than the par value of a share of Common Stock. | |
Contributions: | A Participant may elect to have up to 15% of his or her Compensation deducted on each payday on an after-tax basis for use in purchasing Common Stock pursuant to the Plan. | |
Enrollment: | Eligible Employees must enroll in an Offering Period by delivering a subscription agreement to the Company prior to June 15, for an Offering Period beginning on July 1 and prior to December 15, for an Offering Period beginning on January 1. | |
Changes in Contribution Rates: | Participants may increase, decrease or suspend their rate of contributions once during an Offering Period. Any such change or suspension of contributions shall be effective with the first full payroll period following five business days after the Companys receipt of a new subscription agreement. | |
Withdrawals: | An Eligible Employee must withdraw from an Offering Period at least fifteen days prior to the end of the Offering Period. | |
If an Eligible Employee withdraws from the Plan, the Eligible Employee may elect to participate again in the Plan for any subsequent Offering Period so long as the Eligible Employee is still eligible to participate in the Plan. |
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Exhibit 10.19
BJs WHOLESALE CLUB HOLDINGS, INC.
2018 INCENTIVE AWARD PLAN
STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) an option to purchase the number of Shares set forth below (the Option ). The Option is subject to the terms and conditions set forth in this Stock Option Grant Notice (the Grant Notice ), the Plan and the Stock Option Agreement attached hereto as Exhibit A (the Agreement ), each of which is incorporated into this Grant Notice by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
Participant: | [_____] | |
Grant Date: | [_____] | |
Exercise Price Per Share: | $[_____] | |
Total Exercise Price: | $[_____] | |
Total Number of Shares Subject to Option: | [_____] | |
Expiration Date: | [_____] | |
Type of Option: | ☐ Incentive Stock Option ☐ Non-Qualified Stock Option | |
Vesting Schedule: | [To be specified in individual award agreements] |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Plan, the Agreement and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Plan, the Agreement and the Grant Notice. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Agreement and the Grant Notice.
BJS WHOLESALE CLUB HOLDINGS, INC. | PARTICIPANT | |||||
By: |
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By: |
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Print Name: | [_____] | Print Name: | [_____] | |||
Title: | [_____] |
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice. For purposes of this Agreement,
(a) Cause shall mean a Company Group Member having Cause to terminate Participants employment or services, as such term is defined in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, a Company Group Member shall have Cause to terminate Participants employment or services upon: (i) Participants failure to substantially perform the Participants duties as reasonably determined by the Board (other than as a result of the Participants Disability); (ii) materially dishonest statements or acts by the Participant with respect to the Company Group or any of its Affiliates; (iii) Participants commission of an act constituting a felony under the laws of the United States or any state thereof; (iv) Participants gross negligence, willful misconduct or insubordination with respect to the Company Group or any of its Affiliates; or (v) any other act or omission by the Participant which is materially injurious to the financial condition or business reputation of the Company Group or any of its Affiliates. Whether or not an event giving rise to Cause occurs will be determined by the Board in its sole discretion.
(b) Cessation Date shall mean the date of Participants Termination of Service (regardless of the reason for such termination).
(c) Company Group shall mean the Company and its Subsidiaries.
(d) Company Group Member shall mean each member of the Company Group.
(e) Disability shall have the meaning ascribed to such term in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
1.2 Incorporation of Terms of Plan . The Option is subject to the terms and conditions set forth in this Agreement and the Plan, each of which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
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ARTICLE II.
GRANT OF OPTION
2.1 Grant of Option . In consideration of Participants past and/or continued employment with or service to any Company Group Member, and for other good and valuable consideration that the Administrator has determined exceeds the aggregate par value of the Shares subject to the Award, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has granted to Participant the Option to purchase any part or all of an aggregate number of Shares set forth in the Grant Notice upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustment as provided in Article 12 of the Plan.
2.2 Exercise Price . The exercise price per Share of the Shares subject to the Option (the Exercise Price ) shall be as set forth in the Grant Notice.
2.3 Consideration to the Company . In consideration of the grant of the Option by the Company, Participant agrees to render faithful and efficient services to any Company Group Member. Nothing in the Plan, the Grant Notice or this Agreement shall confer upon Participant any right to continue in the employ or service of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between any Company Group Member and Participant.
ARTICLE III.
PERIOD OF EXERCISABILITY
3.1 Commencement of Exercisability .
(a) Subject to Participants continued employment with or service to a Company Group Member on each applicable vesting date and subject to Sections 3.2 , 3.3 , 6.12 and 6.17 hereof, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice.
(b) Subject to Section 12.2(d) of the Plan and unless otherwise determined by the Administrator or as set forth in a written agreement between Participant and the Company, any portion of the Option that has not become vested and exercisable on or prior to the Cessation Date (including, without limitation, pursuant to any employment or similar agreement by and between Participant and the Company) shall be forfeited on the Cessation Date and shall not thereafter become vested or exercisable.
3.2 Duration of Exercisability . The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment that becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3 hereof. Once the Option becomes unexercisable, it shall be forfeited immediately.
3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The expiration date set forth in the Grant Notice;
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(b) Except as the Administrator may otherwise approve, the expiration of three (3) months from the Cessation Date by reason of Participants Termination of Service due to death, Disability or by the Company without Cause; and
(c) Except as the Administrator may otherwise approve, immediately upon the Cessation Date by reason of Participants Termination of Service by the Company Group for Cause.
(d) Except as the Administrator may otherwise approve, the expiration of ninety (90) days from the date of Participants Termination of Service for any other reason.
ARTICLE IV.
EXERCISE OF OPTION
4.1 Person Eligible to Exercise . During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by Participants personal representative or by any person empowered to do so under the deceased Participants will or under the then Applicable Laws of descent and distribution.
4.2 Partial Exercise . Subject to Section 6.5 , any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof.
4.3 Manner of Exercise . The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person designated by the Company), during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3 hereof.
(a) An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator;
(b) The receipt by the Company of full payment for the Shares with respect to which the Option or portion thereof is exercised, in such form of consideration permitted under Section 4.4 hereof that is acceptable to the Administrator;
(c) The payment of any applicable withholding tax in accordance with Section 6.1 ;
(d) Any other written representations or documents as may be required in the Administrators sole discretion to effect compliance with Applicable Law; and
(e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
Notwithstanding any of the foregoing, the Administrator shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.
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4.4 Method of Payment . Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of Participant:
(a) Cash or check;
(b) With the consent of the Administrator, surrender of vested Shares (including, without limitation, Shares otherwise issuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate Exercise Price of the Option or exercised portion thereof;
(c) Through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Exercise Price; provided that payment of such proceeds is then made to the Company at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(d) Any other form of legal consideration acceptable to the Administrator.
ARTICLE V.
RESTRICTIVE COVENANTS
5.1 Obligation to Maintain Confidentiality . Participant acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company Group and any of its Affiliates obtained by Participant while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) ( Confidential Information ) are the property of the Company Group and/or its Affiliates, including information concerning acquisition opportunities in or reasonably related to the Company Groups or any of its Affiliates business or industry of which Participant becomes aware during the period of Participants employment or service. Therefore, Participant agrees that he or she will not disclose to any unauthorized person, group or entity or use for Participants own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment or service with the Company Group or any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. Participant shall use reasonable best efforts to deliver to the Company on his or her Cessation Date, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company Group and any of its Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which Participant may then possess or have under his or her control, but excluding financial information of the Company relating to Participants ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
5.2 Ownership of Property . Participant acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Company Group or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Participant (either solely or jointly with others) while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement)
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(including any of the foregoing that constitutes any proprietary information or records) ( Work Product ) belong to the Company Group and its Affiliates and Participant hereby assigns, and agrees to assign, all of the above Work Product to the Company Group and its Affiliates. Any copyrightable work prepared in whole or in part by Participant in the course of Participants work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company Group and its Affiliates shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Participant hereby assigns and agrees to assign to the Company Group and its Affiliates all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Participant shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Participants employment with or service to the Company Group and its Affiliates) to establish and confirm the Company Groups or its Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
5.3 Third Party Information . Participant understands that the Company Group and its Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Company Group and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Participants employment with or service to the Company Group or any of its Affiliates and thereafter, and without in any way limiting the provisions of Section 5.1 above, Participant will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company Group or its Affiliates who need to know such information in connection with their work for the Company Group or its Affiliates) or use, except in connection with Participants work for the Company Group or any of its Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment with or service to the Company Group and any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
5.4 Use of Information of Prior Employers . During Participants employment with and/or services, Participant will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Participant has an obligation of confidentiality, and will not bring onto the premises of the Company Group or any of its Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Participant has an obligation of confidentiality unless consented to in writing by the former employer or person. Participant will use in the performance of Participants duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company Group or its Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Participant has an obligation of confidentiality, approved for such use in writing by such former employer or person.
5.5 Nonsolicitation . Participant acknowledges that, in the course of Participants employment and/or services, Participant will become familiar with the Company Groups and its Affiliates trade secrets and with other confidential information concerning the Company Group and its Affiliates and that Participants services will be of special, unique and extraordinary value to the Company Group and its Affiliates. Therefore, Participant agrees that:
(a) Restriction . While employed or engaged by the Company Group or any of its Affiliates, and for a period beginning on the Participants Cessation Date and ending on the second anniversary of such Cessation Date, Participant shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company Group or any of its Affiliates to leave the
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employ of the Company Group or any of its Affiliates, or in any way interfere with the relationship between the Company Group or any of its Affiliates and any employee thereof, and (ii) hire any person who was an employee of the Company Group or any of its Affiliates within 180 days prior to the time such employee was hired by Participant, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company Group or any of its Affiliates to cease doing business with the Company Group and its Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company Group and its Affiliates or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company Group or its Affiliates and with which the Company Group or its Affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company Group or any of its Affiliates in the two-year period immediately preceding Participants Termination of Services with the Company Group and its Affiliates.
(b) Enforcement . If, at the time of enforcement of Section 5.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Participant agrees that because his or her services are unique and Participant has access to confidential information, money damages would be an inadequate remedy for any breach of this Article 5. Participant agrees that the Company Group or any of its Affiliates in the event of a breach or threatened breach of this Article 5, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
(c) Non-disparagement . Participant agrees that at no time during his employment or engagement by the Company Group and its Affiliates or thereafter, shall he or she make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company Group or any of its Affiliates or any of their respective directors, officers or employees; provided that Participant shall not be required to make any untruthful statement or to violate any law.
5.6 Acknowledgments . Participant acknowledges that the provisions of this Article 5 are (a) in addition to, and not in limitation of, any obligation of Participants under the terms of any employment agreement with the Company Group or any of its Affiliates, (b) in consideration of (i) employment with or engagement by the Company Group or any of its Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Participant agrees and acknowledges that the restrictions contained in Article 5 do not preclude Participant from earning a livelihood, nor do they unreasonably impose limitations on Participants ability to earn a living. Participant agrees and acknowledges that the potential harm to the Company Group or any of its Affiliates of the non-enforcement of this Article 5 outweighs any potential harm to Participant of its enforcement by injunction or otherwise. Participant acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Participant by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company Group and its Affiliates now existing or to be developed in the future. Participant expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
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5.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Participant violates any of the restrictive covenants set forth in Article 5, then Participant shall pay to the Company in cash any financial gain Participant realizes from exercising all or a portion of this Option. For purposes of this Section 5.7, financial gain shall equal any excess of the Fair Market Value of the Common Stock on the date of exercise over the purchase price set forth in Section 2.2, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered). By accepting this Option, Participant consents to and authorizes the Company to deduct from any amounts payable by the Company to Participant any amounts Participant owes to the Company under this Section 5.7. This right of set-off is in addition to any other remedies the Company may have against Participant for Participants breach of this Agreement. Participants obligations under this Section 5.7 shall be cumulative (but not duplicative) of any similar obligations Participant have pursuant to this Agreement or any other agreement with the Company.
5.8 Response to Subpoena; Whistleblower Protection . Participant may respond to a lawful and valid subpoena or other legal process but shall give the Company Group the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company Group and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. Participant does not need the prior authorization of the Company Group to make any such reports or disclosures and Participant shall not be not required to notify the Company Group that such reports or disclosures have been made.
ARTICLE VI.
OTHER PROVISIONS
6.1 Tax Withholding . Notwithstanding any other provision of this Agreement:
(a) The Company Group has the authority to deduct or withhold, or require Participant to remit to the applicable Company Group Member, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by Applicable Law to be withheld with respect to any taxable event arising pursuant to this Agreement. The Company Group may withhold or Participant may make such payment in one or more of the forms specified below:
(i) by cash or check made payable to the Company Group Member with respect to which the withholding obligation arises;
(ii) by the deduction of such amount from other compensation payable to Participant;
(iii) with respect to any withholding taxes arising in connection with the exercise of the Option, with the consent of the Administrator, by requesting that the Company withhold a net number of Shares issuable upon the exercise of the Option having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(iv) with respect to any withholding taxes arising in connection with the exercise of the Option, with the consent of the Administrator, by tendering to the Company vested Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting
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consequences and having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(v) with respect to any withholding taxes arising in connection with the exercise of the Option, through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable to Participant pursuant to the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company Group Member with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the applicable Company Group Member at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(vi) in any combination of the foregoing.
(b) With respect to any withholding taxes arising in connection with the Option, in the event Participant fails to provide timely payment of all sums required pursuant to Section 6.1(a) , the Company shall have the right and option, but not the obligation, to treat such failure as an election by Participant to satisfy all or any portion of Participants required payment obligation pursuant to Section 6.1(a)(ii) or Section 6.1(a)(iii) above, or any combination of the foregoing as the Company may determine to be appropriate. The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the exercise of the Option to, or to cause any such Shares to be held in book-entry form by, Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the exercise of the Option or any other taxable event related to the Option.
(c) In the event any tax withholding obligation arising in connection with the Option will be satisfied under Section 6.1(a)(iii) , then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participants behalf a whole number of Shares from those Shares then issuable upon the exercise of the Option as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company Group Member with respect to which the withholding obligation arises. Participants acceptance of this Option constitutes Participants instruction and authorization to the Company and such brokerage firm to complete the transactions described in this Section 6.1(c) , including the transactions described in the previous sentence, as applicable. The Company may refuse to issue any Shares to Participant until the foregoing tax withholding obligations are satisfied, provided that no payment shall be delayed under this Section 6.1(c) if such delay will result in a violation of Section 409A.
(d) In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 6.1(a)(v) or Section 6.1(c) or the payment of the Exercise Price as provided in Section 4.4(c) : (a) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation or exercise of the Option, as applicable, occurs or arises, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (c) Participant will be responsible for all brokers fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the proceeds of such sale exceed the applicable tax withholding obligation or Exercise Price, the Company agrees to pay such excess in cash to Participant as soon as reasonably practicable; (e) Participant acknowledges that the
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Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation or Exercise Price; and (f) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Participant agrees to pay immediately upon demand to the Company Group Member with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the applicable Company Group Members withholding obligation.
(e) Participant is ultimately liable and responsible for, and, to the extent permitted by Applicable Law, agrees to indemnify and keep indemnified the Company Group from, all taxes owed in connection with the Option, regardless of any action any Company Group Member takes with respect to any tax withholding obligations that arise in connection with the Option. No Company Group Member makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or exercise of the Option or the subsequent sale of Shares. The Company Group does not commit and is under no obligation to structure the Option to reduce or eliminate Participants tax liability.
6.2 Conditions to Issuance of Shares . The Company shall not be required to issue or deliver Shares purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares, which may be in one or more of the forms of consideration permitted under Section 4.4 hereof, and
(e) The receipt of full payment of any applicable withholding tax in accordance with Section 6.1 by the Company Group Member with respect to which the applicable withholding obligation arises.
6.3 Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares purchasable upon the exercise of any part of the Option unless and until certificates representing such Shares (which may be in book-entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars and delivered to Participant (including through electronic delivery to a brokerage account). No adjustment will be made for a dividend or other right for which the record date is prior to the date of such issuance, recordation and delivery, except as provided in Section 12.2 of the Plan. Except as otherwise provided herein, after such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to such Shares, including, without limitation, the right to receipt of dividends and distributions on such Shares.
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6.4 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
6.5 Whole Shares . The Option may only be exercised for whole Shares.
6.6 Option Not Transferable . Subject to Section 4.1 hereof, the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the Option have been issued, and all restrictions applicable to such Shares have lapsed. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. Notwithstanding the foregoing, with the consent of the Administrator, if the Option is a Non-Qualified Stock Option, it may be transferred to Permitted Transferees pursuant to any conditions and procedures the Administrator may require.
6.7 Adjustments . The Administrator may accelerate the vesting of all or a portion of the Option in such circumstances as it, in its sole discretion, may determine. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.
6.8 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 6.8 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
6.9 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
6.10 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
6.11 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
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6.12 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board , provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of Participant.
6.13 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 6.6 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
6.14 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
6.15 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
6.16 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
6.17 Section 409A . This Award is not intended to constitute nonqualified deferred compensation within the meaning of Section 409A. However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
6.18 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
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6.19 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the right to receive Shares as a general unsecured creditor with respect to the Option, as and when exercised pursuant to the terms hereof.
6.20 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
6.21 Incentive Stock Options . Participant acknowledges that to the extent the aggregate Fair Market Value of Shares (determined as of the time the option with respect to the Shares is granted) with respect to which Incentive Stock Options, including this Option (if applicable), are exercisable for the first time by Participant during any calendar year exceeds $100,000 or if for any other reason such Incentive Stock Options do not qualify or cease to qualify for treatment as incentive stock options under Section 422 of the Code, such Incentive Stock Options shall be treated as Non-Qualified Stock Options. Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other stock options into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. Participant also acknowledges that an Incentive Stock Option exercised more than three (3) months after Participants Termination of Service, other than by reason of death or disability, will be taxed as a Non-Qualified Stock Option.
6.22 Notification of Disposition . If this Option is designated as an Incentive Stock Option, Participant shall give prompt written notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the Grant Date or (b) within one (1) year after the transfer of such Shares to Participant. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.
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Exhibit 10.20
BJs WHOLESALE CLUB HOLDINGS, INC.
2018 INCENTIVE AWARD PLAN
STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) an option to purchase the number of Shares set forth below (the Option ). The Option is subject to the terms and conditions set forth in this Stock Option Grant Notice (the Grant Notice ), the Plan and the Stock Option Agreement attached hereto as Exhibit A (the Agreement ), each of which is incorporated into this Grant Notice by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
Participant: | [ ] | |
Grant Date: | [ ] | |
Exercise Price Per Share: | $[ ] | |
Total Exercise Price: | $[ ] | |
Total Number of Shares Subject to Option: | [ ] | |
Expiration Date: | [ ] | |
Type of Option: | ☐ Incentive Stock Option ☐ Non-Qualified Stock Option | |
Vesting Schedule: | [ ] |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Plan, the Agreement and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Plan, the Agreement and the Grant Notice. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Agreement and the Grant Notice.
BJS WHOLESALE CLUB HOLDINGS, INC. |
PARTICIPANT | |||||
By: |
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By: |
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Print Name: |
[ ] | Print Name: | [ ] | |||
Title: |
[ ] |
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice. For purposes of this Agreement,
(a) Cause shall mean a Company Group Member having Cause to terminate Participants employment or services, as such term is defined in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, a Company Group Member shall have Cause to terminate Participants employment or services upon: (i) Participants failure to substantially perform the Participants duties as reasonably determined by the Board (other than as a result of the Participants Disability); (ii) materially dishonest statements or acts by the Participant with respect to the Company Group or any of its Affiliates; (iii) Participants commission of an act constituting a felony under the laws of the United States or any state thereof; (iv) Participants gross negligence, willful misconduct or insubordination with respect to the Company Group or any of its Affiliates; or (v) any other act or omission by the Participant which is materially injurious to the financial condition or business reputation of the Company Group or any of its Affiliates. Whether or not an event giving rise to Cause occurs will be determined by the Board in its sole discretion.
(b) Cessation Date shall mean the date of Participants Termination of Service (regardless of the reason for such termination).
(c) Company Group shall mean the Company and its Subsidiaries.
(d) Company Group Member shall mean each member of the Company Group.
(e) Disability shall have the meaning ascribed to such term in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
(f) Non-Compete Event shall mean following the Cessation Date, the Participant (i) directly or indirectly through another entity inducing or attempting to induce any customer, supplier, licensee or other business relation of a Company Group Member to cease doing business with any member of the Company Group or in any way interferes with the relationship between any such customer, supplier, licensee or business relation and the Company Group Member, (ii) engaging in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company Group with respect to any business or activity of the Company Group entered into by the Company Group after the Grant Date.
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1.2 Incorporation of Terms of Plan . The Option is subject to the terms and conditions set forth in this Agreement and the Plan, each of which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
GRANT OF OPTION
2.1 Grant of Option . In consideration of Participants past and/or continued employment with or service to any Company Group Member, and for other good and valuable consideration that the Administrator has determined exceeds the aggregate par value of the Shares subject to the Award, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has granted to Participant the Option to purchase any part or all of an aggregate number of Shares set forth in the Grant Notice upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustment as provided in Article 12 of the Plan.
2.2 Exercise Price . The exercise price per Share of the Shares subject to the Option (the Exercise Price ) shall be as set forth in the Grant Notice.
2.3 Consideration to the Company . In consideration of the grant of the Option by the Company, Participant agrees to render faithful and efficient services to any Company Group Member. Nothing in the Plan, the Grant Notice or this Agreement shall confer upon Participant any right to continue in the employ or service of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between any Company Group Member and Participant.
ARTICLE III.
PERIOD OF EXERCISABILITY
3.1 Commencement of Exercisability .
(a) Subject to Participants continued employment with or service to a Company Group Member through the applicable vesting date and subject to Sections 3.2 , 3.3 , 6.12 and 6.18 hereof, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice.
(b) Subject to Section 12.2(d) of the Plan and unless otherwise determined by the Administrator or as set forth in a written agreement between Participant and the Company, any portion of the Option that has not become vested and exercisable on or prior to the Cessation Date (including, without limitation, pursuant to any employment or similar agreement by and between Participant and the Company) shall be forfeited on the Cessation Date and shall not thereafter become vested or exercisable.
3.2 Duration of Exercisability . The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment that becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3 hereof. Once the Option becomes unexercisable, it shall be forfeited immediately.
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3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The expiration date set forth in the Grant Notice;
(b) Except as the Administrator may otherwise approve, the expiration of three (3) months from the Cessation Date by reason of Participants Termination of Service due to death, Disability or by the Company without Cause; and
(c) Except as the Administrator may otherwise approve, immediately upon the Cessation Date by reason of Participants Termination of Service by the Company Group for Cause.
(d) Except as the Administrator may otherwise approve, the expiration of ninety (90) days from the date of Participants Termination of Service for any other reason.
ARTICLE IV.
EXERCISE OF OPTION
4.1 Person Eligible to Exercise . During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by Participants personal representative or by any person empowered to do so under the deceased Participants will or under the then Applicable Laws of descent and distribution.
4.2 Partial Exercise . Subject to Section 6.6 , any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof.
4.3 Manner of Exercise . The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person designated by the Company), during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3 hereof.
(a) An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator;
(b) The receipt by the Company of full payment for the Shares with respect to which the Option or portion thereof is exercised, in such form of consideration permitted under Section 4.4 hereof that is acceptable to the Administrator;
(c) The payment of any applicable withholding tax in accordance with Section 6.1 ;
(d) Any other written representations or documents as may be required in the Administrators sole discretion to effect compliance with Applicable Law; and
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(e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
Notwithstanding any of the foregoing, the Administrator shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.
4.4 Method of Payment . Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of Participant:
(a) Cash or check;
(b) With the consent of the Administrator, surrender of vested Shares (including, without limitation, Shares otherwise issuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate Exercise Price of the Option or exercised portion thereof;
(c) Through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Exercise Price; provided that payment of such proceeds is then made to the Company at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(d) Any other form of legal consideration acceptable to the Administrator.
ARTICLE V.
RESTRICTIVE COVENANTS
5.1 Obligation to Maintain Confidentiality . Participant acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company Group and any of its Affiliates obtained by Participant while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) ( Confidential Information ) are the property of the Company Group and/or its Affiliates, including information concerning acquisition opportunities in or reasonably related to the Company Groups or any of its Affiliates business or industry of which Participant becomes aware during the period of Participants employment or service. Therefore, Participant agrees that he or she will not disclose to any unauthorized person, group or entity or use for Participants own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment or service with the Company Group or any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. Participant shall use reasonable best efforts to deliver to the Company on his or her Cessation Date, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company Group and any of its Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which Participant may then possess or have under his or her control, but excluding financial information of the Company relating to Participants ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
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5.2 Ownership of Property . Participant acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Company Group or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Participant (either solely or jointly with others) while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) ( Work Product ) belong to the Company Group and its Affiliates and Participant hereby assigns, and agrees to assign, all of the above Work Product to the Company Group and its Affiliates. Any copyrightable work prepared in whole or in part by Participant in the course of Participants work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company Group and its Affiliates shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Participant hereby assigns and agrees to assign to the Company Group and its Affiliates all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Participant shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Participants employment with or service to the Company Group and its Affiliates) to establish and confirm the Company Groups or its Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
5.3 Third Party Information . Participant understands that the Company Group and its Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Company Group and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Participants employment with or service to the Company Group or any of its Affiliates and thereafter, and without in any way limiting the provisions of Section 5.1 above, Participant will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company Group or its Affiliates who need to know such information in connection with their work for the Company Group or its Affiliates) or use, except in connection with Participants work for the Company Group or any of its Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment with or service to the Company Group and any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
5.4 Use of Information of Prior Employers . During Participants employment with and/or services, Participant will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Participant has an obligation of confidentiality, and will not bring onto the premises of the Company Group or any of its Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Participant has an obligation of confidentiality unless consented to in writing by the former employer or person. Participant will use in the performance of Participants duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company Group or its Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Participant has an obligation of confidentiality, approved for such use in writing by such former employer or person.
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5.5 Nonsolicitation . Participant acknowledges that, in the course of Participants employment and/or services, Participant will become familiar with the Company Groups and its Affiliates trade secrets and with other confidential information concerning the Company Group and its Affiliates and that Participants services will be of special, unique and extraordinary value to the Company Group and its Affiliates. Therefore, Participant agrees that:
(a) Restriction . While employed or engaged by the Company Group or any of its Affiliates, and for a period beginning on the Participants Cessation Date and ending on the second anniversary of such Cessation Date, Participant shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company Group or any of its Affiliates to leave the employ of the Company Group or any of its Affiliates, or in any way interfere with the relationship between the Company Group or any of its Affiliates and any employee thereof, and (ii) hire any person who was an employee of the Company Group or any of its Affiliates within 180 days prior to the time such employee was hired by Participant, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company Group or any of its Affiliates to cease doing business with the Company Group and its Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company Group and its Affiliates or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company Group or its Affiliates and with which the Company Group or its Affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company Group or any of its Affiliates in the two-year period immediately preceding Participants Termination of Services with the Company Group and its Affiliates.
(b) Enforcement . If, at the time of enforcement of Section 5.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Participant agrees that because his or her services are unique and Participant has access to confidential information, money damages would be an inadequate remedy for any breach of this Article 5. Participant agrees that the Company Group or any of its Affiliates in the event of a breach or threatened breach of this Article 5, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
(c) Non-disparagement . Participant agrees that at no time during his employment or engagement by the Company Group and its Affiliates or thereafter, shall he or she make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company Group or any of its Affiliates or any of their respective directors, officers or employees; provided that Participant shall not be required to make any untruthful statement or to violate any law.
5.6 Acknowledgments . Participant acknowledges that the provisions of this Article 5 are (a) in addition to, and not in limitation of, any obligation of Participants under the terms of any employment agreement with the Company Group or any of its Affiliates, (b) in consideration of (i) employment with or engagement by the Company Group or any of its Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Participant agrees and acknowledges that the restrictions contained in Article 5 do not preclude Participant from earning a livelihood, nor do they unreasonably impose limitations on Participants ability to earn a living.
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Participant agrees and acknowledges that the potential harm to the Company Group or any of its Affiliates of the non-enforcement of this Article 5 outweighs any potential harm to Participant of its enforcement by injunction or otherwise. Participant acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Participant by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company Group and its Affiliates now existing or to be developed in the future. Participant expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
5.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Participant violates any of the restrictive covenants set forth in Article 5, then Participant shall pay to the Company in cash any financial gain Participant realizes from exercising all or a portion of this Option. For purposes of this Section 5.7, financial gain shall equal any excess of the Fair Market Value of the Common Stock on the date of exercise over the purchase price set forth in Section 2.2, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered). By accepting this Option, Participant consents to and authorizes the Company to deduct from any amounts payable by the Company to Participant any amounts Participant owes to the Company under this Section 5.7. This right of set-off is in addition to any other remedies the Company may have against Participant for Participants breach of this Agreement. Participants obligations under this Section 5.7 shall be cumulative (but not duplicative) of any similar obligations Participant have pursuant to this Agreement or any other agreement with the Company.
5.8 Response to Subpoena; Whistleblower Protection . Participant may respond to a lawful and valid subpoena or other legal process but shall give the Company Group the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company Group and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. Participant does not need the prior authorization of the Company Group to make any such reports or disclosures and Participant shall not be not required to notify the Company Group that such reports or disclosures have been made.
ARTICLE VI.
OTHER PROVISIONS
6.1 Tax Withholding . Notwithstanding any other provision of this Agreement:
(a) The Company Group has the authority to deduct or withhold, or require Participant to remit to the applicable Company Group Member, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by Applicable Law to be withheld with respect to any taxable event arising pursuant to this Agreement. The Company Group may withhold or Participant may make such payment in one or more of the forms specified below:
(i) by cash or check made payable to the Company Group Member with respect to which the withholding obligation arises;
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(ii) by the deduction of such amount from other compensation payable to Participant;
(iii) with respect to any withholding taxes arising in connection with the exercise of the Option, with the consent of the Administrator, by requesting that the Company withhold a net number of Shares issuable upon the exercise of the Option having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(iv) with respect to any withholding taxes arising in connection with the exercise of the Option, with the consent of the Administrator, by tendering to the Company vested Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(v) with respect to any withholding taxes arising in connection with the exercise of the Option, through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable to Participant pursuant to the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company Group Member with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the applicable Company Group Member at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(vi) in any combination of the foregoing.
(b) With respect to any withholding taxes arising in connection with the Option, in the event Participant fails to provide timely payment of all sums required pursuant to Section 6.1(a) , the Company shall have the right and option, but not the obligation, to treat such failure as an election by Participant to satisfy all or any portion of Participants required payment obligation pursuant to Section 6.1(a)(ii) or Section 6.1(a)(iii) above, or any combination of the foregoing as the Company may determine to be appropriate. The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the exercise of the Option to, or to cause any such Shares to be held in book-entry form by, Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the exercise of the Option or any other taxable event related to the Option.
(c) In the event any tax withholding obligation arising in connection with the Option will be satisfied under Section 6.1(a)(iii) , then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participants behalf a whole number of Shares from those Shares then issuable upon the exercise of the Option as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company Group Member with respect to which the withholding obligation arises. Participants acceptance of this Option constitutes Participants instruction and authorization to the Company and such brokerage firm to complete the transactions described in this Section 6.1(c) , including the transactions described in the previous sentence, as applicable. The Company may refuse to issue any Shares to Participant until the foregoing tax withholding obligations are satisfied, provided that no payment shall be delayed under this Section 6.1(c) if such delay will result in a violation of Section 409A.
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(d) In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 6.1(a)(v) or Section 6.1(c) or the payment of the Exercise Price as provided in Section 4.4(c) : (a) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation or exercise of the Option, as applicable, occurs or arises, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (c) Participant will be responsible for all brokers fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the proceeds of such sale exceed the applicable tax withholding obligation or Exercise Price, the Company agrees to pay such excess in cash to Participant as soon as reasonably practicable; (e) Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation or Exercise Price; and (f) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Participant agrees to pay immediately upon demand to the Company Group Member with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the applicable Company Group Members withholding obligation.
(e) Participant is ultimately liable and responsible for, and, to the extent permitted by Applicable Law, agrees to indemnify and keep indemnified the Company Group from, all taxes owed in connection with the Option, regardless of any action any Company Group Member takes with respect to any tax withholding obligations that arise in connection with the Option. No Company Group Member makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or exercise of the Option or the subsequent sale of Shares. The Company Group does not commit and is under no obligation to structure the Option to reduce or eliminate Participants tax liability.
6.2 Conditions to Issuance of Shares . The Company shall not be required to issue or deliver Shares purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares, which may be in one or more of the forms of consideration permitted under Section 4.4 hereof, and
(e) The receipt of full payment of any applicable withholding tax in accordance with Section 6.1 by the Company Group Member with respect to which the applicable withholding obligation arises.
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6.3 Transfer Restrictions on Issued Shares .
(a) Notwithstanding Section 10.3(a)(i) of the Plan but subject to Section 6.3(b) of this Agreement, no Shares issued upon the exercise of the Option or any portion thereof or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect (the Transfer Restrictions ); provided, however, that this Section 6.3(a) notwithstanding, with the consent of the Administrator and subject to the terms of the Plan, the Shares may be transferred to a Permitted Transferee, pursuant to any such conditions and procedures the Administrator may require.
(b) Lapse of Transfer Restrictions; Non-Compete Event . The Transfer Restrictions shall lapse with respect to 2/3rd of the Shares granted hereunder (rounded down to the next whole number of Shares) on the first anniversary of the Grant Date and with respect to the remaining 1/3 rd of the Shares granted hereunder on the second anniversary of the Grant Date such that the Transfer Restrictions on all Shares granted hereunder shall have lapsed on the second anniversary of the Grant Date. Notwithstanding any other provision of this Agreement to the contrary, if, on or prior to the second anniversary of the Grant Date, a Non-Compete Event occurs or Participant experiences a Termination of Services by the Company for Cause, then all Shares for which the Transfer Restrictions have not lapsed prior to the date of such Non-Compete Event or the date of Participants Termination of Services by the Company for Cause (less any Shares that have theretofore been surrendered to or withheld by the Company pursuant to Section 10.1 or Section 10.2 of the Plan to pay the Exercise Price or to satisfy any tax withholding obligations), shall be immediately forfeited for no consideration.
6.4 Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares purchasable upon the exercise of any part of the Option unless and until certificates representing such Shares (which may be in book-entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars and delivered to Participant (including through electronic delivery to a brokerage account). No adjustment will be made for a dividend or other right for which the record date is prior to the date of such issuance, recordation and delivery, except as provided in Section 12.2 of the Plan. Except as otherwise provided herein, after such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to such Shares, including, without limitation, the right to receipt of dividends and distributions on such Shares.
6.5 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
6.6 Whole Shares . The Option may only be exercised for whole Shares.
6.7 Option Not Transferable . Subject to Section 4.1 hereof, the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the Option have been issued, and all restrictions applicable to such Shares have lapsed. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to
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disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. Notwithstanding the foregoing, with the consent of the Administrator, if the Option is a Non-Qualified Stock Option, it may be transferred to Permitted Transferees pursuant to any conditions and procedures the Administrator may require.
6.8 Adjustments . Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.
6.9 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 6.9 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
6.10 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
6.11 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
6.12 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
6.13 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board , provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of Participant.
6.14 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 6.7 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
6.15 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option,
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the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
6.16 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
6.17 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
6.18 Section 409A . This Award is not intended to constitute nonqualified deferred compensation within the meaning of Section 409A. However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
6.19 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
6.20 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the right to receive Shares as a general unsecured creditor with respect to the Option, as and when exercised pursuant to the terms hereof.
6.21 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
6.22 Incentive Stock Options . Participant acknowledges that to the extent the aggregate Fair Market Value of Shares (determined as of the time the option with respect to the Shares is granted) with respect to which Incentive Stock Options, including this Option (if applicable), are exercisable for the first time by Participant during any calendar year exceeds $100,000 or if for any other reason such Incentive Stock Options do not qualify or cease to qualify for treatment as incentive stock options under Section 422 of the Code, such Incentive Stock Options shall be treated as Non-Qualified Stock Options. Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other stock options into account in the order in which they were granted, as determined under Section
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422(d) of the Code and the Treasury Regulations thereunder. Participant also acknowledges that an Incentive Stock Option exercised more than three (3) months after Participants Termination of Service, other than by reason of death or disability, will be taxed as a Non-Qualified Stock Option.
6.23 Notification of Disposition . If this Option is designated as an Incentive Stock Option, Participant shall give prompt written notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the Grant Date or (b) within one (1) year after the transfer of such Shares to Participant. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.
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Exhibit 10.21
BJS WHOLESALE CLUB HOLDINGS, INC.
2018 INCENTIVE AWARD PLAN
RESTRICTED STOCK AWARD GRANT NOTICE AND
RESTRICTED STOCK AWARD AGREEMENT
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) the number of shares of Restricted Stock set forth below (the Restricted Shares ). The Restricted Shares are subject to the terms and conditions set forth in this Restricted Stock Award Grant Notice (the Grant Notice ), the Plan and the Restricted Stock Award Agreement attached hereto as Exhibit A (the Agreement ), each of which is incorporated into this Grant Notice by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
Participant: | ||
Grant Date: | [_____] | |
Total Number of Shares of Restricted Stock: |
[_____] Shares | |
Purchase Price: | $0.00 | |
Vesting Schedule: | [To be specified in individual award agreements] |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Plan, the Agreement and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Plan, the Agreement and the Grant Notice. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Agreement and the Grant Notice.
BJS WHOLESALE CLUB HOLDINGS, INC. | PARTICIPANT | |||||
By: |
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By: |
|
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Print Name: | [__________________] | Print Name: | ||||
Title: | [__________________] |
EXHIBIT A
TO RESTRICTED STOCK AWARD GRANT NOTICE
RESTRICTED STOCK AWARD AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant the number of Restricted Shares set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice. For purposes of this Agreement,
(a) Cause shall mean a Company Group Member having Cause to terminate Participants employment or services, as such term is defined in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, a Company Group Member shall have Cause to terminate Participants employment or services upon: (i) Participants failure to substantially perform the Participants duties as reasonably determined by the Board (other than as a result of the Participants Disability); (ii) materially dishonest statements or acts by the Participant with respect to the Company Group or any of its Affiliates; (iii) Participants commission of an act constituting a felony under the laws of the United States or any state thereof; (iv) Participants gross negligence, willful misconduct or insubordination with respect to the Company Group or any of its Affiliates; or (v) any other act or omission by the Participant which is materially injurious to the financial condition or business reputation of the Company Group or any of its Affiliates. Whether or not an event giving rise to Cause occurs will be determined by the Board in its sole discretion.
(b) Cessation Date shall mean the date of Participants Termination of Service (regardless of the reason for such termination).
(c) Company Group shall mean the Company and its Subsidiaries.
(d) Company Group Member shall mean each member of the Company Group.
(e) Disability shall have the meaning ascribed to such term in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
1.2 Incorporation of Terms of Plan . The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, each of which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
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ARTICLE II.
AWARD OF RESTRICTED SHARES
2.1 Award of Restricted Shares .
(a) Award . In consideration of Participants past and/or continued employment with or service to any Company Group Member, and for other good and valuable consideration that the Administrator has determined exceeds the aggregate par value of the Shares subject to the Award, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has issued to Participant the number of Restricted Shares set forth in the Grant Notice upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustments as provided in Article 12 of the Plan.
(b) Purchase Price; Book Entry Form . The purchase price of the Restricted Shares is set forth on the Grant Notice. At the sole discretion of the Administrator, the Restricted Shares (and any securities that constitute Retained Distributions (as defined below)) will be issued in either (i) uncertificated form, with the Restricted Shares (and securities that constitute Retained Distributions) recorded in the name of Participant in the books and records of the Companys transfer agent with appropriate notations regarding the Restrictions (as defined below) imposed pursuant to this Agreement, and upon vesting and the satisfaction of all conditions set forth in Section 2.2 , the Company shall cause the book entries evidencing the Restricted Shares (and any securities that constitute Retained Distributions) to indicate that the Restrictions have lapsed; or (ii) certificate form pursuant to the terms of Section 2.1(c) and Section 2.1(d) .
(c) Legend . Any certificates representing Restricted Shares issued pursuant to this Agreement shall, until all Restrictions imposed pursuant to this Agreement lapse or shall have been removed and the Restricted Shares shall thereby have become vested or the Restricted Shares represented thereby have been forfeited hereunder, bear the following legend (or such other legend as shall be determined by the Administrator):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF A RESTRICTED STOCK AWARD AGREEMENT, BY AND BETWEEN BJS WHOLESALE CLUB HOLDINGS, INC. AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH AGREEMENT.
(d) Escrow . The Secretary of the Company or such other escrow Participant as the Administrator may appoint may retain physical custody of any certificates representing the Restricted Shares (and any securities that constitute Retained Distributions) until all of the Restrictions imposed pursuant to this Agreement lapse or shall have been removed; in such event Participant shall not retain physical custody of any certificates representing unvested Restricted Shares issued to him or her (or any certificates representing securities that constitute Retained Distributions). Participant, by acceptance of the Award, shall be deemed to appoint, and does so appoint the Company and each of its authorized representatives as Participants attorney(s)-in-fact to effect any transfer of unvested forfeited Restricted Shares or securities that constitute Retained Distributions (or Restricted Shares otherwise reacquired by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.
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(e) Delivery of Certificates and Payment Upon Vesting .
(i) As soon as administratively practicable after the vesting of any Restricted Shares subject to the Award pursuant to Section 2.2(c) , the Company shall, as applicable, either remove the notations on any Restricted Shares subject to the Award issued in book entry form that have vested or deliver to Participant a certificate or certificates, evidencing the number of Restricted Shares subject to the Award that have vested.
(ii) As soon as administratively practicable after the vesting of any Restricted Shares subject to the Award pursuant to Section 2.2(c) , the Company shall (A) as applicable, either remove the notations on any securities that constitute Retained Distributions issued in book entry form with respect to such Restricted Shares or deliver to Participant a certificate or certificates evidencing the number of securities that constitute Retained Distributions with respect to such Restricted Shares and (B) pay Participant in cash an amount equal to all cash dividends or other cash distributions that constitute Retained Distributions with respect to such Restricted Shares.
(iii) Participant (or the beneficiary or personal representative of Participant in the event of Participants death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances required by the Company in connection with this Section 2.1(e) . The Restricted Shares and securities that constitute Retained Distributions delivered pursuant to this Section 2.1(e) shall no longer be subject to the Restrictions hereunder.
2.2 Restrictions .
(a) Forfeiture . Any Restricted Shares that are not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
(b) Restricted Shares Not Transferable . No Restricted Shares or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 10.3(a)(i) of the Plan; provided, however, that this Section 2.2(b) notwithstanding, with the consent of the Administrator and subject to the terms of the Plan, the Restricted Shares may be transferred to a Permitted Transferee, pursuant to any such conditions and procedures the Administrator may require. For purposes of this Agreement, Restrictions shall mean the restrictions on sale or other transfer set forth in this Section 2.2(b) and the exposure to forfeiture set forth in Section 2.2(a) .
(c) Vesting and Lapse of Restrictions . Subject to Section 12.4 of the Plan and subject to Participants continued employment with or service to a Company Group Member on each applicable vesting date and subject to Sections 4.11 and 4.16 hereof, the Award shall vest and the Restrictions shall lapse in accordance with the vesting schedule set forth in the Grant Notice.
(d) Retained Distributions . Unless otherwise determined by the Administrator, the Company will retain custody of all cash dividends and other distributions ( Retained Distributions ) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to
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the Restrictions and the other terms and conditions under this Agreement that are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall vest in accordance with Section 2.2 , and such Retained Distributions shall not bear interest or be segregated in separate accounts. Any Retained Distributions with respect to Restricted Shares that have not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
2.3 Consideration to the Company . In consideration of the grant of the Award by the Company, Participant agrees to render faithful and efficient services to the Company Group. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company Group or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
ARTICLE III.
RESTRICTIVE COVENANTS
3.1 Obligation to Maintain Confidentiality . Participant acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company Group and any of its Affiliates obtained by Participant while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) ( Confidential Information ) are the property of the Company Group and/or its Affiliates, including information concerning acquisition opportunities in or reasonably related to the Company Groups or any of its Affiliates business or industry of which Participant becomes aware during the period of Participants employment or service. Therefore, Participant agrees that he or she will not disclose to any unauthorized person, group or entity or use for Participants own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment or service with the Company Group or any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. Participant shall use reasonable best efforts to deliver to the Company on his or her Cessation Date, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company Group and any of its Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which Participant may then possess or have under his or her control, but excluding financial information of the Company relating to Participants ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
3.2 Ownership of Property . Participant acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Company Group or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Participant (either solely or jointly with others) while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) ( Work Product )
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belong to the Company Group and its Affiliates and Participant hereby assigns, and agrees to assign, all of the above Work Product to the Company Group and its Affiliates. Any copyrightable work prepared in whole or in part by Participant in the course of Participants work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company Group and its Affiliates shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Participant hereby assigns and agrees to assign to the Company Group and its Affiliates all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Participant shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Participants employment with or service to the Company Group and its Affiliates) to establish and confirm the Company Groups or its Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
3.3 Third Party Information . Participant understands that the Company Group and its Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Company Group and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Participants employment with or service to the Company Group or any of its Affiliates and thereafter, and without in any way limiting the provisions of Section 3.1 above, Participant will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company Group or its Affiliates who need to know such information in connection with their work for the Company Group or its Affiliates) or use, except in connection with Participants work for the Company Group or any of its Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment with or service to the Company Group and any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
3.4 Use of Information of Prior Employers . During Participants employment with and/or services, Participant will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Participant has an obligation of confidentiality, and will not bring onto the premises of the Company Group or any of its Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Participant has an obligation of confidentiality unless consented to in writing by the former employer or person. Participant will use in the performance of Participants duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company Group or its Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Participant has an obligation of confidentiality, approved for such use in writing by such former employer or person.
3.5 Nonsolicitation . Participant acknowledges that, in the course of Participants employment and/or services, Participant will become familiar with the Company Groups and its Affiliates trade secrets and with other confidential information concerning the Company Group and its Affiliates and that Participants services will be of special, unique and extraordinary value to the Company Group and its Affiliates. Therefore, Participant agrees that:
(a) Restriction . While employed or engaged by the Company Group or any of its Affiliates, and for a period beginning on the Participants Cessation Date and ending on the second anniversary of such Cessation Date, Participant shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company Group or any of its Affiliates to leave the employ of the Company Group or any of its Affiliates, or in any way interfere with the relationship
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between the Company Group or any of its Affiliates and any employee thereof, and (ii) hire any person who was an employee of the Company Group or any of its Affiliates within 180 days prior to the time such employee was hired by Participant, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company Group or any of its Affiliates to cease doing business with the Company Group and its Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company Group and its Affiliates or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company Group or its Affiliates and with which the Company Group or its Affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company Group or any of its Affiliates in the two-year period immediately preceding Participants Termination of Services with the Company Group and its Affiliates.
(b) Enforcement . If, at the time of enforcement of Section 3.5(a), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Participant agrees that because his or her services are unique and Participant has access to confidential information, money damages would be an inadequate remedy for any breach of this Article 3. Participant agrees that the Company Group or any of its Affiliates in the event of a breach or threatened breach of this Article 3, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
(c) Non-disparagement . Participant agrees that at no time during his employment or engagement by the Company Group and its Affiliates or thereafter, shall he or she make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company Group or any of its Affiliates or any of their respective directors, officers or employees; provided that Participant shall not be required to make any untruthful statement or to violate any law.
3.6 Acknowledgments . Participant acknowledges that the provisions of this Article 3 are (a) in addition to, and not in limitation of, any obligation of Participants under the terms of any employment agreement with the Company Group or any of its Affiliates, (b) in consideration of (i) employment with or engagement by the Company Group or any of its Affiliates, (ii) the issuance of the Restricted Shares by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Participant agrees and acknowledges that the restrictions contained in Article 3 do not preclude Participant from earning a livelihood, nor do they unreasonably impose limitations on Participants ability to earn a living. Participant agrees and acknowledges that the potential harm to the Company Group or any of its Affiliates of the non-enforcement of this Article 3 outweighs any potential harm to Participant of its enforcement by injunction or otherwise. Participant acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Participant by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company Group and its Affiliates now existing or to be developed in the future. Participant expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
3.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Participant violates any of the restrictive covenants set forth in Article 3 or upon Participants Termination of Service by the Company Group for Cause, (a) the Restricted Shares (whether vested or unvested) shall immediately be terminated and forfeited in their entirety and (b) the Participant shall pay
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to the Company in cash any amounts paid to the participant in respect of the Restricted Shares during the 12 month period immediately preceding (or at any time after) the date of such violation. By accepting these Restricted Shares Participant consents to and authorizes the Company to deduct from any amounts payable by the Company to Participant any amounts Participant owes to the Company under this Section 3.7. This right of set-off is in addition to any other remedies the Company may have against Participant for Participants breach of this Agreement. Participants obligations under this Section 3.7 shall be cumulative (but not duplicative) of any similar obligations Participant have pursuant to this Agreement or any other agreement with the Company.
3.8 Response to Subpoena; Whistleblower Protection . Participant may respond to a lawful and valid subpoena or other legal process but shall give the Company Group the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company Group and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. Participant does not need the prior authorization of the Company Group to make any such reports or disclosures and Participant shall not be not required to notify the Company Group that such reports or disclosures have been made.
ARTICLE IV.
OTHER PROVISIONS
4.1 Tax Withholding . Notwithstanding any other provision of this Agreement:
(a) The Company Group has the authority to deduct or withhold, or require Participant to remit to the applicable Company Group Member, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by Applicable Law to be withheld with respect to any taxable event arising pursuant to this Agreement. The Company Group may withhold or Participant may make such payment in one or more of the forms specified below:
(i) by cash or check made payable to the Company Group Member with respect to which the withholding obligation arises;
(ii) by the deduction of such amount from other compensation payable to Participant;
(iii) with the consent of the Administrator, by requesting that the Company withhold a net number of Shares subject to the Award having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
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(iv) with the consent of the Administrator, by tendering to the Company vested Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(v) through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to the Shares for which the Restrictions are then subject to lapse, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company Group Member with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the applicable Company Group Member at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(vi) in any combination of the foregoing.
(b) With respect to any withholding taxes arising in connection with the Award, in the event Participant fails to provide timely payment of all sums required pursuant to Section 4.1(a) , the Company shall have the right and option, but not the obligation, to treat such failure as an election by Participant to satisfy all or any portion of Participants required payment obligation pursuant to Section 4.1(a)(ii) or Section 4.1(a)(iii) above, or any combination of the foregoing as the Company may determine to be appropriate. The Company shall not be obligated to deliver any new certificate representing Restricted Shares to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the grant of the Award or the issuance or vesting of Restricted Shares hereunder or any other taxable event with respect to the Restricted Shares.
(c) In the event any tax withholding obligation arising in connection with the Award will be satisfied under Section 4.1(a)(iii) above, then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participants behalf a whole number of Shares from those Shares that are subject to the Award as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company Group Member with respect to which the withholding obligation arises. Participants acceptance of this Award constitutes Participants instruction and authorization to the Company and such brokerage firm to complete the transactions described in this Section 4.1(c) , including the transactions described in the previous sentence, as applicable.
(d) In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 4.1(a)(v) or Section 4.1(c) : (i) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation arises, or as soon thereafter as practicable; (ii) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (iii) Participant will be responsible for all brokers fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Participant as soon as reasonably practicable; (v) Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (vi) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Participant agrees to pay immediately upon demand to the Company Group Member with respect to which the withholding obligation arises, an amount in cash sufficient to satisfy any remaining portion of the applicable Company Group Members withholding obligation.
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(e) Participant is ultimately liable and responsible for, and, to the extent permitted by Applicable Law, agrees to indemnify and keep indemnified the Company Group from, all taxes owed in connection with the Award, regardless of any action any Company Group Member takes with respect to any tax withholding obligations that arise in connection with the Award. No Company Group Member makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding or vesting of the Award or the subsequent sale of Shares. The Company Group does not commit and is under no obligation to structure the Award to reduce or eliminate Participants tax liability.
4.2 Conditions to Delivery of Stock . Subject to Section 2.1 , the Restricted Shares deliverable under this Award may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares under this Award prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body that the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares;
(e) The receipt of any applicable withholding tax in accordance with Section 4.1 by the Company Group Member with respect to which the applicable withholding obligation arises; and
(f) The lapse of such reasonable period of time following the grant of this Award as the Administrator may from time to time establish for reasons of administrative convenience.
4.3 Rights as Stockholder . Except as otherwise provided herein and subject to Section 2.2(d), upon the Grant Date, Participant shall have all the rights of a stockholder with respect to the Restricted Shares, subject to the Restrictions herein, including the right to vote the Restricted Shares and the right to receive any cash or stock dividends paid to or made with respect to the Restricted Shares; provided, however, that at the discretion of the Company, and prior to the delivery of Restricted Shares, Participant may be required to execute a stockholders agreement in such form as shall be determined by the Company.
4.4 Section 83(b) Election . Participant understands that Section 83(a) of the Code taxes as ordinary income the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares and any Retained Distributions at the time the Restrictions on such Restricted Shares and Retained Distributions lapse. Participant understands that, notwithstanding the preceding sentence, Participant may elect to be taxed at the time of the Grant Date, rather than at the time the Restrictions lapse, by filing an election under Section 83(b) of the Code (an 83(b) Election )
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with the Internal Revenue Service within 30 days of the Grant Date. In the event that Participant files an 83(b) Election, Participant shall provide the Company a copy thereof prior to the expiration of such 30 day period. Participant understands that in the event an 83(b) Election is filed with the Internal Revenue Service within such time period, Participant will recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares as of the Grant Date. Participant further understands that an additional copy of such 83(b) Election form should be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Participant acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the Award hereunder, and does not purport to be complete. PARTICIPANT FURTHER ACKNOWLEDGES THAT THE COMPANY IS NOT RESPONSIBLE FOR FILING PARTICIPANTS 83(b) ELECTION, AND THE COMPANY HAS DIRECTED PARTICIPANT TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH PARTICIPANT MAY RESIDE, AND THE TAX CONSEQUENCES OF PARTICIPANTS DEATH. PARTICIPANT HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING PARTICIPANTS 83(b) ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR FROM FAILURE TO FILE THE ELECTION AND PAYING TAXES RESULTING FROM THE LAPSE OF THE RESTRICTIONS ON THE UNVESTED RESTRICTED SHARES AND RETAINED DISTRIBUTIONS. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANTS PURCHASE OR DISPOSITION OF THE RESTRICTED SHARES AND PARTICIPANT REPRESENTS THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
4.5 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
4.6 Adjustments . The Administrator may accelerate the vesting of all or a portion of the Restricted Shares in such circumstances as it, in its sole discretion, may determine. Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.
4.7 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 4.7 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
4.8 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
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4.9 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
4.10 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
4.11 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board, provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of Participant.
4.12 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 2.2 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.13 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Award, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.14 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
4.15 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.16 Section 409A . This Award is not intended to constitute nonqualified deferred compensation within the meaning of Section 409A. However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
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4.17 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.18 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets.
4.19 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
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Exhibit 10.22
BJS WHOLESALE CLUB HOLDINGS, INC.
2018 INCENTIVE AWARD PLAN
RESTRICTED STOCK AWARD GRANT NOTICE AND
RESTRICTED STOCK AWARD AGREEMENT
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) the number of shares of Restricted Stock set forth below (the Restricted Shares ). The Restricted Shares are subject to the terms and conditions set forth in this Restricted Stock Award Grant Notice (the Grant Notice ), the Plan and the Restricted Stock Award Agreement attached hereto as Exhibit A (the Agreement ), each of which is incorporated into this Grant Notice by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
Participant: | [ ] | |
Grant Date: | [ ] | |
Total Number of Shares of Restricted Stock: | [ ] Shares | |
Purchase Price: | $0.00 | |
Vesting Schedule: | [ ] |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Plan, the Agreement and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Plan, the Agreement and the Grant Notice. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Agreement and the Grant Notice.
BJS WHOLESALE CLUB HOLDINGS, INC. | PARTICIPANT | |||||
By: |
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By: |
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Print Name: | [ ] | Print Name: | ||||
Title: | [ ] |
EXHIBIT A
TO RESTRICTED STOCK AWARD GRANT NOTICE
RESTRICTED STOCK AWARD AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant the number of Restricted Shares set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice. For purposes of this Agreement,
(a) Cause shall mean a Company Group Member having Cause to terminate Participants employment or services, as such term is defined in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, a Company Group Member shall have Cause to terminate Participants employment or services upon: (i) Participants failure to substantially perform the Participants duties as reasonably determined by the Board (other than as a result of the Participants Disability); (ii) materially dishonest statements or acts by the Participant with respect to the Company Group or any of its Affiliates; (iii) Participants commission of an act constituting a felony under the laws of the United States or any state thereof; (iv) Participants gross negligence, willful misconduct or insubordination with respect to the Company Group or any of its Affiliates; or (v) any other act or omission by the Participant which is materially injurious to the financial condition or business reputation of the Company Group or any of its Affiliates. Whether or not an event giving rise to Cause occurs will be determined by the Board in its sole discretion.
(b) Cessation Date shall mean the date of Participants Termination of Service (regardless of the reason for such termination).
(c) Company Group shall mean the Company and its Subsidiaries.
(d) Company Group Member shall mean each member of the Company Group.
(e) Disability shall have the meaning ascribed to such term in any relevant employment agreement between Participant and a Company Group Member; provided that, in the absence of such agreement containing such definition, Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Board in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
(f) Non-Compete Event shall mean following the Cessation Date, the Participant (i) directly or indirectly through another entity inducing or attempting to induce any customer, supplier, licensee or other business relation of a Company Group Member to cease doing business with any member of the Company Group or in any way interferes with the relationship between any such customer, supplier, licensee or business relation and the Company Group Member, (ii) engaging in any activity (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) for Wal-Mart Stores Inc., Costco Wholesale Corporation, or Target Corporation, or any of their respective subsidiaries or affiliates (including, without limitation, Sams West, Inc. and Sams East, Inc. and any successors thereof), or any other person or entity that competes with the Company Group with respect to any business or activity of the Company Group entered into by the Company Group after the Grant Date.
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1.2 Incorporation of Terms of Plan . The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, each of which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
AWARD OF RESTRICTED SHARES
2.1 Award of Restricted Shares .
(a) Award . In consideration of Participants past and/or continued employment with or service to any Company Group Member, and for other good and valuable consideration that the Administrator has determined exceeds the aggregate par value of the Shares subject to the Award, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has issued to Participant the number of Restricted Shares set forth in the Grant Notice upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustments as provided in Article 12 of the Plan.
(b) Purchase Price; Book Entry Form . The purchase price of the Restricted Shares is set forth on the Grant Notice. At the sole discretion of the Administrator, the Restricted Shares (and any securities that constitute Retained Distributions (as defined below)) will be issued in either (i) uncertificated form, with the Restricted Shares (and securities that constitute Retained Distributions) recorded in the name of Participant in the books and records of the Companys transfer agent with appropriate notations regarding the Restrictions (as defined below) imposed pursuant to this Agreement, and upon vesting, the lapse of the Transfer Restrictions (as defined below) and the satisfaction of all conditions set forth in Section 2.2 , the Company shall cause the book entries evidencing the Restricted Shares (and any securities that constitute Retained Distributions) to indicate that the Restrictions have lapsed; or (ii) certificate form pursuant to the terms of Section 2.1(c) and Section 2.1(d) .
(c) Legend . Any certificates representing Restricted Shares issued pursuant to this Agreement shall, until all Restrictions imposed pursuant to this Agreement lapse or shall have been removed and the Restricted Shares shall thereby have become vested and transferable or the Restricted Shares represented thereby have been forfeited hereunder, bear the following legend (or such other legend as shall be determined by the Administrator):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF A RESTRICTED STOCK AWARD AGREEMENT, BY AND BETWEEN BJS WHOLESALE CLUB HOLDINGS, INC. AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH AGREEMENT.
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(d) Escrow . The Secretary of the Company or such other escrow Participant as the Administrator may appoint may retain physical custody of any certificates representing the Restricted Shares (and any securities that constitute Retained Distributions) until all of the Restrictions imposed pursuant to this Agreement lapse or shall have been removed; in such event Participant shall not retain physical custody of any certificates representing unvested Restricted Shares or Restricted Shares subject to Transfer Restrictions issued to him or her. Participant, by acceptance of the Award, shall be deemed to appoint, and does so appoint the Company and each of its authorized representatives as Participants attorney(s)-in-fact to effect any transfer of unvested and/or forfeited Restricted Shares (or Restricted Shares otherwise reacquired by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.
(e) Delivery of Certificates and Payment Upon Vesting and Lapse of Transfer Restrictions .
(i) As soon as administratively practicable after the vesting of any Restricted Shares and the lapse of Transfer Restrictions on any Restricted Shares subject to the Award pursuant to Section 2.2(b) - (d) , the Company shall, as applicable, either remove the notations on any Restricted Shares subject to the Award issued in book entry form that have vested and are no longer subject to the Transfer Restrictions or deliver to Participant a certificate or certificates, without the legend set forth in Section 2.1(c) , evidencing the number of Restricted Shares subject to the Award that have vested and for which the Transfer Restrictions have lapsed.
(ii) As soon as administratively practicable after the vesting of any Restricted Shares and the lapse of Transfer Restrictions on any Restricted Shares subject to the Award pursuant to Section 2.2(b) - (d) , the Company shall (A) as applicable, either remove the notations on any securities that constitute Retained Distributions issued in book entry form with respect to such Restricted Shares or deliver to Participant a certificate or certificates evidencing the number of securities that constitute Retained Distributions with respect to such Restricted Shares and (B) pay Participant in cash an amount equal to all cash dividends or other cash distributions that constitute Retained Distributions with respect to such Restricted Shares.
(iii) Participant (or the beneficiary or personal representative of Participant in the event of Participants death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances required by the Company in connection with this Section 2.1(e) . The Restricted Shares and securities that constitute Retained Distributions delivered pursuant to this Section 2.1(e) shall no longer be subject to the Restrictions hereunder.
2.2 Restrictions .
(a) Forfeiture . Any Restricted Shares that are not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
(b) Restricted Shares Not Transferable . Notwithstanding Section 10.3(a)(i) of the Plan, but subject to Section 2.2(c) of this Agreement, no Restricted Shares (whether vested or unvested) or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect (the Transfer Restrictions ); provided, however, that this Section 2.2(b) notwithstanding, with the consent of the Administrator and subject to the terms of the Plan, the Restricted Shares may be transferred to a Permitted Transferee, pursuant to any such conditions and procedures the Administrator may require.
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(c) Lapse of Transfer Restrictions; Non-Compete Event . The Transfer Restrictions shall lapse with respect to 2/3rd of the Restricted Shares granted hereunder (rounded down to the next whole number of Shares) on the first anniversary of the Grant Date and with respect to the remaining 1/3 rd of the Shares granted hereunder on the second anniversary of the Grant Date such that the Transfer Restrictions on all Restricted Shares granted hereunder shall have lapsed on the second anniversary of the Grant Date. Notwithstanding any other provision of this Agreement to the contrary, if, on or prior to the second anniversary of the Grant Date, a Non-Compete Event occurs or Participant experiences a Termination of Services by the Company for Cause, then all Restricted Shares for which the Transfer Restrictions have not lapsed prior to the date of such Non-Compete Event or the date of Participants Termination of Services by the Company for Cause (less any Restricted Shares that have theretofore been surrendered to or withheld by the Company pursuant to Section 10.2 of the Plan to satisfy any tax withholding obligation), shall be immediately forfeited for no consideration.
(d) Vesting . Subject to Section 12.4 of the Plan and subject to Participants continued employment with or service to a Company Group Member on each vesting date and subject to Sections 4.11 and 4.16 hereof, the Award shall become vested (and, except as set forth in Section 2.2(c), no longer be subject to forfeiture or repurchase by the Company) in accordance with the vesting schedule set forth in the Grant Notice. For purposes of this Agreement, Restrictions shall mean the restrictions on sale or other transfer set forth in Section 2.2(b) and (c), the exposure to forfeiture set forth in Section 2.2(a) and the vesting schedule set forth in this Section 2.2(d) .
(e) Retained Distributions . Unless otherwise determined by the Administrator, the Company will retain custody of all cash dividends and other distributions ( Retained Distributions ) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the Restrictions and the other terms and conditions under this Agreement that are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested in accordance with Section 2.2(d) , and such Retained Distributions shall not bear interest or be segregated in separate accounts. Any Retained Distributions with respect to Restricted Shares that have not vested as of the Cessation Date shall thereupon be forfeited immediately and without any further action by the Company.
2.1 Consideration to the Company . In consideration of the grant of the Award by the Company, Participant agrees to render faithful and efficient services to the Company Group. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company Group or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
ARTICLE III.
RESTRICTIVE COVENANTS
3.1 Obligation to Maintain Confidentiality . Participant acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company Group and any of its Affiliates obtained by Participant while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) ( Confidential Information ) are the property of the Company Group and/or its Affiliates, including information concerning acquisition opportunities in or reasonably related to the Company Groups or any of its Affiliates business or industry of which Participant becomes aware during the period of Participants employment or service. Therefore, Participant agrees that he or she will not disclose to any unauthorized person, group or entity or use for Participants own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment or service with the Company Group or any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. Participant shall use reasonable best efforts to deliver to the Company on his or her Cessation Date, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company Group and any of its Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which Participant may then possess or have under his or her control, but excluding financial information of the Company relating to Participants ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
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3.2 Ownership of Property . Participant acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Company Group or any of its Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by Participant (either solely or jointly with others) while employed by or in the service of the Company Group or any of its Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) ( Work Product ) belong to the Company Group and its Affiliates and Participant hereby assigns, and agrees to assign, all of the above Work Product to the Company Group and its Affiliates. Any copyrightable work prepared in whole or in part by Participant in the course of Participants work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company Group and its Affiliates shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, Participant hereby assigns and agrees to assign to the Company Group and its Affiliates all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Participant shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after Participants employment with or service to the Company Group and its Affiliates) to establish and confirm the Company Groups or its Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
3.3 Third Party Information . Participant understands that the Company Group and its Affiliates will receive from third parties confidential or proprietary information ( Third Party Information ) subject to a duty on the Company Group and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of Participants employment with or service to the Company Group or any of its Affiliates and thereafter, and without in any way limiting the provisions of Section 3.1 above, Participant will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company Group or its Affiliates who need to know such information in connection with their work for the Company Group or its Affiliates) or use, except in connection with Participants work for the Company Group or any of its Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of Participants acts or omissions to act, (b) was known to Participant prior to Participants employment with or service to the Company Group and any of its Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
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3.4 Use of Information of Prior Employers . During Participants employment with and/or services, Participant will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Participant has an obligation of confidentiality, and will not bring onto the premises of the Company Group or any of its Affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Participant has an obligation of confidentiality unless consented to in writing by the former employer or person. Participant will use in the performance of Participants duties only information which is (a)(i) common knowledge in the industry or (ii) otherwise legally in the public domain, (b) otherwise provided or developed by the Company Group or its Affiliates or (c) in the case of materials, property or information belonging to any former employer or other person to whom Participant has an obligation of confidentiality, approved for such use in writing by such former employer or person.
3.5 Nonsolicitation . Participant acknowledges that, in the course of Participants employment and/or services, Participant will become familiar with the Company Groups and its Affiliates trade secrets and with other confidential information concerning the Company Group and its Affiliates and that Participants services will be of special, unique and extraordinary value to the Company Group and its Affiliates. Therefore, Participant agrees that:
(a) Restriction . While employed or engaged by the Company Group or any of its Affiliates, and for a period beginning on the Participants Cessation Date and ending on the second anniversary of such Cessation Date, Participant shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company Group or any of its Affiliates to leave the employ of the Company Group or any of its Affiliates, or in any way interfere with the relationship between the Company Group or any of its Affiliates and any employee thereof, and (ii) hire any person who was an employee of the Company Group or any of its Affiliates within 180 days prior to the time such employee was hired by Participant, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company Group or any of its Affiliates to cease doing business with the Company Group and its Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company Group and its Affiliates or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company Group or its Affiliates and with which the Company Group or its Affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company Group or any of its Affiliates in the two-year period immediately preceding Participants Termination of Services with the Company Group and its Affiliates.
(b) Enforcement . If, at the time of enforcement of Section 3.5(a) , a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Participant agrees that because his or her services are unique and Participant has access to confidential information, money damages would be an inadequate remedy for any breach of this Article 3. Participant agrees that the Company Group or any of its Affiliates in the event of a breach or threatened breach of this Article 3, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
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(c) Non-disparagement . Participant agrees that at no time during his employment or engagement by the Company Group and its Affiliates or thereafter, shall he or she make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company Group or any of its Affiliates or any of their respective directors, officers or employees; provided that Participant shall not be required to make any untruthful statement or to violate any law.
3.6 Acknowledgments . Participant acknowledges that the provisions of this Article 3 are (a) in addition to, and not in limitation of, any obligation of Participants under the terms of any employment agreement with the Company Group or any of its Affiliates, (b) in consideration of (i) employment with or engagement by the Company Group or any of its Affiliates, (ii) the issuance of the Restricted Shares by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Participant agrees and acknowledges that the restrictions contained in Article 3 do not preclude Participant from earning a livelihood, nor do they unreasonably impose limitations on Participants ability to earn a living. Participant agrees and acknowledges that the potential harm to the Company Group or any of its Affiliates of the non-enforcement of this Article 3 outweighs any potential harm to Participant of its enforcement by injunction or otherwise. Participant acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon Participant by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company Group and its Affiliates now existing or to be developed in the future. Participant expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
3.7 Forfeiture . Notwithstanding anything contained in this Agreement to the contrary, if Participant violates any of the restrictive covenants set forth in Article 3 or upon Participants Termination of Service by the Company Group for Cause, (a) the Restricted Shares (whether vested or unvested) shall immediately be terminated and forfeited in their entirety and (b) the Participant shall pay to the Company in cash any amounts paid to the participant in respect of the Restricted Shares during the 12 month period immediately preceding (or at any time after) the date of such violation. By accepting these Restricted Shares Participant consents to and authorizes the Company to deduct from any amounts payable by the Company to Participant any amounts Participant owes to the Company under this Section 3.7 . This right of set-off is in addition to any other remedies the Company may have against Participant for Participants breach of this Agreement. Participants obligations under this Section 3.7 shall be cumulative (but not duplicative) of any similar obligations Participant have pursuant to this Agreement or any other agreement with the Company.
3.8 Response to Subpoena; Whistleblower Protection . Participant may respond to a lawful and valid subpoena or other legal process but shall give the Company Group the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company Group and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Notwithstanding anything to the contrary contained herein, no provision of this Agreement shall be interpreted so as to impede Participant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. Participant does not need the prior authorization of the Company Group to make any such reports or disclosures and Participant shall not be not required to notify the Company Group that such reports or disclosures have been made.
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ARTICLE IV.
OTHER PROVISIONS
4.1 Tax Withholding . Notwithstanding any other provision of this Agreement:
(a) The Company Group has the authority to deduct or withhold, or require Participant to remit to the applicable Company Group Member, an amount sufficient to satisfy any applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by Applicable Law to be withheld with respect to any taxable event arising pursuant to this Agreement. The Company Group may withhold or Participant may make such payment in one or more of the forms specified below:
(i) by cash or check made payable to the Company Group Member with respect to which the withholding obligation arises;
(ii) by the deduction of such amount from other compensation payable to Participant;
(iii) with the consent of the Administrator, by requesting that the Company withhold a net number of Shares subject to the Award having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(iv) with the consent of the Administrator, by tendering to the Company vested Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company Group based on the maximum statutory withholding rates in Participants applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(v) through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to the Shares for which the Restrictions are then subject to lapse, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company Group Member with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the applicable Company Group Member at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(vi) in any combination of the foregoing.
(b) With respect to any withholding taxes arising in connection with the Award, in the event Participant fails to provide timely payment of all sums required pursuant to Section 4.1(a) , the Company shall have the right and option, but not the obligation, to treat such failure as an election by Participant to satisfy all or any portion of Participants required payment obligation pursuant to Section 4.1(a)(ii) or Section 4.1(a)(iii) above, or any combination of the foregoing as the Company may determine to be appropriate. The Company shall not be obligated to deliver any new certificate representing Restricted Shares to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the grant of the Award or the issuance or vesting of Restricted Shares hereunder or any other taxable event with respect to the Restricted Shares.
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(c) In the event any tax withholding obligation arising in connection with the Award will be satisfied under Section 4.1(a)(iii) above, then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participants behalf a whole number of Shares from those Shares that are subject to the Award as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company Group Member with respect to which the withholding obligation arises. Participants acceptance of this Award constitutes Participants instruction and authorization to the Company and such brokerage firm to complete the transactions described in this Section 4.1(c) , including the transactions described in the previous sentence, as applicable.
(d) In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 4.1(a)(v) or Section 4.1(c) : (i) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation arises, or as soon thereafter as practicable; (ii) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (iii) Participant will be responsible for all brokers fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Participant as soon as reasonably practicable; (v) Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (vi) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Participant agrees to pay immediately upon demand to the Company Group Member with respect to which the withholding obligation arises, an amount in cash sufficient to satisfy any remaining portion of the applicable Company Group Members withholding obligation.
(e) Participant is ultimately liable and responsible for, and, to the extent permitted by Applicable Law, agrees to indemnify and keep indemnified the Company Group from, all taxes owed in connection with the Award, regardless of any action any Company Group Member takes with respect to any tax withholding obligations that arise in connection with the Award. No Company Group Member makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding or vesting of the Award or the subsequent sale of Shares. The Company Group does not commit and is under no obligation to structure the Award to reduce or eliminate Participants tax liability.
4.2 Conditions to Delivery of Stock . Subject to Section 2.1 , the Restricted Shares deliverable under this Award may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares under this Award prior to fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body that the Administrator shall, in its absolute discretion, deem necessary or advisable;
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(c) The obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares;
(e) The receipt of any applicable withholding tax in accordance with Section 4.1 by the Company Group Member with respect to which the applicable withholding obligation arises; and
(f) The lapse of such reasonable period of time following the grant of this Award as the Administrator may from time to time establish for reasons of administrative convenience.
4.3 Rights as Stockholder . Except as otherwise provided herein and subject to Section 2.2(d) , upon the Grant Date, Participant shall have all the rights of a stockholder with respect to the Restricted Shares, subject to the Restrictions herein, including the right to vote the Restricted Shares and the right to receive any cash or stock dividends paid to or made with respect to the Restricted Shares; provided, however, that at the discretion of the Company, and prior to the delivery of Restricted Shares, Participant may be required to execute a stockholders agreement in such form as shall be determined by the Company.
4.4 Section 83(b) Election . Participant understands that Section 83(a) of the Code taxes as ordinary income the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares and any Retained Distributions at the time the Restrictions on such Restricted Shares and Retained Distributions lapse. Participant understands that, notwithstanding the preceding sentence, Participant may elect to be taxed at the time of the Grant Date, rather than at the time the Restrictions lapse, by filing an election under Section 83(b) of the Code (an 83(b) Election ) with the Internal Revenue Service within 30 days of the Grant Date. In the event that Participant files an 83(b) Election, Participant shall provide the Company a copy thereof prior to the expiration of such 30 day period. Participant understands that in the event an 83(b) Election is filed with the Internal Revenue Service within such time period, Participant will recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the Restricted Shares and the Fair Market Value of such Restricted Shares as of the Grant Date. Participant further understands that an additional copy of such 83(b) Election form should be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Participant acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the Award hereunder, and does not purport to be complete. PARTICIPANT FURTHER ACKNOWLEDGES THAT THE COMPANY IS NOT RESPONSIBLE FOR FILING PARTICIPANTS 83(b) ELECTION, AND THE COMPANY HAS DIRECTED PARTICIPANT TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH PARTICIPANT MAY RESIDE, AND THE TAX CONSEQUENCES OF PARTICIPANTS DEATH. PARTICIPANT HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING PARTICIPANTS 83(b) ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR FROM FAILURE TO FILE THE ELECTION AND PAYING TAXES RESULTING FROM THE LAPSE OF THE RESTRICTIONS ON THE UNVESTED RESTRICTED SHARES AND RETAINED DISTRIBUTIONS. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANTS PURCHASE OR DISPOSITION OF THE RESTRICTED SHARES AND PARTICIPANT REPRESENTS THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
4.5 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
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4.6 Adjustments . The Administrator may accelerate the vesting of all or a portion of the Restricted Shares in such circumstances as it, in its sole discretion, may determine Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.
4.7 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 4.7 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
4.8 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.9 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
4.10 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
4.11 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board, provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of Participant.
4.12 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 2.2 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
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4.13 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Award, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.14 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of any Company Group Member or shall interfere with or restrict in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between a Company Group Member and Participant.
4.15 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.16 Section 409A . This Award is not intended to constitute nonqualified deferred compensation within the meaning of Section 409A. However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
4.17 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.18 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets.
4.19 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
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Exhibit 10.23
BJS WHOLESALE CLUB HOLDINGS, INC.
2018 INCENTIVE AWARD PLAN
DIRECTOR RESTRICTED STOCK UNIT AWARD GRANT NOTICE
BJs Wholesale Club Holdings, Inc., a Delaware corporation (the Company ), pursuant to its 2018 Incentive Award Plan, as amended from time to time (the Plan ), hereby grants to the holder listed below ( Participant ) the number of Restricted Stock Units (the RSUs ) set forth below. The RSUs are subject to the terms and conditions set forth in this Restricted Stock Unit Grant Notice (the Grant Notice ) and the Restricted Stock Unit Agreement attached hereto as Exhibit A (the Agreement ) and the Plan, which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in the Grant Notice and the Agreement.
Participant: |
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Grant Date: |
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Number of RSUs: |
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Type of Shares Issuable: |
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Vesting Schedule: |
Subject to Section 2.2 of the Agreement, the RSUs shall vest on the earlier to occur of the first anniversary of the Grant Date or immediately prior to the annual meeting of the Companys stockholders in 2019. |
By Participants signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Agreement, the Plan and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Grant Notice, the Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Grant Notice or the Agreement.
BJS WHOLESALE CLUB HOLDINGS, INC. | PARTICIPANT | |||||||||
H OLDER : | ||||||||||
By: |
By: |
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Title: |
EXHIBIT A
TO DIRECTOR RESTRICTED STOCK UNIT AWARD GRANT NOTICE
DIRECTOR RESTRICTED STOCK UNIT AWARD AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant the number of RSUs set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
1.2 Incorporation of Terms of Plan . The RSUs and the shares of Common Stock ( Stock ) issued to Participant hereunder ( Shares ) are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
AWARD OF RESTRICTED STOCK UNITS
2.1 Award of RSUs .
(a) In consideration of Participants past and/or continued employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the grant date set forth in the Grant Notice (the Grant Date ), the Company has granted to Participant the number of RSUs set forth in the Grant Notice, upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustment as provided in Section 3.1(b) hereof and Section 12.2 of the Plan. Each RSU represents the right to receive one Share or, at the option of the Company, an amount of cash as set forth in Section 2.3(b), in either case, at the times and subject to the conditions set forth herein. However, unless and until the RSUs have vested, Participant will have no right to the payment of any Shares subject thereto. Prior to the actual delivery of any Shares, the RSUs will represent an unsecured obligation of the Company, payable only from the general assets of the Company.
2.2 Vesting of RSUs .
(a) Subject to Participants continued employment with or service to the Company or a Subsidiary on the vesting date and subject to the terms of this Agreement, the RSUs shall vest in such amounts and at such times as are set forth in the Grant Notice.
(b) Notwithstanding the Grant Notice or the provisions of Section 2.2(a) and (c), in the event that the Participant incurs a Termination of Service upon or within twelve months following a Change in Control, the RSUs shall accelerate and vest in full.
(c) In the event Participant incurs a Termination of Service, except as may be otherwise provided by the Administrator or as set forth in a written agreement between Participant and the Company, Participant shall immediately forfeit any and all RSUs granted under this Agreement which have not vested or do not vest on or prior to the date on which such Termination of Service occurs, and Participants rights in any such RSUs which are not so vested shall lapse and expire.
2.3 Distribution or Payment of RSUs .
(a) Participants RSUs shall be distributed in Shares (either in book-entry form or otherwise) or, at the option of the Company, paid in an amount of cash as set forth in Section 2.3(b), in either case, as soon as administratively practicable following the vesting of the applicable RSU pursuant to Section 2.2, and, in any event, within sixty (60) days following such vesting (for the avoidance of doubt, this deadline is intended to comply with the short-term deferral exemption from Section 409A of the Code). Notwithstanding the foregoing, the Company may delay a distribution or payment in settlement of RSUs if it reasonably determines that such payment or distribution will violate Federal securities laws or any other Applicable Law, provided that such distribution or payment shall be made at the earliest date at which the Company reasonably determines that the making of such distribution or payment will not cause such violation, as required by Treasury Regulation Section 1.409A-2(b)(7)(ii), and provided further that no payment or distribution shall be delayed under this Section 2.3(a) if such delay will result in a violation of Section 409A of the Code.
(b) In the event that the Company elects to make payment of Participants RSUs in cash, the amount of cash payable with respect to each RSU shall be equal to the Fair Market Value of a Share on the day immediately preceding the applicable distribution or payment date set forth in Section 2.3(a). All distributions made in Shares shall be made by the Company in the form of whole Shares, and any fractional share shall be distributed in cash in an amount equal to the value of such fractional share determined based on the Fair Market Value as of the date immediately preceding the date of such distribution.
2.4 Conditions to Issuance of Certificates . The Company shall not be required to issue or deliver any certificate or certificates for any Shares or to cause any Shares to be held in book-entry form prior to the fulfillment of all of the following conditions: (A) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (B) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable, and (C) the obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable.
2.5 Tax Withholding . Notwithstanding any other provision of this Agreement, to the extent applicable the Company shall be entitled to require payment by Participant of any sums required by applicable law to be withheld with respect to the grant of RSUs or the issuance of shares of Common Stock. Any such payment shall be made pursuant to the Plan.
(a) Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RSUs. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure the RSUs to reduce or eliminate Participants tax liability.
2.6 Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book-entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). Except as otherwise provided herein, after such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to such Shares, including, without limitation, the right to receipt of dividends and distributions on such Shares.
ARTICLE III.
OTHER PROVISIONS
3.1 Administration . The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.
3.2 RSUs Not Transferable . The RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the RSUs have been issued, and all restrictions applicable to such Shares have lapsed. No RSUs or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. Notwithstanding the foregoing, with the consent of the Administrator, the RSUs may be transferred to certain persons or entities related to the Participant, including but not limited to members of Participants family, charitable institutions or trusts or other entities whose beneficiaries or beneficial owners are members of Participants family or to such other persons or entities as may be expressly approved by the Administrator, pursuant to any such conditions and procedures the Administrator may require.
3.3 Adjustments . The Administrator may accelerate the vesting of all or a portion of the RSUs in such circumstances as it, in its sole discretion, may determine. Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan (subject to the terms of Section 3.13 hereof).
3.4 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 3.4, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
3.5 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
3.6 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
3.7 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.
3.8 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board , provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in any material way without the prior written consent of Participant.
3.9 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 3.2 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
3.10 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the RSUs, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
3.11 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
3.12 Entire Agreement . The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
3.13 Section 409A . This Award is not intended to constitute nonqualified deferred compensation within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, Section 409A ). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
3.14 Agreement Severable . In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
3.15 Limitation on Participants Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs.
3.16 Counterparts . The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.
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Exhibit 10.24
BJS WHOLESALE CLUB HOLDINGS, INC.
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Non-employee members of the board of directors (the Board ) of BJs Wholesale Club Holdings, Inc. (the Company ) shall be eligible to receive cash and equity compensation as set forth in this Non-Employee Director Compensation Policy (this Policy ). The cash and equity compensation described in this Policy shall be paid or be made, as applicable, automatically and without further action of the Board, to each member of the Board who is not an employee of the Company or any parent or subsidiary of the Company (each, a Non-Employee Director ), who may be eligible to receive such cash or equity compensation, unless such Non-Employee Director declines the receipt of such cash or equity compensation by written notice to the Company. This Policy shall become effective after the effectiveness of the Companys initial public offering (the IPO ) and shall remain in effect until it is revised or rescinded by further action of the Board. This Policy may be amended, modified or terminated by the Board at any time in its sole discretion. The terms and conditions of this Policy shall supersede any prior cash and/or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors and between any subsidiary of the Company and any of its non-employee directors.
1. Cash Compensation .
(a) Annual Retainers . Each Non-Employee Director shall receive an annual retainer of $85,000 for service on the Board.
(b) Additional Annual Retainers . In addition, a Non-Employee Director shall receive the following annual retainers:
(i) Lead Independent Director of the Board . A Non-Employee Director serving as Lead Independent Director of the Board shall receive an additional annual retainer of $30,000 for such service.
(ii) Audit Committee . A Non-Employee Director serving as Chairperson of the Audit Committee shall receive an additional annual retainer of $25,000 for such service. A Non-Employee Director serving as a member of the Audit Committee (other than the Chairperson) shall receive an additional annual retainer of $12,500 for such service.
(iii) Compensation Committee . A Non-Employee Director serving as Chairperson of the Compensation Committee shall receive an additional annual retainer of $20,000 for such service. A Non-Employee Director serving as a member of the Compensation Committee (other than the Chairperson) shall receive an additional annual retainer of $10,000 for such service.
(vi) Nominating and Corporate Governance Committee . A Non-Employee Director serving as Chairperson of the Nominating and Corporate Governance Committee shall receive an additional annual retainer of $15,000 for such service. A Non-Employee Director serving as a member of the Nominating and Corporate Governance Committee (other than the Chairperson) shall receive an additional annual retainer of $7,500 for such service.
(c) Payment of Retainers . The annual retainers described in Sections 1(a) and 1(b) shall be earned on a quarterly basis based on a calendar quarter and shall be paid by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable positions described in Section
1(b), for an entire calendar quarter, such Non-Employee Director shall receive a prorated portion of the retainer(s) otherwise payable to such Non-Employee Director for such calendar quarter pursuant to Sections 1(a) and 1(b), with such prorated portion determined by multiplying such otherwise payable retainer(s) by a fraction, the numerator of which is the number of days during which the Non-Employee Director serves as a Non-Employee Director or in the applicable positions described in Section 1(b) during the applicable calendar quarter and the denominator of which is the number of days in the applicable calendar quarter.
2. Equity Compensation . Non-Employee Directors shall be granted the equity awards described below. The awards described below shall be granted under and shall be subject to the terms and provisions of the Companys 2018 Incentive Award Plan or any other applicable Company equity incentive plan then-maintained by the Company (such plan, as may be amended from time to time the Equity Plan ) and shall be granted subject to the execution and delivery of award agreements, including attached exhibits, in substantially the forms previously approved by the Board. All applicable terms of the Equity Plan apply to this Policy as if fully set forth herein, and all equity grants hereunder are subject in all respects to the terms of the Equity Plan.
(a) Annual Awards . Each Non-Employee Director who (i) serves on the Board as of the date of any annual meeting of the Companys stockholders (an Annual Meeting ) after the Pricing Date and (ii) will continue to serve as a Non-Employee Director immediately following such Annual Meeting shall be automatically granted, on the date of such Annual Meeting, restricted stock units that have an aggregate fair value on the date of grant of $140,000 (as determined in accordance with ASC 718 and subject to adjustment as provided in the Equity Plan). The awards described in this Section 2(a) shall be referred to as the Annual Awards . For the avoidance of doubt, a Non-Employee Director elected for the first time to the Board at an Annual Meeting shall receive only an Annual Award in connection with such election, and shall not receive any Initial Award on the date of such Annual Meeting as well.
(b) Initial Awards . Except as otherwise determined by the Board, each Non-Employee Director who is initially elected or appointed to the Board after the Pricing Date on any date other than the date of an Annual Meeting shall be automatically granted, on the date of such Non-Employee Directors initial election or appointment (such Non-Employee Directors Start Date), restricted stock units that have an aggregate fair value on such Non-Employee Directors Start Date equal to the product of (i) $140,000 (as determined in accordance with ASC 718 and subject to adjustment as provided in the Equity Plan) and (ii) a fraction, the numerator of which is (x) 365 minus (y) the number of days in the period beginning on the date of the Annual Meeting immediately preceding such Non-Employee Directors Start Date (or, if no such Annual Meeting has occurred, the effective date of the Companys IPO) and ending on such Non-Employee Directors Start Date and the denominator of which is 365 (with the number of shares of common stock underlying each such award subject to adjustment as provided in the Equity Plan). The awards described in this Section shall be referred to as Initial Awards . For the avoidance of doubt, no Non-Employee Director shall be granted more than one Initial Award.
(c) Deferral of Awards . Notwithstanding the foregoing, each Non-Employee Director may elect to defer the grant of an Annual Award or Initial Award, subject to compliance with Section 409A of the Internal Revenue Code of 1986, as amended. The Board may also determine, in its sole discretion that an Annual Award for a Non-Employee Director be granted in the form of deferred stock or shares of common stock with equivalent value on the date of grant.
(d) Termination of Employment of Employee Directors . Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will not receive an Initial Award pursuant to Section 2(b) above, but to the extent that they are otherwise eligible, will be eligible to receive, after termination from employment with the Company and any parent or subsidiary of the Company, Annual Awards as described in Section 2(a) above.
(e) Vesting of Awards Granted to Non-Employee Directors . Each Annual Award and Initial Award shall vest and become exercisable on the earlier of (i) the day immediately preceding the date of the first Annual Meeting following the date of grant and (ii) the first anniversary of the date of grant, subject to the Non-Employee Director continuing in service on the Board through the applicable vesting date. No portion of an Annual Award or Initial Award that is unvested or unexercisable at the time of a Non-Employee Directors termination of service on the Board shall become vested and exercisable thereafter. In the event that a Non-Employee Director incurs a Termination of Service upon or within twelve months following a Change in Control (as such terms are defined in the Equity Plan), each of the Non-Employee Directors outstanding Initial Awards and Annual Awards shall accelerate and vest in full.
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Exhibit 10.25
BJS WHOLESALE CLUB, INC.
DIRECTOR STOCK OWNERSHIP POLICY
Section 1. Purpose and Effective Date .
The purpose of this Director Stock Ownership Policy (this Policy ), together with the equity awards granted to certain members of the board of directors (the Board ) of BJs Wholesale Club, Inc. (the Company ) pursuant to the Companys Non-Employee Director Compensation Policy, as may be amended from time to time (the Non-Employee Director Compensation Policy ), is to encourage such members of the Board to remain invested in the performance of the Company and the Companys common stock, par value $0.01 per share (the Common Stock ), and to more closely align the interests of the members of the Board with those of the Companys shareholders. This Policy is designed to aid the Company in attracting and retaining those persons whose abilities, experience and judgment can contribute to maximizing stockholder value. This Policy shall become effective upon the consummation of an initial public offering of the Companys Common Stock and if such an initial public offering does not occur on or prior to December 31, 2018 this policy shall be void ab initio.
Section 2. Share Ownership Requirements .
(a) Minimum Ownership Requirement . Each person serving as a member of the Board that is not an employee of the Company or its subsidiaries (each, a Non-Employee Director ) is required to maintain during his or her tenure at the Company beneficial ownership of a number of shares of Common Stock with a value equal to five times his or her applicable annual cash retainer, excluding any committee retainers or retainers paid based on his or her service as lead independent director, if applicable (the Minimum Ownership Requirement ), during his or her service on the Board. The value of a Non-Employee Directors beneficial ownership shall be calculated by multiplying (i) the sum of the number of shares of Common Stock beneficially owned by the Non-Employee Director (as determined in accordance with Section 2(b) hereof) by (ii) the closing price per share of the Common Stock on the applicable measurement date. Once a Non-Employee Director has achieved his or her Minimum Ownership Requirement, he or she will not be deemed non-compliant with this Policy if the value of his qualifying shares (as determined pursuant to Section 2(b) below) decreases below the Minimum Ownership Requirement solely due to a decrease in the closing price per share of Common Stock on the applicable measurement date and not due to a sale or other disposal of Common Stock by the Non-Employee Director.
(b) Counting . For purposes of this Policy, shares of Common Stock that count toward satisfaction of the Minimum Ownership Requirement shall include (a) any class of equity securities of the Company, in any case whether held (i) directly or indirectly or by or for the benefit of immediate family members; (ii) by trusts for the benefit of such person or such persons immediate family members, or (iii) in a 401(k) plan, IRA or deferred compensation plan; and (b) shares of restricted Common Stock and shares subject to outstanding restricted stock unit awards, in either case, that vest solely based on the passage of time. Shares of Common Stock that count toward satisfaction of the Minimum Ownership Requirement shall not include (x) shares of Common Stock subject to outstanding stock options, whether exercisable or unexercisable; (y) unearned performance-based vesting restricted Common Stock, restricted stock unit awards or other incentive awards; and (z) warrants and all other forms of derivative securities.
Section 3. Compliance .
(a) Compliance Deadline . Each Non-Employee Director serving on the Board as of the date hereof shall have until [ , 2023] 1 to come into compliance with this Policy. Any newly appointed or elected Non-Employee Director hereafter shall come into compliance with this Policy no later than the fifth anniversary of the Non-Employee Directors appointment or election.
(b) Determination of Share Ownership . Each Non-Employee Director shall certify as to his or her compliance with the Minimum Ownership Requirement during his or her service on the Board of Non-Employee Directors of the Company at least once each year (beginning with the year in which these ownership guidelines become applicable to such Non-Employee Director) in connection with responding to the Companys annual Director and Officer Questionnaire.
(c) Exceptions . The Minimum Ownership Requirement may be waived, at the sole discretion of the disinterested members of the Board, if compliance would create severe hardship for a Non-Employee Director, or would violate Section 16(b) of the Securities Exchange Act of 1934, as amended or would prevent the Non-Employee Director from complying with a court order, as in the case of a divorce settlement. A Non-Employee Director may file notice with the Corporate Secretary to be presented to the Board, advising the Board of the circumstances and describing the extent of the waiver requested. It is expected that these instances will be rare.
(d) Remedies for Non-Compliance . The Compensation Committee of the Board (the Compensation Committee ) has the authority to review each Non-Employee Directors compliance (or progress towards compliance) with this Policy from time to time and, in its sole discretion, to impose such conditions, restrictions or limitations on any Non-Employee Director as the Compensation Committee determines to be necessary or appropriate in order to achieve the purposes of this Policy. For example, the Compensation Committee may mandate that a Non-Employee Director retain (and not transfer) all or a portion of any shares delivered to the Non-Employee Director through the Companys equity plans or otherwise restrict the Non-Employee Directors transfer of previously owned shares.
Section 4. Administration of the Policy .
(a) Authority . The Compensation Committee shall conduct the general administration of this Policy in accordance with its provisions. The Compensation Committee shall have full power and authority to interpret this Policy and to adopt such rules for the administration, interpretation and application of this Policy as are consistent therewith and to interpret, amend or revoke any such rules. The Compensation Committee may delegate administrative duties under this Policy to one or more agents as it shall deem necessary or advisable. Any decision or action taken by the Compensation Committee with respect to the administration or interpretation of this Policy shall be conclusive and binding on all persons.
(b) Liability . No member of the Board shall be personally liable for any action or determination made in good faith with respect to this Policy or to any settlement of any dispute between a Non-Employee Director and the Company. The Board shall be entitled to rely upon the advice or opinions of any attorneys, consultants, accountants, appraisers, brokers or other persons with respect to all matters concerning this Policy.
Section 5. Amendment, Modification, and Termination .
This Policy may at any time or from time to time be amended, modified or terminated by the Compensation Committee.
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NTD: To be the fifth anniversary of the IPO. |
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Exhibit 10.26
BJS WHOLESALE CLUB, INC.
EXECUTIVE OFFICER STOCK OWNERSHIP POLICY
Section 1. Purpose and Effective Date .
The purpose of this Executive Officer Stock Ownership Policy (this Policy ) is to encourage executive officers as defined under Section 16 of the Securities Exchange Act of 1934, as amended (the Executive Officers ) of BJs Wholesale Club, Inc. (the Company ), to remain invested in the performance of the Company and the Companys common stock, par value $0.01 per share (the Common Stock ), and to more closely align the interests of the Executive Officers with those of the Companys shareholders. This Policy is designed to aid the Company in attracting and retaining those persons whose abilities, experience and judgment can contribute to maximizing stockholder value. This Policy shall become effective upon the consummation of an initial public offering of the Companys Common Stock and if such an initial public offering does not occur on or prior to December 31, 2018 this policy shall be void ab initio.
Section 2. Share Ownership Requirements .
(a) Minimum Ownership Requirement . Each Executive Officer is required to maintain during his or her tenure at the Company beneficial ownership of a number of shares of Common Stock with a value equal to the following during his or her tenure as an Executive Officer of the Company, as applicable (the Minimum Ownership Requirement ):
(i) Each person serving as a Chief Executive Officer: five times his or her annual base salary.
(ii) Each person serving as an Executive Vice President: three times his or her annual base salary.
(iii) Each person serving as a Senior Vice President: one times his or her annual base salary.
(b) The value of an Executive Officers beneficial ownership shall be calculated by multiplying (i) the sum of the number of shares of Common Stock beneficially owned by the Executive Officer (as determined in accordance with Section 2(b) hereof) by (ii) the closing price per share of the Common Stock on the applicable measurement date. Once an Executive Officer has achieved his or her Minimum Ownership Requirement, he or she will not be deemed non-compliant with this Policy if the value of his or her qualifying shares (as determined pursuant to Section 2(c) below) decreases below the Minimum Ownership Requirement solely due to a decrease in the closing price per share of Common Stock on the applicable measurement date and not due to a sale or other disposal of Common Stock by the Executive Officer.
(c) Counting . For purposes of this Policy, shares of Common Stock that count toward satisfaction of the Minimum Ownership Requirement shall include (a) any class of equity securities of the Company, in any case whether held (i) directly or indirectly or by or for the benefit of immediate family members; (ii) by trusts for the benefit of such person or such persons immediate family members, or (iii) in a 401(k) plan, IRA or employee equity purchase or deferred compensation plan; and (b) shares of restricted Common Stock and shares subject to outstanding restricted stock unit awards, in either case, that vest solely based on the passage of time. Shares of Common Stock that count toward satisfaction of the Minimum Ownership Requirement shall not include (x) shares of Common Stock subject to outstanding stock options, whether exercisable or unexercisable; (y) unearned performance-based vesting restricted Common Stock, restricted stock unit awards or other incentive awards; and (z) warrants and all other forms of derivative securities.
Section 3. Compliance .
(a) Compliance Deadline . Each Executive Officer as of the date hereof shall have until [ , 2023] 1 to come into compliance with this Policy. Any newly hired or promoted Executive Officer hereafter shall come into compliance with this Policy no later than the fifth anniversary of the Executive Officers hire or promotion date. Notwithstanding anything to the contrary, in the event such Executive Officer is elevated to a higher executive position ( e.g. , Senior Vice President to Executive Vice President or Executive Vice President to CEO), such Executive Officer shall come into compliance with the newly applicable Minimum Ownership Requirement no later than the later of the applicable deadline set forth in the immediately preceding sentences or December 31 of the year in which the fifth anniversary of the date on which such Executive Officer becomes of his or her advancement to such higher position.
(b) Determination of Share Ownership . Each Executive Officer shall certify as to his or her compliance with the Minimum Ownership Requirement during his or her tenure as an Executive Officer of the Company at least once each year (beginning with the year in which these ownership guidelines become applicable to such Executive Officer) in connection with responding to the Companys annual Director and Officer Questionnaire.
(c) Exceptions . The Minimum Ownership Requirement may be waived, at the sole discretion of the disinterested members of the Board of Directors of the Company (the Board ), if compliance would create severe hardship for an Executive Officer, or would violate Section 16(b) of the Securities Exchange Act of 1934, as amended or would prevent the Executive Officer from complying with a court order, as in the case of a divorce settlement. An Executive Officer may file notice with the Corporate Secretary to be presented to the Board, advising the Board of the circumstances and describing the extent of the waiver requested. It is expected that these instances will be rare.
(d) Remedies for Non-Compliance . The Compensation Committee of the Board (the Compensation Committee ) has the authority to review each Executive Officers compliance (or progress towards compliance) with this Policy from time to time and, in its sole discretion, to impose such conditions, restrictions or limitations on any Executive Officer as the Compensation Committee determines to be necessary or appropriate in order to achieve the purposes of this Policy. For example, the Compensation Committee may mandate that an Executive Officer retain (and not transfer) all or a portion of any shares delivered to the Executive Officer through the Companys equity plans or otherwise restrict the Executive Officers transfer of previously owned shares.
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NTD: To be the fifth anniversary of the IPO. |
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Section 4. Administration of the Policy .
(a) Authority . The Compensation Committee shall conduct the general administration of this Policy in accordance with its provisions. The Compensation Committee shall have full power and authority to interpret this Policy and to adopt such rules for the administration, interpretation and application of this Policy as are consistent therewith and to interpret, amend or revoke any such rules. The Compensation Committee may delegate administrative duties under this Policy to one or more agents as it shall deem necessary or advisable. Any decision or action taken by the Compensation Committee with respect to the administration or interpretation of this Policy shall be conclusive and binding on all persons.
(b) Liability . No member of the Board shall be personally liable for any action or determination made in good faith with respect to this Policy or to any settlement of any dispute between an Executive Officer and the Company. The Board shall be entitled to rely upon the advice or opinions of any attorneys, consultants, accountants, appraisers, brokers or other persons with respect to all matters concerning this Policy.
Section 5. Amendment, Modification, and Termination .
This Policy may at any time or from time to time be amended, modified or terminated by the Compensation Committee.
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Exhibit 10.27
BJS WHOLESALE CLUB, INC.
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of this [DATE] (the Agreement), is between BJs Wholesale Club, Inc., a Delaware corporation (the Company, which term shall include any one or more of its subsidiaries where appropriate), and [OFFICER] (Indemnitee).
WHEREAS, highly competent persons are reluctant to serve as directors or officers or in other capacities unless they are provided with adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of, such companies; and
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company; and
WHEREAS, Indemnitee is willing to serve, to continue to serve and/or to perform additional service for or on behalf of the Company on the condition that he or she be so indemnified;
NOW THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
1. Definitions . For purposes of this Agreement:
(a) Change of Control shall have the meaning set forth on Exhibit A hereto.
(b) Corporate Status describes the status of a person who is or was or has agreed to become a director of the Company or any of its subsidiaries, or is or was or has agreed to become an officer or fiduciary of the Company or of any other corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other enterprise which such person is or was serving or has agreed to serve at the request of the Company.
(c) Disinterested Director means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(d) Expenses shall include all reasonable attorneys fees, retainers, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend or investigating a Proceeding, but shall not include the amount of judgments, fines or penalties against Indemnitee.
(e) Independent Counsel means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has
been, retained to represent the Company or Indemnitee in any matter material to either such party. Notwithstanding the forgoing, the term Independent Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitees rights under this Agreement.
(f) Proceeding includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, appeal or any other proceeding, whether civil, criminal, administrative or investigative, arising on or after the date of this Agreement (and regardless of when Indemnitees act or failure to act occurred), except one initiated by Indemnitee pursuant to Section 10 of this Agreement to enforce his or her rights under this Agreement.
2. Services by Indemnitee . Indemnitee agrees to serve or continue to serve as a director or officer of the Company and/or one or more of its subsidiaries. This Agreement shall not impose any obligation on Indemnitee or the Company or any of its subsidiaries to continue Indemnitees position with the Company or any of its subsidiaries beyond any period otherwise applicable.
3. General . The Company shall indemnify, and shall advance Expenses to, Indemnitee as provided in this Agreement with respect to any matters pertaining to Indemnitees Corporate Status and to the fullest extent permitted by law.
4. Proceedings Other Than Proceedings by or in the Right of the Company . Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his or her Corporate Status, he or she is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding other than a Proceeding by or in the right of the Company. Pursuant to this Section 4, Indemnitee shall be indemnified against Expenses, judgments, penalties and fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with any such Proceeding or any claim, issue or matter therein, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe his or her conduct was unlawful. Notwithstanding the preceding provisions of this Section 4, it is the intention of the parties hereto that Indemnitee shall be indemnified to the full extent authorized or permitted by Delaware law and, therefore, to the extent Delaware law shall permit broader contractual indemnification, this contract shall be deemed amended to incorporate such broader indemnification.
5. Proceedings by or in the Right of the Company . Indemnitee shall be entitled to the rights of indemnification provided in this Section 5 if, by reason of his or her Corporate Status, he or she is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 5, Indemnitee shall be indemnified against Expenses and, to the extent permitted by applicable law, amounts paid in settlement actually and reasonably incurred by him or her on his or her behalf in connection with such Proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Notwithstanding the preceding provisions of this Section 5, it is the intention of the parties hereto
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that Indemnitee shall be indemnified to the full extent authorized or permitted by Delaware law and, therefore, to the extent Delaware law shall permit broader contractual indemnification, this contract shall be deemed amended to incorporate such broader indemnification. Notwithstanding the foregoing provisions of this Section 5, no indemnification against such Expenses shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company; provided, however, that indemnification against Expenses shall nevertheless be made by the Company in such event to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine.
6. Indemnification for Expenses of a Party who is Wholly or Partly Successful . Notwithstanding any other provision of this Agreement, but subject to Section 14, to the extent that Indemnitee is, by reason of his or her Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he or she shall be indemnified against all Expenses actually and reasonably incurred by him or her on his or her behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 6 and without limitation, the termination of any claim, issue, or matter in such a Proceeding by dismissal or withdrawal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue, or matter.
7. Advance of Expenses . The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within 20 days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred or to be incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced to the extent it shall ultimately be determined that Indemnitee is not entitled to be indemnified hereunder against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification .
(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification hereunder.
(b) Upon written request by Indemnitee for indemnification pursuant to Section 8(a) hereof, a determination, if required by applicable law, with respect to Indemnitees entitlement thereto under Delaware law shall be made in the specific case: (i) if a Change of Control shall have occurred, by Independent Counsel (unless Indemnitee shall request that such determination be made by the Board of Directors or the stockholders, in which case the determination shall be made in the manner provided below in clauses (ii) or (iii), as the case may be) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; (ii) if a
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Change of Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors, or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable, or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, or (C) by the stockholders of the Company; or (iii) as provided in Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitees entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys fees and disbursements) incurred by Indemnitee in so cooperating shall be borne by the Company (irrespective of the determination as to Indemnitees entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) of this Agreement, the Independent Counsel shall be selected as provided in this Section 8(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall have been selected or if selected, shall have been objected to, in accordance with this Section 8(c), either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the others selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 8(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees and
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expenses incident to the procedures of this Section 8(c), regardless of the manner in which such Independent Counsel was selected or appointed.
9. Presumptions and Effect of Certain Proceedings .
(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under Section 8 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made such determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitees statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 9(b) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 8(b) of this Agreement and if (A) within 15 days after receipt by the Company of the request for such determination the Board of Directors has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat.
(c) The termination of any Proceeding or of any claim, issue or matter therein by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
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10. Remedies of Indemnitee .
(a) In the event that (i) a determination is made pursuant to Section 8 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7 of this Agreement, (iii) payment of indemnification is not made pursuant to Section 6 of this Agreement within ten days after receipt by the Company of a written request therefor, or (iv) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 9(b) of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his or her entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Company shall not oppose Indemnitees right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section 8 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 10 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made pursuant to Section 8 or Section 9 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitees statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his or her rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 1 of this Agreement) actually and reasonably incurred by him or her in such judicial adjudication or arbitration, but only if he or she prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the
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expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.
11. Security . To the extent requested by Indemnitee and approved by the Board of Directors, the Company may at any time and from time to time provide security to Indemnitee for the Companys obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.
12. Non-Exclusivity; Duration of Agreement; Subrogation .
(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Companys certificate of incorporation or by-laws, any other agreement, a vote of stockholders or a resolution of directors, or otherwise. This Agreement shall continue as to Indemnitee even though his or her Corporate Status may have ceased and shall inure to the benefit of Indemnitee and his or her heirs, executors and administrators.
(b) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
13. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent permitted by applicable law, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses . Notwithstanding any other provision of this Agreement, except as otherwise provided in Section 10, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding, or any claim therein, brought or made by him or her against the Company without the prior written consent of the Company.
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15. Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
16. Modification and Waiver . This Agreement may be amended from time to time to reflect changes in Delaware law or for other reasons. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
17. Notice by Indemnitee . Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder; provided, however, that the failure to give any such notice shall not disqualify the Indemnitee from indemnification hereunder.
18. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:
(a) If to Indemnitee to:
(b) If to the Company to:
BJs Wholesale Club, Inc.
25 Research Drive
Westborough, Massachusetts 01581
Attention: President
or to such other address as may have been furnished to Indemnitee by the Company or the Company by Indemnitee, as the case may be.
19. Governing Law . The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws rule or provision that would result in the application of the domestic substantive laws of any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
BJS WHOLESALE CLUB, INC.
|
By |
Graham Luce |
Senior Vice President and General Counsel |
INDEMNITEE |
|
[OFFICER] |
GL2015:Indemnification Agreements/Standard Indem Agreement CURRENT 2015 rev.050515
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EXHIBIT A
Definition of Change of Control
For the purpose of this Agreement, a Change of Control shall mean:
(a) The acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act))(a Person) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then-outstanding shares of common stock of the Company (the Outstanding Company Common Stock) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which satisfies the criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this definition; or
(b) Individuals who, as of the date hereof, constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequently to the date hereof whose election, or nomination for election by the Companys stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board (except that this proviso shall not apply to any individual whose initial assumption of office as a director occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board); or
(c) Consummation of a reorganization, merger or consolidation involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a Business Combination), in each case, unless, immediately following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, of the corporation resulting from such Business Combination (which as used in section (c) of this definition shall include, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person
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(excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation and (iii) at least half of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
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Exhibit 21.1
SUBSIDIARIES OF BEACON HOLDING INC.
Legal Name |
State or Other Jurisdiction of Incorporation or Organization |
|
BJs Wholesale Club, Inc. |
Delaware |
|
BJME Operating Corp. |
Massachusetts |
|
BJNH Operating Co., LLC |
Delaware |
|
Natick Realty, Inc. |
Maryland |
|
Natick Fifth Realty Corp. |
Maryland |
|
Natick NH Hooksett Realty Corp. |
New Hampshire |
|
Natick NJ 1993 Realty Corp. |
New Jersey |
|
Natick NJ Flemington Realty Corp. |
New Jersey |
|
Natick NJ Manahawkin Realty Corp. |
New Jersey |
|
Natick NJ Realty Corp. |
New Jersey |
|
CWC Beverages Corp. |
Connecticut |
|
JWC Beverages Corp. |
New Jersey |
|
Mormax Beverages Corp. |
Delaware |
|
Mormax Corporation |
Massachusetts |
|
Natick GA Beverage Corp. |
Georgia |
|
YWC Beverages Corp. |
New York |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of BJs Wholesale Club Holdings, Inc. of our report dated April 18, 2018 except for the effects of the revision discussed in Note 3 to the consolidated financial statements, as to which the date is May 17, 2018, and except for the effects of the stock split as discussed in Note 23 to the consolidated financial statements, as to which the date is June 15, 2018, relating to the consolidated financial statements, which appears in this Registration Statement. We also consent to the reference to us under the heading Experts in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 8, 2019