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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended July 31, 2023
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to Commission File Number: 001-40066
Ferguson plc
(Exact name of registrant as specified in its charter)
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Jersey, Channel Islands | | 98-1499339 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
1020 Eskdale Road, Winnersh Triangle, Wokingham,
Berkshire, RG41 5TS, United Kingdom
+44 (0) 118 927 3800
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| (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
Securities registered pursuant to Section 12(b) of the Act: |
| Title of Each Class: | Trading Symbol: | Name of Each Exchange on Which Registered: |
| Ordinary Shares of 10 pence | FERG | The New York Stock Exchange |
| | London Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ☐Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). ☒ Yes ☐ No
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.
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| 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financing reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☒ No
The aggregate market value of the voting shares held by non-affiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of Ferguson plc’s most recently completed second fiscal quarter (January 31, 2023), was $29,332,352,096. Ferguson plc has no non-voting common equity. As of September 11, 2023, the number of outstanding ordinary shares was 203,983,731.
Documents Incorporated by Reference:
The information required by Part III of this Annual Report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual General Meeting to be held in 2023, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Annual Report relates (the “2023 Proxy Statement”).
TABLE OF CONTENTS
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| PART II | |
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| PART III | |
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| PART IV | |
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CERTAIN TERMS
Unless otherwise specified or the context otherwise requires, the terms “Company,” “Ferguson,” “we,” “us,” and “our” and other similar terms refer to Ferguson plc and its consolidated subsidiaries. Except as otherwise specified or the context otherwise requires, references to years indicate our fiscal year ended July 31 of the respective year. For example, references to “fiscal 2023” or similar references refer to the fiscal year ended July 31, 2023.
MARKET AND INDUSTRY DATA
The information in this Annual Report on Form 10-K (the “Annual Report”) that has been sourced from third parties has been accurately reproduced and, as far as we are aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Industry publications generally state that their information is obtained from sources they believe reliable but that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on a number of significant assumptions. We are not aware of any exhaustive industry or market reports that cover or address our specific markets.
TRADEMARKS
All trademarks, trade names and service marks appearing in this Annual Report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Annual Report are referred to without the symbols ® and ™, but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY
Certain information included in this Annual Report is forward-looking, including within the meaning of the Private Securities Litigation Reform Act of 1995, and involves risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied by forward-looking statements. Forward-looking statements cover all matters which are not historical facts and include, without limitation, statements or guidance regarding or relating to our future financial position, results of operations and growth, projected interest in and ownership of our ordinary shares by investors including as a result of inclusion in North American market indices, plans and objectives for the future including our capabilities and priorities, risks associated with changes in global and regional economic, market and political conditions, ability to manage supply chain challenges, ability to manage the impact of product price fluctuations, our financial condition and liquidity, legal or regulatory changes, statements regarding our expectations for U.S. residential and non-residential growth drivers and other statements concerning the success of our business and strategies.
Forward-looking statements can be identified by the use of forward-looking terminology, including terms such as “believes,” “estimates,” “anticipates,” “expects,” “forecasts,” “intends,” “continues,” “plans,” “projects,” “goal,” “target,” “aim,” “may,” “will,” “would,” “could” or “should” or, in each case, their negative or other variations or comparable terminology and other similar references to future periods. Forward-looking statements speak only as of the date on which they are made. They are not assurances of future performance and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Therefore, you should not place undue reliance on any of these forward-looking statements. Although we believe that the forward-looking statements contained in this Annual Report are based on reasonable assumptions, you should be aware that many factors could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:
•weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, and other factors beyond our control, including disruption in the financial markets and any macroeconomic or other consequences of the current conflict in Ukraine or potential conflict between China and Taiwan;
•failure to rapidly identify or effectively respond to direct and/or end customers’ wants, expectations or trends, including costs and potential problems associated with new or upgraded information technology systems or our ability to timely deploy new omni-channel capabilities;
•decreased demand for our products as a result of operating in highly competitive industries and the impact of declines in the residential and non‐residential markets, as well as the repair, maintenance and improvement (“RMI”) and new construction markets;
•changes in competition, including as a result of market consolidation or competitors responding more quickly to emerging technologies (such as generative artificial intelligence (“AI”));
•failure of a key information technology system or process as well as exposure to fraud or theft resulting from payment‐related risks;
•privacy and protection of sensitive data failures, including failures due to data corruption, cybersecurity incidents or network security breaches;
•ineffectiveness of or disruption in our domestic or international supply chain or our fulfillment network, including delays in inventory availability at our distribution facilities and branches, increased delivery costs or lack of availability;
•failure to effectively manage and protect our facilities and inventory or to prevent personal injury to customers, suppliers or associates, including as a result of workplace violence;
•unsuccessful execution of our operational strategies;
•failure to attract, retain and motivate key associates;
•exposure of associates, contractors, customers, suppliers and other individuals to health and safety risks;
•inherent risks associated with acquisitions, partnerships, joint ventures and other business combinations, dispositions or strategic transactions;
•regulatory, product liability and reputational risks and the failure to achieve and maintain a high level of product and service quality;
•inability to renew leases on favorable terms or at all, as well as any remaining obligations under a lease when we close a facility;
•changes in, interpretations of, or compliance with tax laws in the United States, the United Kingdom, Switzerland or Canada;
•our indebtedness and changes in our credit ratings and outlook;
•fluctuations in product prices (e.g., commodity-priced materials, inflation/deflation) and foreign currency;
•funding risks related to our defined benefit pension plans;
•legal proceedings as well as failure to comply with domestic and foreign laws, regulations and standards, as those laws, regulations and standards or interpretations and enforcement thereof may change, or the occurrence of unforeseen developments such as litigation;
•our failure to comply with the obligations associated with being a U.S. domestic issuer and the costs associated therewith;
•the costs and risk exposure relating to environmental, social and governance (“ESG”) matters, including sustainability issues, regulatory or legal requirements, and disparate stakeholder expectations;
•adverse impacts caused by a public health crisis; and
•other risks and uncertainties set forth under the heading “Risk Factors” in Item 1A of this Annual Report.
Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Other than in accordance with our legal or regulatory obligations, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Part I
Item 1.Business
Overview
Ferguson’s operations are based, through its subsidiaries, in North America. Ferguson is a leading value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to heating, ventilation and air conditioning (“HVAC”), fire, fabrication and more. We exist to make our customers’ complex projects simple, successful and sustainable. We sell through a common network of distribution centers, branches, counter service and specialist sales associates, showroom consultants and e-commerce channels.
The Company has a long history and maintained businesses throughout Europe, Canada and the United States in the 1900s. In the early 2000s, the Company’s focus shifted to attractive North American markets. As a result, the operating businesses across Europe were disposed of through various transactions, most recently in 2021. As part of this transition and following a corporate restructuring, the Company became the ultimate holding company for the business in 2019.
The Company was incorporated and registered in Jersey as Alpha JCo Limited on March 8, 2019 under the Companies (Jersey) Law 1991, as amended (the “Jersey Companies Law”), as a private limited company with company number 128484. The Company converted its status to a public limited company and changed its name, first to Ferguson Newco plc on March 26, 2019, and then to Ferguson plc on May 10, 2019. Our jurisdiction of organization is Jersey and we manage our affairs so that we are centrally managed and controlled in the United Kingdom and therefore we are a tax resident of the United Kingdom.
The Company’s corporate headquarters is located at 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire RG41 5TS and its telephone number is +44 (0) 118 927 3800. The Company is also registered in the United Kingdom as Ferguson Group Holdings, U.K. Establishment No. BR021199. Our management office in the United States is located at 751 Lakefront Commons, Newport News, VA 23606.
Ferguson is listed on the New York Stock Exchange (NYSE: FERG) and the London Stock Exchange (LSE: FERG).
Business segments
The Company’s reportable segments are established based on how the Company manages its business and allocates resources, which is on a geographical basis. The Company’s reportable segments are the United States and Canada. For further segment information, see Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2, Revenue and segment information of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Annual Report (the “Consolidated Financial Statements”). Below is a description of the Company’s reportable segments.
United States segment
The United States segment contributed 95%, 95% and 94% of net sales from continuing operations in fiscal 2023, 2022 and 2021, respectively.
The United States segment operates primarily under the Ferguson brand and provides expertise, solutions, and products, from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more, to residential and non-residential customers. Its products are delivered through a common network of distribution centers, branches, counter service and specialist sales associates, showroom consultants and e-commerce channels. As of July 31, 2023, the United States business operated 1,549 branches and 10 national distribution centers serving all 50 states with approximately 32,000 associates. These locations provide same-day and next-day product availability, which we believe to be a competitive advantage and an important requirement for customers. In addition, our United States business operates three market distribution centers (“MDCs”) in Denver, Colorado, Houston, Texas and Phoenix, Arizona for branch replenishment and final mile distribution to customers.
Canada segment
The Canada segment contributed 5%, 5% and 6% of net sales from continuing operations in fiscal 2023, 2022 and 2021, respectively.
The Canada segment operates primarily under the Wolseley brand and supplies plumbing, HVAC and refrigeration products to residential and commercial contractors. The Canada segment also supplies specialist water and wastewater treatment products to residential, commercial and infrastructure contractors, and supplies pipe, valves and fittings (“PVF”) solutions to industrial customers. As of July 31, 2023, the Canada business operated 213 branches with one national distribution center and approximately 3,000 associates.
Business model
We have a balanced approach to attractive end markets and serve customers principally in North America. Approximately 52% of our net sales are to residential markets and 48% to non-residential markets with net sales within the residential and non-residential markets balanced between RMI (approximately 60% of our net sales) and new construction (approximately 40% of our net sales), based on management’s estimates.
Ferguson operates in highly fragmented markets, with no one market dominated by any single distributor. We are positioned as one of the top distributors in most end markets we serve, including residential, commercial, civil/infrastructure and industrial.
Our business bridges the gap between a large and fragmented supplier base with an even larger and more fragmented customer base. As of July 31, 2023, we had approximately 36,000 suppliers, with no supplier accounting for more than 5% of total inventory purchases, which provides us access to a diverse and broad range of quality products. We serve our customers through a network of 11 national distribution centers, three MDCs, 5,700 fleet vehicles, 1,762 branches and approximately 35,000 associates, in each case, as of July 31, 2023.
Customers
We exist to make our customers’ complex projects simple, successful and sustainable. We offer expertise and a broad range of products delivered where and when our customers need them. Customers rely on us to help them deliver critical infrastructure spanning almost every stage of projects within the residential and non-residential markets. We partner with our customers to keep millions of homes and businesses operating while helping them to run their business more efficiently. No single customer accounted for more than 1% of our net sales in fiscal 2023.
Value-added products and solutions
Our value-added solutions include a variety of sales channels available to our customers ranging from inside and outside sales teams, sales centers, digital commerce capabilities, system-to-system capabilities, counter sales and showrooms. We also offer customized solutions such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation and project management services. With our value-added solutions, we aim to increase productivity for our customers and for the industry.
We source, distribute and sell products from domestic and international suppliers. Our products include branded products and own brand products that the Company sells exclusively in the market. We purchase from approximately 36,000 suppliers. Over 95% of the products sold in the United States are sourced from U.S.-based suppliers, while approximately 90% of the products sold in Canada are sourced from Canada-based suppliers.
Our branded and own brand products are generally available from several sources and are not typically subject to supply constraints in normal market conditions. In the United States, approximately 14% of net sales are derived from basic products containing significant amounts of commodity-priced materials, predominantly plastic, copper and steel, and other components which can be subject to volatile price changes based upon fluctuations in the commodities market. To a lesser extent, fluctuations in the price of fuel could affect transportation costs. In general, increases in such prices increase our operating costs and negatively impact our operating profit to the extent that such increases cannot be passed on to customers. Conversely, if competitive pressures allow us to hold prices despite relevant raw material prices falling, profitability can increase.
Fulfillment options for our customers include delivery, customer pick-up from our branches, counters and locker locations, and direct shipments.
We also offer after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, repair and operations (“MRO”) support.
Global supply chain
We have a global supply chain which provides access to approximately 36,000 suppliers and we sell more than 1 million unique products each year. We operate an extensive network across North America, including two import centers, 11 national distribution centers and 1,762 branch locations as of July 31, 2023. Our network also includes three MDCs which provide greater access to key strategic markets and allows us to bring our products closer to our customers. These MDCs include automated picking and replenishment systems for the majority of items picked. This automation improves efficiency and reduces manual handling of certain products which supports associate health and safety.
Competitive conditions
We believe we are well-equipped to win new customers and generate attractive returns. We have leading positions in the residential and non-residential markets based on net sales as a percentage of overall market size. For fiscal 2023, approximately 52% and 48% of our net sales were derived from residential and non-residential end markets, respectively, and approximately 60% and 40% of our net sales were derived from the RMI and new construction sectors, respectively, based on management’s estimates. We have chosen to operate in each of these markets because we believe we can generate strong growth, solid gross and net margins and good returns on capital.
The markets we serve are highly fragmented with very few large competitors and a high number of small, local distributors, as well as mid-size regional distributors. While our market positions can be expanded through growth of our existing business, acquisitions also remain a core part of our growth strategy and we expect to focus on acquisitions that bolt-on to our existing branch network as well as acquisitions that provide further capabilities to serve our customers. We believe there is a significant opportunity for strong growth and continued consolidation within our markets.
Many customer projects require a range of products and solutions and we leverage our scale and expertise across the organization for the benefit of our customers. Specifically, we believe our network of suppliers, associates and the number of branches and distribution centers provides us with the scale and expertise to serve our customers better than our competitors do, as many of these competitors operate only locally. In addition, we also benefit from significant synergies to help lower operating costs and improve margins. We believe these factors enable continued growth in net sales as well as growth in cash flow and, therefore, may better enable us to provide investment returns to shareholders.
Our scale and expertise position us to be involved in all stages of our customers’ projects, including design, staging, and project management. Across all our customers, we take a consultative approach. We partner with our customers in an effort to guide complex projects to a successful conclusion, and to make the entire project better because Ferguson was involved.
Contractual relationships and seasonality
We are not dependent on any material licenses, industrial, commercial or financial contracts (including contracts with customers and suppliers) or new manufacturing processes. Our business is not highly seasonal although we generally experience the highest volume of sales in our fourth fiscal quarter which begins during the spring season in North America.
Intellectual property
We rely on a combination of intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary assets and our brands. We have registered or applied for registration of trademarks, service marks, and internet domain names, both domestically and internationally.
Regulatory landscape
Our operations are affected by various statutes, regulations and standards in the countries and markets in which we operate, including the United States and Canada. The amount of such regulation and the penalties for any breaches can vary. While we are not engaged in a highly regulated industry, we are subject to the laws governing businesses generally, including laws relating to competition, product safety, data protection, labor and employment practices, accounting and tax standards, international trade, fraud, bribery and corruption, land usage, the environment, health and safety, transportation, payment terms and other matters. We do not currently expect compliance with these laws and regulations to have a material effect on our capital expenditures, results of operations, or competitive position as compared to prior periods.
Human capital management
Our associates are fundamental to the long-term success of the Company. We continue to invest in the development of our associates and are committed to attracting, developing, engaging and retaining the best talent.
Our people
As of July 31, 2023, Ferguson employed approximately 35,000 associates, of which approximately 32,000 were in the United States, 3,000 were in Canada and a small number of associates were in certain other jurisdictions, including Asia, Switzerland, and the U.K.
The goal of our human capital management program is to attract diverse associates, develop associates to reach their full potential, and engage and retain the best talent – all contributing towards creating and maintaining a culture of inclusion where all associates can bring their true authentic selves to work every day.
Attracting diverse associates
Our hiring process is intended to reach a diverse talent pool to assist us in fostering a culture of innovation and acceptance through differences in thought, experience and perspective. We believe that the range of perspectives and experiences fostered by an inclusive and diverse organization gives us a competitive advantage, especially when it is shaped by a workforce that reflects the communities we serve.
Talent development
We place great emphasis on our associates’ development and provide opportunities to help them reach their full potential. Evidence of these opportunities can be seen in the career paths of our tenured leadership team. Through internal mobility, many of our leaders shifted from frontline roles to managerial roles. We offer a variety of leadership and development programs that develop skills and capabilities for our associates and leaders. These programs are tailored to associates’ leadership level and potential. The Company also offers associates professional development courses, many of which are on-demand and targeted at improving technical skills, sales, communication, well-being, critical thinking and relationship management skills. A mix of internal opportunities and external hires, blended with new talent through acquisitions, allows us to broaden the experience, knowledge and diversity of our leadership teams and overall workforce.
Associate engagement and retention
We champion engagement initiatives to further a culture where associates feel welcomed and valued. Our Business Resource Groups (“BRGs”) provide associates with opportunities to network with other associates and leaders, share common experiences, build allyship and strengthen Ferguson’s culture of inclusion and belonging within our organization. We currently maintain five BRGs supporting our Black, Women, LGBTQ+, Veteran and Hispanic/Latin American associates. Membership in our BRGs is open to all our associates. Each BRG is led by an executive sponsor, a chair and a leadership team who are voted into their roles by their respective BRG members.
We are committed to supporting our associates as well as customers and people within our communities. Through a variety of outreach efforts, we provide our associates with the opportunity to directly engage in community service and contribute to Ferguson being a good corporate citizen.
We offer these development and engagement programs to aid in the growth, engagement and retention of our associates. We believe that these programs, as well as our strategic focus on I&D, support our objective to retain the best talent.
Culture and values
We strive to maintain a culture of integrity and are committed to acting ethically in all our business activities. Our core values provide guidance on ethical situations where there may be uncertainty over how to proceed and set out the standards that we expect of our associates and those who may work on our behalf. Our Code of Business Conduct and Ethics (“Code of Conduct”) is a resource dedicated to helping our associates live by our values and understand Ferguson’s commitment to compliance with all applicable laws and regulations, our Code of Conduct and Company policies. We require all associates, including new associates, to complete our Code of Conduct training on an annual basis.
Compensation and rewards
To help attract and retain the best talent available in the market, we offer our associates competitive rewards packages. We regularly review the structure of our incentive programs for alignment with our talent attraction and retention policy, our purpose and values, and our goal to incentivize associates to take ownership of their performance. We are committed to rewarding our associates based on the delivery of business objectives, as well as outstanding individual performance. We offer a wide variety of health, welfare, and financial benefits to our full-time and part-time associates, including health care and insurance benefits, mental health and well-being resources, retirement plans, and an employee share purchase plan, among others.
We currently have several established recognition programs, where our top performing sales associates and managers receive recognition. The purpose of these programs is to demonstrate our appreciation for our associates and to recognize the exceptional performance and outstanding contributions they make to help support profitable growth in our business.
Health and safety
We strive to drive continuous improvement in our health and safety performance by maintaining high standards for our health and safety compliance programs and enforcing expected safe behaviors and global safety rules. We promote a culture of “first in safety,” which is supported by a commitment from our executive leadership and through engagement with our associates. We endeavor to ensure that at each location, our associates are well-informed about health and safety measures and are provided with the appropriate equipment and tools to protect themselves and those around them. Our safety efforts are further supported by the allocation of additional resources for safety improvements and the employment of dedicated safety professionals. Through continuous investment in health and safety, we strive to mitigate the risk of on-the-job injuries.
ESG Report
Additional information regarding our activities related to ESG matters, including our people and human capital strategy, can be found in our most recent ESG Report, which is available on our website. The contents of this report are not incorporated by reference into this Annual Report or in any other report or document we file with the SEC.
Available information
The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In accordance with these requirements, the Company files reports and other information with the Securities and Exchange Commission (the “SEC”). The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The Company’s website is corporate.ferguson.com. The Company’s reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto, are available, free of charge, through the Company’s website as soon as reasonably practicable after the material is electronically filed with or furnished to the SEC.
Any references to the Company’s website contained herein do not constitute incorporation by reference of information contained on such website and such information should not be considered part of this Annual Report.
Item 1A.Risk Factors
Risk factors summary
For a summary of risk factors, see our “Forward-Looking Statements and Risk Factor Summary” on page 1.
Risk factors
In addition to the other information contained in this Annual Report, you should carefully consider the following risk factors before investing in our ordinary shares. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are not aware or that we currently believe are immaterial may also adversely affect the business, financial condition and results of operations of the Company. If any of the possible events described below were to occur, the business, financial condition and results of operations of the Company could be materially and adversely affected. If that happens, the market price of our ordinary shares could decline, and holders of our ordinary shares could lose all or part of their investment.
This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks described below and elsewhere in this Annual Report.
Market conditions, competition, financial
Weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, particularly in the United States, may adversely affect the profitability and financial stability of our customers, and could negatively impact our sales growth and results of operations.
Our financial performance depends significantly on industry trends and general economic conditions, including the state of the residential and non-residential markets, as well as changes in gross domestic product in the geographic markets in which we operate, particularly in the United States where we generated 95% of our net sales from continuing operations in fiscal 2023. We serve several end markets in which the demand for our products is sensitive to the construction activity, capital spending and demand for products of our customers. Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, costs of goods sold, rising interest rates, currency exchange rates, labor shortages including a shortage of skilled trade professionals, work stoppages and strikes, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, wage inflation and a variety of other factors beyond our control. In addition, geopolitical conflicts, such as the current conflict in Ukraine or potential conflict between China and Taiwan and any related international response, may exacerbate inflationary pressures, including causing increases in commodity prices and energy costs. Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels or experience reductions in the demand for their own products or services.
Adverse conditions in, or uncertainty about, the markets in which we operate, the economy or the political climate could also adversely impact our customers and their confidence or financial condition, causing them to decide not to purchase our products or alter the timing of purchasing decisions or construction projects, and could also impact their ability to pay for products purchased from us. Other factors beyond our control, including but not limited to unemployment, interest rate and mortgage rate fluctuation, mortgage delinquency and foreclosure rates, inventory loss due to theft, foreign currency fluctuations, labor and healthcare costs, the availability of financing, disruption in the financial and credit markets, including as a result of instability in the banking sector and the failure of financial institutions, changes in tax laws affecting the real estate industry, product availability constraints as a result of ineffectiveness of or disruption to our domestic or international supply chain or the fulfillment network, weather, cybersecurity incidents or network security breaches, natural disasters, acts of terrorism, global pandemics, international trade tensions, and geopolitical uncertainties, could have a material adverse effect on our business, financial condition and results of operations.
Any of these events could impair the ability of our customers to make full and timely payments for, or reduce the volume of, products these customers purchase from us and could cause increased pressure on our selling prices and terms of sale. Accordingly, a significant or prolonged slowdown in activity in our relevant end markets could negatively impact net sales growth and results of operations. In addition, we have closed and may in the future have to close underperforming branches and/or showrooms from time to time as warranted by general economic conditions and/or weakness in the end markets in which we operate. Such closures could have a material adverse effect on our business, financial condition and results of operations.
We could be adversely impacted by declines in the residential and non-residential markets, as well as the RMI and new construction markets.
Our end markets focusing on the residential and non-residential markets as well as the RMI and new construction markets are dependent, in part, upon certain macroeconomic trends in these markets. In fiscal 2023, the Company’s net sales in the residential and non-residential markets generated approximately 52% and 48%, respectively, of net sales from continuing operations. Our sales within the residential and non-residential markets are divided further into RMI and new construction markets, which represent approximately 60% and 40%, respectively, of net sales from continuing operations.
A slowdown in the residential and/or non-residential markets caused by inflation, higher interest or mortgage rates or other issues in the market, may cause unanticipated shifts in our end market preferences and purchasing practices and in the business models and strategies of our customers. Such shifts may alter the nature and prices of products demanded by the end consumer and, in turn, our customers and could adversely affect our business, financial condition and results of operations.
The industries in which we operate are highly competitive, and changes in competition, including as a result of consolidation, could result in decreased demand for our products and related service offerings and could have a material effect on our sales and profitability.
We face competition in all markets we serve from wholesale distributors, supply houses, retail enterprises, online businesses that compete with price transparency, and from manufacturers (including some of our own suppliers) that sell directly to certain segments of the market. In particular, wholesale and distribution businesses in other industry sectors have been disrupted by the arrival of new competitors with lower-cost non-value added transactional business models or new technologies to aggregate demand away from incumbents. In the event that one or more online marketplace companies, which in some cases have larger customer bases, greater brand recognition and greater resources than we do, focus resources on competing in our markets, it could have a material adverse effect on our business, financial condition and results of operations. In addition, such competitors may use aggressive pricing and marketing tactics (such as paid search marketing), devote substantially more financial resources to website and systems development, or respond more quickly to emerging technologies (such as generative AI) and changes in customer preferences than we do. It is expected that competition could further intensify in the future as online commerce continues to grow worldwide. Increased competition may result in reduced net sales, lower operating margins, reduced profitability, loss of market share and diminished brand recognition.
The industries in which we operate may be disrupted by non-traditional competitors through acquisitions of traditional competitors to expand their capabilities. The industries in which we operate are also consolidating as customers are increasingly aware of the total costs of fulfillment and of the need to have consistent sources of supply at multiple locations. This competitor consolidation could cause the industries to become more competitive as greater economies of scale are achieved.
Additionally, we have experienced competitive pressure from certain of our suppliers who are now selling their products directly to customers. Suppliers can often sell their products at lower prices and maintain higher gross margins on their product sales than we can. Continued competition from our suppliers may negatively impact our business and results of operations, including through reduced sales, lower operating margins, reduced profitability, loss of market share and diminished brand recognition.
In response to these competitive pressures, among other initiatives, we are applying technology as an important medium for delivering better customer service alongside the supply of our products, and to create dedicated tools to save customers time and money. However, we may not continue to realize benefits from such investments and such initiatives may not be successful. In addition, failure to effectively execute our strategies, including the development and acquisition of such new business models or technologies, or successfully identify future market and competitive pressures, could have a material adverse effect on net sales and profitability.
Fluctuating product prices may adversely affect the Company’s business, financial condition and results of operations.
Some of our products contain significant amounts of commodity-priced materials, predominantly plastic, copper and steel, and other components that are subject to price changes based upon fluctuations in the commodities market, which can arise from changes in domestic and international supply and demand, general inflationary pressures, labor costs, competition, tariff and trade restrictions and geopolitical conflict, among other factors. To a lesser extent, fluctuations in the price of fuel could affect transportation costs. In addition, shipping capacity constraints and related fluctuations in shipping rates and space availability further impact the product cost. Our ability to adjust prices in a timely manner to account for price fluctuations will often depend on market conditions, our fixed costs, inflation and deflation, and other factors. In the event that circumstances require us to adjust our product prices and operational strategies to reflect fluctuating prices (inflation/deflation), there can be no assurance that such adjustments will be effective. For example, our inability to pass on all or a portion of product price inflation to our customers in a timely manner could reduce our profit margins. Similarly, downward pressure on product prices due to deflation could cause profit margins to decline. Moreover, our efforts to monitor for signs of moderation or deflation, which would present risks that we may not be able to totally mitigate, may be ineffective. Any failure to appropriately address some or all of these risks could have a material adverse effect on our business, financial condition and results of operations.
We have funding risks related to our defined benefit pension plans.
The Company operates a variety of pension plans, including funded and underfunded defined benefit schemes in Canada and the United Kingdom. Our pension trustees and plan sponsors aim to match the liabilities with a portfolio of assets, comprising equity and debt securities alongside diversified growth assets and further investments designed to hedge the underlying interest and inflation risk inherent in the associated liabilities. The market value of these assets can rise and fall over time which impacts the funding position of the plan. The United Kingdom defined benefit pension plan (the “United Kingdom Plan”), the Company’s largest defined benefit plan, is closed to future service costs and has a buy-in insurance policy which covers a large proportion of the existing participants. Following the completion of the Company’s disposal of Wolseley UK Limited (the “U.K. business”) on January 29, 2021, the Company retained future responsibility for the United Kingdom Plan, as the ongoing liabilities were not transferred to the purchaser.
As required by United Kingdom pensions regulation, the United Kingdom Plan completed its triennial actuarial valuation exercise, which is measured on a technical provisions basis, based on the United Kingdom Plan’s financial position as of April 30, 2022. The triennial valuation resulted in a need for deficit reduction contributions by the Company of £133 million spread over the period to January 31, 2026, of which the Company has paid £26 million as of July 31, 2023.
In addition to required contributions, the Company makes voluntary contributions at the discretion of management. The requirement to pay such additional sums, due to factors such as a deterioration in economic conditions or changes in actuarial assumptions, could have an adverse effect on our financial condition. In addition, actions by the U.K. Pensions Regulator or the trustees of our pension plans or any material revisions to the existing pension legislation could result in us being required to incur significant additional costs immediately or in short time frames. Such costs, in turn, could have an adverse effect on our financial condition.
Changes in our credit ratings and outlook may reduce access to capital and increase borrowing costs.
Our credit ratings are based on a number of factors, including our financial strength and factors outside of our control, such as conditions affecting our industry generally and the introduction of new rating practices and methodologies. A resurgence of the COVID-19 pandemic or other public health crisis could negatively impact our credit ratings and thereby adversely affect our access to capital and cost of capital. We cannot provide assurances that our current credit ratings will remain in effect or that the ratings will not be lowered, suspended or withdrawn entirely by the rating agencies. If rating agencies lower, suspend or withdraw the ratings, the market price or marketability of our securities may be adversely affected. Pressure on the ratings could also arise from higher shareholder payouts or larger acquisitions than we have currently planned that result in increased leverage, or in a deterioration in the metrics used by the rating agencies to assess creditworthiness. In addition, any change in ratings could make it more difficult for the Company to raise capital on acceptable terms, impact the ability to obtain adequate financing and result in higher interest costs on future financings.
We may not be able to access the capital and credit markets on terms that are favorable to us.
We may seek access to the capital and credit markets to supplement our existing funds and cash generated from operations for working capital, capital expenditure and debt service requirements and other business initiatives. Capital and credit markets may experience volatility and disruption from time to time, which can lead to uncertainty and liquidity issues for both borrowers and investors. In the event of adverse market conditions, we may be unable to obtain capital or credit market financing on favorable terms, which could materially adversely affect our business, financial condition and results of operations.
Potential regional or global barriers to trade or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.
Trade tensions between the United States and China have escalated over the past several years which resulted in elevated tariffs. The current U.S. presidential administration has not taken action to roll these back. However, in May 2022, the Office of United States Trade Representative (the “USTR”) commenced its quadrennial review of the tariffs imposed on China-origin goods pursuant to Section 301 of the Trade Act of 1974 (the “Trade Act”). The USTR initiated its review pursuant to Section 307(c) of the Trade Act, which requires the USTR to review the “necessity of” Section 301 actions four years after their implementation. In September 2022, the USTR announced that because requests for continuation were received, the tariff actions had not terminated and the USTR would conduct a review of the tariff actions. In October 2022, the USTR announced the public comment phase of its four-year, statutorily mandated review of the Section 301 tariffs. This process may or may not change these tariff actions and it remains unclear what additional, new, or different actions, if any, will be taken by the United States, China, or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the United States, the erection of barriers to trade, tax policy related to international commerce, or other trade matters. The potential removal of some of the tariffs and trade actions and the respective deflationary impact could have an effect on our business, financial condition and results of operations. At this point in time, it remains to be seen what effects, if any, the current administration will have on a long-term comprehensive agreement on tariffs between the United States and China.
The Company’s strategy could be materially adversely affected by its indebtedness.
As of July 31, 2023, we had total debt of $3.8 billion. We may incur substantial additional indebtedness in the future, in particular in connection with future acquisitions which remain a core part of our strategy, some of which may be secured by some or all of our assets. Our overall level of indebtedness from time to time may have an adverse effect on our strategy, including requiring us to dedicate portions of our cash flow to payments on our debt, thereby reducing funds available for reinvestment in the business; restricting us from securing the financing, if necessary, to pursue acquisition opportunities; limiting our flexibility in planning for, or reacting to, changes in our business and industry; limiting our ability to purchase, redeem or retire our ordinary shares; and placing us at a competitive disadvantage compared to our competitors that have lower levels of indebtedness. In addition, our indebtedness exposes us to the risk of increased interest rates because a portion of our borrowings are at variable rates of interest.
We may need to refinance some or all of our debt upon maturity either on terms which could potentially be less favorable than the existing terms or under unfavorable market conditions, which may also have an adverse effect on our strategy. Our ability to generate the amount of cash needed to pay interest and principal on our indebtedness and/or our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.
Fluctuations in foreign currency may have an adverse effect on reported results of operations.
We are exposed to foreign currency exchange rate risk with respect to the U.S. dollar relative to the local currencies of our international subsidiaries, predominantly the Canadian Dollar (“CAD”), and the British Pound Sterling (“GBP”), arising from transactions in the normal course of business (such as sales and loans to wholly-owned subsidiaries, sales to third-party customers, and purchases from suppliers). Our only significant foreign currency exchange exposure from a net sales perspective is CAD. We also have foreign currency exposure to the extent that receipts and expenditures are not denominated in the subsidiary’s functional currency, which could impact net sales, costs and cash flows. Fluctuations in foreign currency exchange rates could affect the Company’s results of operations and impact reported net sales and net income.
Our ability to pay dividends or effect other returns of capital in the future depends, among other things, on our financial performance.
There can be no guarantee that our historical performance will be repeated in the future, particularly given the competitive nature of the industry in which we operate, and our net sales, net income and cash flow may significantly underperform market expectations. If our cash flow underperforms market expectations, then our capacity to pay a dividend or effect other returns of capital (including, without limitation, share repurchases) may be negatively impacted. Any decision to declare and pay dividends or to effect other returns of capital will be made at the discretion of the Company’s Board of Directors (the “Board”) and will depend on, among other things, applicable law, regulation, restrictions (if any) on the payment of dividends and/or capital returns in our financing arrangements, our financial position, retained earnings/net income, working capital requirements, interest expense, general economic conditions, effects from the outbreak or resurgence of a global health crisis, and other factors that the Board deems significant from time to time.
We cannot guarantee that our share repurchase program will be fully consummated or that our share repurchase program will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our ordinary shares and could diminish our cash reserves.
We previously announced our intention to repurchase up to $3.0 billion of our ordinary shares. As of July 31, 2023, we have completed $2.5 billion of this share repurchase program with approximately $0.5 billion remaining. The timing and actual number of shares repurchased will depend on a variety of factors including the price, cash availability and other market conditions. The share repurchase program, authorized by our Board and shareholders, does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. The share repurchase program could affect the price of our ordinary shares and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our ordinary shares. The existence of our share repurchase program could also cause the price of our ordinary shares to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our ordinary shares. Additionally, repurchases under our share repurchase program will diminish our cash reserves.
The Company is a holding company with no business operations of its own and depends on its subsidiaries for cash, including in order to pay dividends.
The Company is a holding company with no independent operations and is dependent on earnings and distributions of funds from its operating subsidiaries for cash, including in order to pay dividends to its shareholders. The Company’s ability to pay dividends to its shareholders therefore depends on the ability of its subsidiaries to distribute profits or pay dividends to the Company, general economic conditions and other factors that the Board deems significant from time to time. The Company’s distributable reserves can be affected by reductions in profitability, impairment of assets and severe market turbulence.
Ownership of Ordinary Shares
The obligations associated with being a public company in the United States require significant resources and management attention and increase our legal and financial compliance costs, and changing laws, regulations and standards are creating uncertainty for United States public companies.
As a public company with a recent U.S. listing of our ordinary shares in the United States, we continue to incur legal, accounting and other expenses that we did not previously incur. We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the listing requirements of the New York Stock Exchange (the “NYSE”), and other applicable securities rules and regulations. The Exchange Act requires that we file annual and other reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. In addition, as of January 31, 2023, we determined that we no longer qualify as a foreign private issuer, as defined under the Exchange Act. As a result, effective as of August 1, 2023, we were no longer eligible to use the rules designed for foreign private issuers and are considered a U.S. domestic issuer. As such, we are required to comply with, among other things, U.S. proxy requirements and Regulation FD and our officers, directors and principal shareholders are subject to the beneficial ownership reporting and short-swing profit recovery requirements under Section 16 of the Exchange Act. We are also no longer eligible to rely upon exemptions from corporate governance requirements that are available to foreign private issuers or to benefit from other accommodations for foreign private issuers under the rules of the SEC or NYSE and have modified certain of our policies to comply with good governance practices applicable to U.S. domestic issuers.
The establishment and the maintenance of the corporate infrastructure demanded of a United States public company may, in certain circumstances, divert management’s attention from implementing our strategy to drive profitable growth, which could prevent us from improving our business, financial condition and results of operations. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems in order to meet our reporting obligations as a public company in the United States with domestic issuer status. However, the measures we take may not be sufficient to satisfy these obligations. In addition, compliance with these rules and regulations have increased, and following loss of foreign private issuer status have further increased, our legal and financial compliance costs and have made some activities more time-consuming and costly. These additional obligations may have a material adverse impact on our business, financial condition, results of operations and cash flow.
In addition, changing laws, regulations and standards relating to corporate governance, ESG matters, and public disclosure are creating uncertainty for public companies in the United States, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We have invested, and expect to continue to invest, resources to comply with evolving laws, regulations and standards, and this investment may result in increased operating expenses and a diversion of management’s time and attention from sales-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business, financial condition, results of operations and cash flow could be adversely affected.
Corporate responsibility, specifically related to ESG matters, may impose additional costs and expose us to new risks.
Public ESG and sustainability reporting is becoming more broadly expected by regulators, investors, shareholders and other third parties. Ongoing focus on ESG matters by investors and other parties as described below may impose additional costs or expose us to new risks. If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters as they continue to evolve, and as they may diverge, or if we are perceived to have not responded appropriately or quickly enough to growing concern for ESG and sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or the market price of our ordinary shares could be materially and adversely affected.
Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers, and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions or take other actions to hold these corporations and their boards of directors accountable. Board diversity and climate change ESG topics have, in particular, received heightened attention from investors, shareholders, lawmakers and listing exchanges. In addition, the SEC has proposed rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including greenhouse gas emission data with third-party attestation and climate-related financial statement metrics in a note to their audited financial statements. The adoption and expansion of ESG-related legislation and regulation may also result in increased capital expenditures and compliance, operational and other costs to us. We may face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity or climate, do not meet the standards set by our regulators, investors, shareholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third-party rating services. A low ESG or sustainability rating by a third-party rating service could also result in the exclusion of our ordinary shares from consideration by certain investors who may elect to invest with our competition instead.
In addition, as we work to align with the recommendations of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures, the Sustainability Accounting Standards Board, and our own ESG assessments and priorities, we have expanded and, in the future, may continue to expand our disclosures in these areas. These ESG reporting disclosure frameworks and reporting standards continue to evolve. Our selection of disclosure frameworks and reporting standards and information voluntarily disclosed may change from time to time and may result in a lack of consistent or meaningful comparative data from period to period, as well as significant revisions to ESG goals, initiatives, commitments, or objectives or reported progress in achieving the same. Our failure to report accurately or achieve progress on our ESG-related goals, targets or metrics on a timely basis, or at all, could adversely affect our reputation, business, financial condition and results of operations. Statements regarding our ESG-related goals reflect our current plans and aspirations; our ESG-related policies, practices and goals are voluntary and subject to change at our discretion. Further, our initiatives and goals may not be favored by certain stakeholders, whose priorities and expectations may not align or may be opposed to one another, and could impact the attraction and retention of investors, customers and employees. Efforts to achieve our initiatives and goals, including collecting, measuring and reporting ESG information, involve operational, reputational, financial, legal and other risks and may result in additional costs or delays, and as a result may have a negative impact on us, including our brand, reputation and the market price of our ordinary shares.
Our ordinary shares are subject to market price volatility and the market price may decline disproportionately in response to developments that are unrelated to our operating performance.
The market price of our ordinary shares has been and may in the future be volatile and subject to wide fluctuations. The market price of our ordinary shares may fluctuate as a result of a variety of factors including, but not limited to, general economic and political conditions, period to period variations in operating results, changes in net sales or net income estimates by us, industry participants or financial analysts, our failure to meet our stated guidance, our failure to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and procedures, the discovery of material weaknesses and other deficiencies in our internal control and accounting procedures, and the other factors discussed in this Item 1A. If we are unable to assert that our internal control over financial reporting is effective, 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, when required, investor confidence in us may be adversely affected and, as a result, the value of our ordinary shares may decline.
We currently maintain a standard listing on the London Stock Exchange (the “LSE”) in addition to our listing on the NYSE. As a result of the transfer of our primary listing to the NYSE, there may be volatility in our share price as a result of turnover in our shareholder base. In addition, the market price of our ordinary shares could also be adversely affected by developments unrelated to our operating performance, such as the operating and share price performance of other companies that investors may consider comparable to us, speculation about us in the press or the investment community, unfavorable press, strategic actions by competitors (including acquisitions and restructurings), changes in market conditions, regulatory changes, broader market volatility and movements and delay in our inclusion in North American indices. Any or all of these factors could result in material fluctuations in the market price of our ordinary shares, which could lead to investors getting back less than they invested or a total loss of their investment. In addition, where the market price of a company’s shares have been volatile, the shareholders of such company may file securities class action litigation against that company based on various claims such as securities fraud and other violations of securities laws. While we have not been a target of this type of litigation, we may be in the future. The defense and disposition of litigation of this type could result in substantial costs and divert resources and the time and attention of our management, which could materially and adversely affect our business or financial condition.
The rights afforded to our shareholders are governed by Jersey law. Not all rights available to shareholders under U.S. law will be available to holders of our ordinary shares.
The rights of holders of our ordinary shares are governed by Jersey law and our Memorandum of Association and Articles of Association (the “Articles”), which may not provide the level of legal certainty and transparency afforded by incorporation in a U.S. state.
The Company is organized under the laws of Jersey, Channel Islands, a British crown dependency that is an island located off the coast of Normandy, France. Jersey is not a member of the European Union. Jersey legislation regarding companies is largely based on English corporate law principles. However, there can be no assurance that Jersey law will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the United States, which could adversely affect the rights of investors.
Rights afforded to shareholders under Jersey law differ in certain respects from the rights of shareholders in typical U.S. companies. In particular, Jersey law currently significantly limits the circumstances in which the shareholders of Jersey companies may bring derivative actions (i.e., legal actions brought by a shareholder on behalf of a company against a third party). Under Jersey law, in most cases, only the Company may be the proper plaintiff for the purposes of maintaining proceedings in respect of wrongful acts committed against us (including breaches of directors’ duties) and, generally, neither an individual shareholder, nor any group of shareholders, has any right of action in such circumstances. There are a number of judicially accepted exceptions to this general rule, including what is known as “fraud on the minority,” being where there is a prima facie case of equitable fraud on the part of the prospective defendant and the alleged wrongdoers themselves were in control of the company and improperly preventing it from bringing proceedings.
Under Article 141 of the Jersey Companies Law, a shareholder may, however, apply to court for relief on the grounds that the conduct of our affairs, including a proposed or actual act or omission by us, is “unfairly prejudicial” to the interests of our shareholders generally or of some part of our shareholders, including at least the shareholder making the application. Under Article 143 of the Jersey Companies Law (which sets out the types of relief a court may grant in relation to an action brought under Article 141 of the Jersey Companies Law), the court may make an order regulating the affairs of a company, requiring a company to refrain from doing or continuing to do an act complained of, authorizing civil proceedings or providing for the purchase of shares by a company or by any of its other shareholders. In addition, Jersey law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders in a U.S. company.
Jersey law does not preclude a shareholder from alleging a violation of federal securities laws in the United States.
Our ordinary shares are listed to trade on more than one stock exchange, and this may result in price variations.
Our ordinary shares are listed on both the NYSE and the LSE. Dual-listing may result in price variations between the exchanges due to a number of factors. Our ordinary shares trade in U.S. dollars on the NYSE and in GBP on the LSE. In addition, the exchanges are open for trade at different times of the day and the two exchanges also have differing vacation schedules. Differences in the trading schedules, as well as volatility in the exchange rate of the two currencies, among other factors, may result different trading prices for our ordinary shares on the two exchanges. Other external influences may have different effects on the trading price of our ordinary shares on the two exchanges.
Operations and technology
If our domestic or international supply chain or our fulfillment network for our products is ineffective or disrupted for any reason, or if these operations are subject to trade policy changes, our business, financial condition and results of operations could be adversely affected.
We source, distribute and sell products from domestic and international suppliers, and their ability to reliably and efficiently fulfill our orders is critical to our business success. We purchase from approximately 36,000 suppliers located in various countries around the world.
Financial instability among key suppliers, political instability (including resulting from potential conflict between China and Taiwan) and labor unrest in source countries or elsewhere in our supply chain, changes in the total costs in our supply chain (including, but not limited, to changes in fuel and labor costs and currency exchange rates), port or rail labor disputes and security, the outbreak or resurgence of pandemics, weather- or climate-related events, natural disasters, work stoppages or strikes, shipping capacity constraints or embargoes, changes in trade policy, trade restrictions imposed by the United States, Europe, China or another major source country, tariffs or duties, fluctuations in currency exchange rates and transport availability, capacity and costs are all beyond our control and could negatively impact our business if they seriously disrupted the movement of products through our supply chain or increased their costs. Additionally, as we add fulfillment capabilities or pursue strategies with different fulfillment requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If our fulfillment network does not operate properly or if a supplier fails to deliver on its commitments, we could experience delays in inventory availability at our distribution facilities and branches, increased delivery costs or lack of availability, any of which could lead to lower net sales and decreased customer confidence, and adversely affect our results of operations. Furthermore, our existing suppliers may decide to supply products directly to end users that are our existing or potential customers, which could have a detrimental effect on our ability to keep and procure customers, and maintain and win business, thereby having a material adverse effect on our business, financial condition and results of operations.
Execution of our operational strategies could prove unsuccessful, which could have a material adverse effect on our business, financial condition and results of operations.
To achieve our key priorities, we must drive profitable growth across our operational businesses by fulfilling customer needs, capitalizing on attractive markets and growth opportunities and achieving planned execution. Meeting customer needs through comprehensive and differentiated products and solutions that support our customers’ projects is a key part of our strategy to drive profitable growth. If service levels were to significantly decrease, customers might purchase from our competitors instead, resulting in reduced net sales, lower operating margins, reduced profitability, loss of market share and/or diminished brand recognition.
Development of our operating model is a key part of driving profitable growth. If we are not sufficiently agile in adapting our operating model, we may be unable to adapt to changing customer wants and/or to flex our cost base when required. Moreover, we may not successfully execute our strategic initiatives on expected timelines or at all, including through failure to have the right talent in place or to achieve internal alignment or coordination. Any failure to appropriately address some or all of these risks could damage our reputation and have a material adverse effect on our business, financial condition and results of operations.
We may not rapidly identify or effectively respond to direct and/or end customers’ wants, expectations or trends, which could adversely affect our relationship with customers, our reputation, the demand for our products and our market share.
The success of our business depends in part on our ability to identify and respond promptly to evolving trends in demographics, as well as customer wants, preferences and expectations, while also managing appropriate inventory levels and maintaining our focus on delivering an excellent customer experience. For example, our customers are currently facing challenges in the form of a shortage of skilled trade professionals and a need for improved construction productivity. It is also difficult to successfully predict the products and solutions that customers will require. In addition, the customers in the markets we serve have different needs and expectations, many of which evolve as the demographics in a particular market change. Inventory levels in excess of customer demand due to the difficulty of calibrating demand for such products, the concentration of demand for a limited number of products, difficulties in product sourcing, or rapid changes in demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could have an adverse effect on our operating results, financial condition and cash flows. Conversely, if we underestimate customer demand for our products or if our manufacturers fail to supply products we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to customers and negatively impact customer relationships.
We offer more localized assortments of our products to appeal to needs within each end market. If we do not successfully evolve and differentiate to meet the individual needs and expectations of, or within, a particular end market, we may lose market share.
We are continuing to invest in our e-commerce and omni-channel capabilities and other technology solutions, including investments in significant upgrades to our enterprise-wide resource planning systems, to simplify our customer propositions and to optimize the supply chain and branch network to be more efficient and to deliver a more efficient business for our customers.
The cost and potential problems and interruptions associated with these initiatives could disrupt or reduce the efficiency of our online and in-store operations in the near term, lead to product availability issues and negatively affect our relationship with our customers. Furthermore, accomplishing these initiatives will require a substantial investment in additional information technology associates and other specialized associates. We may face significant competition in the market for these resources and may not be successful in our hiring efforts. Failure to choose the right investments and implement them in the right manner and at the right pace could adversely affect our relationship with customers, our reputation, the demand for our products and solutions, and our market share. In addition, our branch and omni-channel initiatives, enhanced supply chain, and new or upgraded information technology systems might not provide the anticipated benefits. For example, in fiscal 2023, the Company determined that one of the solutions developed to target certain branch transactional processes did not meet our customer service, speed and efficiency goals and, as a result, chose not to proceed with that component and recorded a non-cash impairment charge of $107 million of previously capitalized software costs in the United States. It might take longer than expected to realize the anticipated benefits, cost more than budgeted, or all or part of the initiatives might fail altogether, each of which could adversely impact our competitive position and our business, financial condition, results of operations or cash flows.
Acquisitions, partnerships, joint ventures, dispositions and other business combinations or strategic transactions involve a number of inherent risks, any of which could result in the benefits anticipated not being realized and could have an adverse effect on our business, financial condition and results of operations.
Acquisitions are an important part of our growth model and we regularly consider and enter into strategic transactions, including mergers, acquisitions, investments and other growth, market and geographic expansion strategies, with the expectation that these transactions will result in increases in sales, cost savings, synergies and various other benefits.
During fiscal 2023, 2022 and 2021, we completed a total of 8, 17 and 7 acquisitions, respectively. We may not realize any anticipated benefits from such transactions or partnerships, or any future ones, and we may be exposed to additional liabilities and risks from any acquired business or joint venture (including but not limited to risks associated with cybersecurity incidents, unknown claims and disputes by third parties against the companies we acquire, and business disruption related to inability to retain associates of the acquired entity). In addition, we may be exposed to litigation in connection with our acquisition and partnership transactions. Our due diligence investigations may fail to identify all of the problems, liabilities or other challenges associated with an acquired business which could result in an increased risk of unanticipated or unknown issues or liabilities, including with respect to environmental, competition and other regulatory matters, and our mitigation strategies for such risks that are identified may not be effective.
Furthermore, we may have trouble identifying suitable acquisition targets in the future. Our ability to deliver the expected benefits from any strategic transactions that we do complete is subject to numerous uncertainties and risks, including our acquisition assumptions; our ability to integrate personnel, labor models, financial, customer relationships, supply chain and logistics, IT and other systems successfully; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; product quality compliance of new suppliers; and increasing the scope, geographic diversity and complexity of our operations.
Effective internal controls are necessary to provide reliable and accurate financial reports, and the integration of businesses may create complexity in our financial systems and internal controls and make them more difficult to manage. Integration of businesses into our internal control system could cause us to fail to meet our financial reporting obligations. Moreover, any failure to integrate, or delay in integrating, IT systems of acquired businesses could create an increased risk of cybersecurity incidents. Additionally, any impairment of goodwill or other assets acquired in a strategic transaction or charges to earnings associated with any strategic transaction, may materially reduce our profitability. Following integration, an acquired business may not produce the expected margins or cash flows. Our shareholders, vendors or customers may react unfavorably to substantial strategic transactions. Furthermore, we may finance these strategic transactions by incurring additional debt or raising equity, which could increase leverage or impact our ability to access capital in the future.
If we fail to qualify for supplier rebates or are unable to maintain or adequately renegotiate our rebate arrangements, our results of operations could be materially adversely affected.
Many of our products are purchased pursuant to rebate arrangements that entitle us to receive a rebate based on specified purchases. Some arrangements require us to purchase minimum quantities and result in higher rebates with increased quantities of purchases. These rebates effectively reduce the costs of our products, and we manage our business to take advantage of these programs. Rebate arrangements are subject to renegotiation with our suppliers from time to time. In addition, consolidation of suppliers may result in the reduction or elimination of rebate programs in which we participate. If we fail to qualify for these rebates or are unable to renew rebate programs on desirable terms, or a supplier materially reduces or stops offering rebates, our costs could materially increase, and our gross margins and net income could be materially adversely affected.
If we are unable to protect our sensitive data and information systems against data corruption, cybersecurity incidents or network security breaches, or if we are unable to provide adequate security in the electronic transmission of sensitive data, it could adversely affect the operations of our business.
We may face global cybersecurity threats, which may range from uncoordinated individual attempts to sophisticated and targeted measures, known as advanced persistent threats, directed at us and our customers, suppliers, and service providers. Cybersecurity incidents and network security breaches may include, but are not limited to, attempts to access or unauthorized access of information, exploitation of vulnerabilities (including those of third-party software or systems), computer viruses, ransomware, denial of service and other electronic security breaches. Cyber-attacks from computer hackers and cyber criminals and other malicious internet-based activity continue to increase generally, and our services and systems, including the systems of our outsourced service providers, have been and may in the future continue to be the target of various forms of cybersecurity incidents such as DNS attacks, wireless network attacks, viruses and worms, malicious software, ransomware, application centric attacks, peer-to-peer attacks, business email compromises and phishing attempts, backdoor trojans and distributed denial of service attacks. Furthermore, given that new technologies continue to emerge, the methods used by computer hackers and cyber criminals to obtain unauthorized access to data or to sabotage computer systems change frequently and continue to grow in sophistication. Accordingly, we may be unable to anticipate or detect such attacks or promptly and effectively respond to them.
While we have instituted safeguards for the protection of our information systems and believe we use reputable third-party service providers, during the normal course of business, we and our service providers have experienced and expect to continue to experience cyber-attacks on our information systems, and we and our service providers may be unable to protect sensitive data and/or the integrity of our information systems. A cybersecurity incident could be caused by malicious third parties using sophisticated methods to circumvent firewalls, encryption and other security defenses. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target. Accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures.
As a result, we or our service providers could experience errors, interruptions, delays, or cessations of service in key portions of our information technology infrastructure, which could significantly disrupt our operations and be costly, time-consuming and resource-intensive to remedy. As a result, we could forego net sales or profit margins if we are unable to operate. Furthermore, if critical information systems fail or otherwise become unavailable, our ability to process orders, maintain proper levels of inventories, collect accounts receivable and disburse funds could be adversely affected. Any such interruption of our information systems could also subject us to additional costs. Loss of customer, supplier, associate, or other business information could disrupt operations, damage our reputation, and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, associates, and others, any of which could have a material adverse effect on our business, financial condition and results of operations.
We are required to maintain the privacy and security of personal information in compliance with privacy and data protection regulations worldwide. Failure to meet the requirements could harm our business and damage our reputation with customers, suppliers, and associates.
We rely on IT systems, networks, products, and services, some of which are managed by service providers to protect our information. Increased information security threats and more sophisticated threat actors pose a risk to our information security program. Additionally, we collect, store, and process personal information relating to our customers, suppliers, and associates. This information is increasingly subject to a variety of U.S. and international laws and regulations that are constantly changing and becoming more complex, such as the General Data Protection Regulation, as enacted in the European Union and the United Kingdom, Canada’s Personal Information Protection and Electronic Documents Act, and the California Consumer Privacy Act (the “CCPA”). These laws and regulations may carry significant potential penalties for non-compliance. For example, in the United States the CCPA, which came into effect in January 2020, has given California consumers more control over the personal information that businesses collect about them. The law created new data privacy rights for California consumers and requires certain businesses who collect personal information from California consumers to comply with various data protection requirements. Further, on November 3, 2020, the California Privacy Rights Act (the “CPRA”) was voted into law by California residents. The CPRA significantly amends the CCPA and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of businesses conducting activities in California in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA became effective on January 1, 2023, and enforceable on July 1, 2023. Businesses like ours that are subject to the CCPA who fail to comply with the CCPA may be subject to fines and penalties per incident of non-compliance and class action lawsuits in the event of a data breach of sensitive personal information. Other U.S. states continue to enact or are proposing or have enacted similar laws related to the protection of consumer personal information.
Data privacy and data protection laws and regulations are typically intended to protect the privacy of personal information that is collected, processed, transmitted, and stored in or from the governing jurisdiction. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between a company and its subsidiaries, including associate information. While we have invested and continue to invest significant resources to comply with data privacy regulations, many of these regulations are new, complex, and subject to interpretation. To maintain compliance with these laws, we may incur increased costs to continually evaluate and modify our policies and processes and to adapt to new legal and regulatory requirements. Non-compliance with these laws could result in negative publicity, damage to our reputation, penalties, or significant legal liability. Our business and operations could also be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business.
A failure of a key information technology system or process could adversely affect the operations of our business.
Technology systems and data are fundamental to the operations, future growth and success of our business. In managing our business, we rely on the integrity and security of, and consistent access to, data from these systems such as sales, customer data, merchandise ordering, inventory replenishment and order fulfillment. A major disruption of the information technology systems and their backup mechanisms may cause us to incur significant costs to repair the systems, experience a critical loss of data and/or result in business interruptions.
For these information technology systems and processes to operate effectively, we or our service providers must periodically maintain and update them. Furthermore, we must retain and recruit information technology associates and other specialized associates that can operate, maintain and update these systems. In addition, our systems and the third-party systems on which we rely are subject to damage or interruption from a number of causes, including: power outages; computer and telecommunications failures; cybersecurity incidents, including the use of ransomware; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, or other natural disasters; a global pandemic outbreak or resurgence; acts of war or terrorism; and design or usage errors by our associates, contractors or service providers. We and our service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise of the integrity, security and consistent operations of these systems, utilizing all reasonable and appropriate means available. However, such efforts may not be successful.
We rely on data centers and other technologies and services provided by third parties in order to manage our cloud-based infrastructure and operate our business. If any of these services becomes unavailable or otherwise is unable to serve our requirements due to extended outages, interruptions, facility closure, or because it is no longer available on commercially reasonable terms, expenses could increase and our operations could be disrupted or otherwise impacted until appropriate substitute services, if available, are identified, obtained, and implemented, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to payment-related risks that could increase our selling, general and administrative expenses, expose us to fraud or theft, subject us to potential liability, and potentially disrupt our business.
We accept payments using a variety of methods, including cash, checks, credit and debit cards, PayPal and electronic payment, and we may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our selling, general and administrative expenses. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business.
The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or be subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types, potential changes to our payment systems that may result in higher costs, or loss of business. As a result, our business, financial condition and results of operations could be adversely affected.
Also, certain of the Company’s customers, suppliers or other third parties may seek to obtain products fraudulently from, or submit fraudulent invoices to, the Company. The Company has sought to put in place a number of processes and controls to minimize opportunities for fraud. However, if the Company is unsuccessful in detecting fraudulent activities, it could suffer loss directly and/or lose the confidence of its customers and/or suppliers, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
In addition, our operations are working capital intensive, and our inventories, accounts receivable and accounts payable are significant components of our net asset base. We manage our inventories and accounts payable through our purchasing policies and our accounts receivable through our customer credit policies. We perform periodic credit evaluations of our customers’ financial condition, and collateral is generally not required. We evaluate the collectability of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness based on reports we receive from independent external credit bureaus, and we provide a reserve for accounts that we believe to be uncollectible. A significant deterioration in the economy, including as a result of any public health crisis or any geopolitical conflict, including the current conflict in Ukraine or potential conflict between China and Taiwan, could have an adverse effect on collecting our accounts receivable, including longer payment cycles, increased collection costs and defaults. In addition, if customers fail to pay within terms of our customer credit policies, we may enforce lien and bond rights, which could lead to customer dissatisfaction and loss. If we fail to adequately manage our product purchasing or customer credit policies, our working capital and financial condition may be adversely affected.
A public health crisis could have a material adverse impact on our business and results of operations.
A public health crisis, and associated government restrictions to prevent its spread, could have a material adverse impact on our business, results of operations and financial condition as well as the operations of some of our suppliers. For example, the COVID-19 pandemic resulted in supply chain disruptions and caused significant disruption in the U.S. and Canadian economies, including due to the restrictive measures adopted to prevent its spread and general market unpredictability.
A widespread public health crisis may decrease demand for our products and solutions due to public reaction to the health crisis or actions taken by governmental or other regulatory organizations to control or otherwise limit the effects of the public health crisis. This crisis may also limit labor availability that could adversely impact manufacturing and distribution throughout the supply chain and limit the availability of product from our suppliers. Depending on the ultimate scope and duration of the supply chain disruptions, we may experience increases in product costs which we may not be able to pass on to our customers, loss of sales due to lack of product availability or potential customer claims from the inability to provide products in accordance with contractual terms. In addition, if significant numbers of associates, key personnel and/or senior management become unavailable due to sickness, legal requirements or self-isolation, our operations could be disrupted and materially adversely affected. Measures taken in response to a public health crisis could adversely impact our ability to retain and attract associates, including key personnel. While we are unable to predict the likelihood, timing, magnitude and duration of a public health crisis and the associated effects to our business, a public health crisis and any associated supply chain disruption, labor market impact, recession, or depression could have a material adverse effect on the Company’s business, financial condition and results of operations and may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
People, products and facilities
In order to compete, we must attract, retain and motivate key associates, and the failure to do so could have an adverse effect on our business, financial condition and results of operations.
We depend on our executive officers and senior management to run our business. As we develop new business models and new ways of working, we will need to develop suitable skill sets within our organization. Furthermore, as we continue to execute our operational strategies it is important that existing skill sets, talent and culture are retained. Failure to do so could delay the execution of our operational strategies, result in loss of institutional knowledge and reduce our supply of future management skill. In addition, our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, including those that work remotely. The current market for such positions is highly competitive. Qualified individuals are in high demand and we may incur significant costs to attract and retain them. Moreover, the loss of any of our senior management or other key employees or our inability to recruit and develop mid-level managers could materially and adversely affect our ability to execute our business plan and we may be unable to find adequate replacements.
We customarily negotiate employment agreements and non-competition agreements with key personnel of the companies we acquire in order to maintain key customer relationships and manage the transition of the acquired business. The loss of senior management and other key personnel, or the inability to hire and retain qualified replacements, both generally and in connection with the execution of key business strategies could adversely affect our business, financial condition and results of operations.
Furthermore, our ability to provide high-quality products, advice and services on a timely basis depends, to a significant extent, on having an adequate number of qualified associates, including those in managerial, technical, sales, marketing and support positions. Accordingly, our ability to increase productivity and profitability and support our growth strategies may be limited by our ability to employ, train, motivate and retain skilled personnel, which in turn may be hindered by any present or future restructurings and cost savings initiatives. Due to the current tight labor market, we face significant competition in attracting and retaining skilled personnel, such as personnel with specialized skills and hourly workers, and our recruiting cycle may be longer as a result. While our retention rates have not changed materially, we have experienced, and may continue to experience, extended lead times in backfilling our more transient roles. If the tight labor market persists, this may increase our costs to maintain our workforce.
Our workforce constitutes a significant proportion of our cost base. Current wage inflation, as well as potential changes in applicable laws and regulations or other factors, such as labor union activity, resulting in increased labor costs, could have a material adverse effect on our business, financial condition and results of operations.
Failure to achieve and maintain a high level of product and service quality could damage our reputation and negatively impact our business, financial condition and results of operations.
To continue to be successful, we must continue to preserve, grow and leverage the value of our brand in the marketplace. Reputational value is based in large part on perceptions of subjective qualities. Even an isolated incident, such as a high-profile product recall, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if such incident or incidents result in adverse publicity, governmental investigations or litigation, and, as a result, could tarnish our brand and lead to adverse effects on our business.
In particular, product quality and service issues, including as a result of our suppliers’ or manufacturers’ acts or omissions, could negatively impact customer confidence in our brands and our products. As we do not have direct control over the quality of the products manufactured or supplied by third-party suppliers, we are exposed to risks relating to the quality of the products we distribute. If our product or service offerings do not meet applicable safety standards or customers’ expectations regarding safety or quality or are alleged to have quality issues or to have caused personal injury or other damage, or our supplier does not meet our expectations on responsible sourcing outlined in our supplier code of conduct, we could experience lower net sales and increased costs and be exposed to legal, financial and reputational risks, as well as governmental enforcement actions. In addition, actual, potential or perceived product safety concerns could result in costly product recalls.
We seek to enter into contracts with suppliers which provide for indemnification from any costs associated with the provision of defective products. However, there can be no assurance that such contractual rights will be obtained or adequate, or that related indemnification claims will be successfully asserted by us.
The nature of our operations may expose our associates, contractors, customers, suppliers and other individuals to health and safety risks and we may incur property, casualty or other losses not covered by our insurance policies and damage to our reputation.
The nature of our operations can expose our associates, contractors, customers, suppliers and other individuals to risks, including the motoring public to health and safety risks (including potential exposure to public health crises, infectious diseases and viruses), which can lead to loss of life or severe injuries or illness. Such risks could harm our reputation and reduce customer demand and expose us to the potential for litigation from third parties. In the United States, in particular, the risk of litigation is generally higher than in other parts of our business in areas such as workers’ compensation, general liability, and other related litigation.
Although we maintain insurance we believe to be sufficient to cover estimated health and safety risks including product liability, health and safety in our operations, vehicle and driver related claims and other types of claims in various jurisdictions, there can be no assurance that such insurance will provide adequate coverage against potential claims. If we do not have adequate contractual indemnification or insurance available, such claims could have a material adverse effect on our business, financial condition and results of operations.
We occupy most of our facilities under non-cancelable leases with terms of 10 years or less. We may be unable to renew leases on favorable terms or at all. Also, when we close a facility, we may remain obligated under the applicable lease.
Most of our branches are located in leased premises. Many of our current leases are non-cancelable and typically have initial terms of around 5 to 10 years, with options to renew for specified periods of time. There can be no assurance that we will be able to renew our current or future leases on favorable terms or at all which could have an adverse effect on our ability to operate our business and on our results of operations. In addition, we make decisions to close certain facilities from time to time. When we close or cease to use a facility, we generally remain committed to perform our obligations under the applicable lease, which include, among other things, payment of the base rent for the balance of the lease term.
We have risks related to the management and protection of our facilities and inventory, including risks of personal injury to customers, suppliers or associates.
We have office, showroom, counter, warehouse and distribution facilities located in all regions in which we operate which may be subject to a risk for crimes that could impact our operations, financial performance or reputation. No security or audit program is 100% effective. There is a risk that our security programs will not prevent the occurrences of crimes of break-ins, theft, property damage, and workplace violence, including violent criminal acts such as interpersonal violence or an active shooter or mass casualty/damage event. Moreover, such programs may not be implemented as intended. In the current climate of geopolitical uncertainty and social unrest, a security compromise could result in significant facility damage or loss, loss of inventory or personal injury to customers, suppliers or associates. There is a risk that inventory controls and facility security will fail resulting in inventory shrinkage or loss due to inadequate inventory tracking or misconduct of associates, customers, vendors or other third parties. Moreover, our inventory is located across the Company’s distribution facilities and branches and the disaggregated nature of our inventory could result in a failure to accurately record the existence and condition of our inventory. Any such security incidents, inventory loss or failure to maintain accurate records related to our inventory could have a negative effect on our business, financial condition, results of operations or reputation.
Regulatory and legal
Changes in, or interpretations of, United States, United Kingdom, Swiss or Canadian tax laws could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are primarily subject to tax in the United States, the United Kingdom, Switzerland and Canada, and increases to tax rates in the jurisdictions in which we operate or changes to the global tax framework could have an adverse effect on our business, financial condition and results of operations. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without advance notice, due to economic, political and other conditions, including those resulting from an outbreak or resurgence of a public health crisis. Significant judgment is required in evaluating and estimating our provision and accruals for these taxes.
Our effective tax rates could be affected by changes in tax laws and regulations, administrative practices, principles and interpretations, the mix and level of earnings in a given taxing jurisdiction or our ownership or capital structures. In December 2021, the Organisation of Economic Co-operation and Development (“OECD”) published model rules that provided a template for countries to implement a new global minimum tax rate of 15%. In July 2022, the U.K. government issued draft legislation to implement these rules, which was enacted (within Finance No 2 Act 2023) on July 11, 2023. The rules are effective for accounting periods beginning on or after December 31, 2023. As a result, it is possible that the Company’s consolidated effective tax rate will increase in the short term. It is difficult to predict whether and when tax law changes that will be enacted or which have very recently been enacted without supporting regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Inflation Reduction Act was enacted on August 16, 2022. This law, among other provisions, provides a U.S. corporate alternative minimum tax on adjusted financial statement income, which is effective for us beginning with fiscal 2024, and an excise tax on certain stock repurchases by U.S. corporations (which the U.S. Department of Treasury indicated may also apply, in certain circumstances, to stock repurchases of foreign corporations deemed funded by their U.S. affiliates). While we do not expect that these tax law changes will have a material adverse effect on our results of operations going forward, it is unclear how this legislation or administrative guidance thereunder will be implemented by the U.S. Department of Treasury and what, if any, impact it will have on the Company, including our tax rate. We will continue to evaluate its impact as further information becomes available.
In addition, our location of tax residence could be challenged. If the Company were to cease, or failed, to maintain our place of central management and control in the location of our tax residency, our ability to rely on specific tax treaty benefits could be impacted, potentially causing withholding taxes on dividends and interest payments made by certain of our subsidiaries to increase while taxes on unrealized gains of the Company could possibly be imposed.
The application of tax law is subject to interpretation. Additionally, administrative guidance can be incomplete or vary from legislative intent, and therefore the application of the tax law is uncertain. While we believe the positions reported by the Company comply with relevant tax laws and regulations, we could be subject to tax audits and taxing authorities could interpret our application of certain laws and regulations differently. Future tax controversy matters may result in previously unrecorded tax expenses, higher future tax expenses or the assessment of interest and penalties which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our own brand products subject us to certain increased risks such as regulatory, product liability and reputational risks that could have an adverse effect on our business, results of operations and financial condition.
As we expand our own brand product offerings organically and through acquisitions, we may become subject to increased risks due to our greater role in the design, sourcing, marketing and sale of those products. The risks include greater responsibility to administer and comply with applicable regulatory requirements, increased potential product liability and product recall exposure, and increased potential legal and reputational risks related to the responsible sourcing of those products. To effectively execute on our own brand product differentiation strategy, we must also be able to successfully protect our proprietary rights and successfully navigate and avoid claims related to the proprietary rights of third parties. In addition, an increase in sales of our own brand products may adversely affect sales of our suppliers’ products, which in turn could adversely affect our relationships with certain of our suppliers. Further, the development of our own brand products may require us to make investments in specialized personnel and operating systems, increase marketing efforts and reallocate resources away from other uses. Any failure to appropriately address some or all of these risks could damage our reputation and have an adverse effect on our business, results of operations and financial condition.
We are and may continue to be involved in legal proceedings in the course of our business, and while we cannot predict the outcomes of those proceedings and other contingencies with certainty, some of these outcomes may adversely impact our business, financial condition, results of operations and cash flows.
We are and may continue to be involved in legal proceedings such as consumer and employment and other litigation that arises from time to time in the course of our business. In future periods, we could be subject to cash costs or non-cash charges to earnings if any of these litigation matters are resolved on unfavorable terms, or if our estimates regarding legal provisions accounting or our insurance coverage are incorrect. Various factors could cause actual results to differ from these estimates.
Litigation is inherently unpredictable, and the outcome of some of these proceedings and other contingencies could require us to take or refrain from taking actions which could adversely impact the business or could result in excessive verdicts. Any such outcome could have an adverse effect on our business, financial condition, results of operations and cash flows. Additionally, involvement in these lawsuits and related inquiries and other proceedings may involve significant expense, divert management’s attention and resources from other matters, and negatively affect our reputation.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters, could significantly affect our financial results or financial condition.
Accounting standards and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition and net sales, asset impairment, impairment of goodwill and other intangible assets, inventories, lease obligations, self-insurance, tax matters, pensions and litigation, are complex and involve many subjective assumptions, estimates and judgments. Changes in accounting standards or their interpretation or changes in underlying assumptions and estimates or judgments could significantly change our reported or expected financial performance or financial condition.
We are subject to various risks related to the local and international nature of our business, including domestic and foreign laws, regulations and standards. Failure to comply with such laws and regulations or the occurrence of unforeseen developments such as litigation could adversely affect our business.
Our business operates in the United States and Canada and is subject to specific risks of conducting business in different jurisdictions across these countries and other parts of the world, including China, Taiwan, India, Thailand, Vietnam, Italy, Turkey, and South Korea. Our business is subject to a wide array of domestic and international laws, regulations and standards in jurisdictions where we operate, including advertising and marketing regulations, anti-bribery and corruption/money laundering laws, anti-competition regulations, data privacy and data protection (including payment card industry data security standards) and cybersecurity requirements (including protection of information and incident responses), consumer protection laws, cash and electronic payment regulations and industry standards, environmental protection laws, foreign exchange controls and cash repatriation restrictions, government business regulations applicable to us as a government contractor selling to federal, state and local government entities, import and export requirements, intellectual property laws, labor laws, product compliance laws, fleet and driver related laws, supplier regulations regarding the sources of supplies or products, tax laws, zoning laws, unclaimed property laws and laws, regulations and standards applicable to other commercial matters. In particular, occupational health and safety or consumer product safety regulation may require that we take appropriate corrective action, including but not limited to product recall, in respect of products that we have distributed. Managing a product recall or other corrective action can be expensive and can divert the attention of management and other personnel for significant time periods. Any product recall or other corrective action may negatively affect customer confidence in the Company’s products and the Company itself, regardless of whether it is successfully implemented. Moreover, we are also subject to audits and inquiries by government agencies in the normal course of business.
In recent years, a number of new laws and regulations have been adopted, and there has been expanded enforcement of certain existing laws and regulations by federal, state and local agencies. These laws and regulations, and related interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events. Changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations could increase our costs of doing business or impact our operations, including, among other factors, as a result of required investments in technology and the development of new operational processes.
Failure to comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary penalties as well as potential damage to the Company’s reputation. Furthermore, while we have implemented policies and procedures designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that associates, contractors or agents will not violate such laws, regulations and standards or our policies. Any failure to comply with or violation of the various laws, regulations and standards to which we are subject could individually or in the aggregate materially adversely affect our business, financial condition, results of operations and cash flows.
Item 1B.Unresolved Staff Comments
None.
Item 2.Properties
We maintain our principal executive offices at 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, RG41 5TS, United Kingdom, and our management office in the United States is located in Newport News, Virginia. We believe our facilities are maintained in good operating condition and sufficient to meet our present operating needs.
The following tables presents our principal facilities as of July 31, 2023:
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| Location / Segment | | Facility & Use | | Total locations | | Owned locations | | Leased locations | | Square Feet |
| United States | | National Distribution Centers(1) | | 10 | | 90% | | 10% | | 6,541,697 |
| United States | | Market Distribution Centers | | 3 | | 67% | | 33% | | 1,603,988 |
| United States | | Branches | | 1,549 | | 17% | | 83% | | 45,285,226 |
| Canada | | National Distribution Center | | 1 | | —% | | 100% | | 292,395 |
| Canada | | Branches | | 213 | | 23% | | 77% | | 2,989,375 |
(1)Includes one owned building on leased land.
Item 3.Legal Proceedings
The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to such lawsuits, claims and proceedings, the Company records reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not expect any of its pending legal proceedings to have a material adverse effect on its results of operations, financial position, or cash flows. In accordance with Item 103 of Regulation S-K, we have adopted a $1 million disclosure threshold for certain proceedings under environmental laws to which a governmental authority is a party, as we believe matters under this threshold are not material to the Company. The Company maintains liability insurance for certain risks that are subject to certain self-insurance limits.
Item 4.Mine Safety Disclosures
Not applicable.
Information about our Executive Officers
Set forth below is a list of names and ages of the executive officers of the Company indicating all positions and offices with the Company held by each such person and each person’s principal occupations or employment during the past five years unless otherwise noted. Our executive officers do not have a specific term of office.
Kevin Murphy, age 53, Chief Executive Officer and Executive Director. Mr. Murphy was appointed as an Executive Director in August 2017 and as Chief Executive Officer in November 2019. Mr. Murphy was chief executive officer of Ferguson Enterprises, LLC (“FEL”), the Company’s U.S. business segment, from 2017 until his appointment as Chief Executive Officer in 2019. Prior to that, he was chief operating officer of FEL from 2007 to 2017. Mr. Murphy joined Ferguson in 1999 as an operations manager following Ferguson’s acquisition of his family’s business, Midwest Pipe and Supply, and went on to hold a number of leadership positions before his eventual appointment as the Company’s Chief Executive Officer.
Bill Brundage, age 47, Chief Financial Officer and Executive Director. Mr. Brundage was appointed as an Executive Director and Chief Financial Officer in November 2020. Mr. Brundage was the chief financial officer of FEL from 2017 to 2020, having previously served as senior vice president of finance from 2016 to 2017 and vice president of finance since 2008. Mr. Brundage joined Ferguson in 2003 as manager of finance and was promoted to corporate controller of FEL two years later. Previously, Mr. Brundage spent five years at PricewaterhouseCoopers in the United States as a senior associate.
Ian Graham, age 55, Chief Legal Officer. Mr. Graham joined the Company as Chief Legal Officer in May 2019. Prior to joining the Company, he was Senior Vice President, General Counsel and Secretary for BAE Systems, Inc. from 2010 to 2019. Prior to that he held senior roles at EMCORE Corporation, UUNET Technologies, Jenner & Block LLP and McKenna & Cuneo LLP.
Michael Jacobs, age 62, Senior Vice President of Supply Chain. Mr. Jacobs was appointed Senior Vice President of Supply Chain in February 2017. He is responsible for managing all aspects of the supply chain processes within Ferguson and developing a supply chain strategy that meets performance objectives and customer expectations. Prior to Ferguson, Mr. Jacobs held various roles at Keurig Green Mountain, including Chief Product Officer and Chief Logistics Officer, where he led the re-engineering of Keurig’s supply chain. Prior to Keurig, Mr. Jacobs served as Senior Vice President, Logistics for Toys “R” Us, where he led store, ecommerce and omni-channel fulfillment globally.
Sammie Long, age 55, Chief Human Resources Officer. Ms. Long was appointed Chief Human Resources Officer in 2017. Before joining the Company, Ms. Long was Chief Human Resources Officer for the Kellogg Company. Prior to her 14-year career in human resources at Kellogg, Ms. Long held human resources positions at Sharp Electronics UK Ltd and Fujitsu Services Europe.
Victoria Morrissey, age 56, Chief Marketing Officer. Ms. Morrissey was appointed as Chief Marketing Officer in May 2021. With more than 20 years of diversified experience, Ms. Morrissey was most recently responsible for Global Marketing and Brand at Caterpillar Inc. from 2017 to 2021, where she led a global team with oversight of brand, digital marketing, analytics, customer insights and customer experience. Prior to this, she led brand and content marketing at Grainger. In addition to her industry experience, Ms. Morrissey worked at several agencies, including WPP, one of the world’s largest advertising agencies.
Andy Paisley, age 55, Chief Digital and Information Officer. Mr. Paisley became the Chief Digital and Information Officer for Ferguson in June 2023 after joining the Company in January 2023 as the Chief Information Officer. He is responsible for overseeing Digital Commerce, Digital Engineering, Digital Data, User Experience and Commerce Operations. Prior to joining Ferguson, Mr. Paisley served as the chief information officer of Dollar Tree, Inc. from December 2020 until 2022, Old Dominion Freight Line, Inc. from 2017 to 2020 and Advance Auto Parts, Inc. from 2014 to 2017, where he aligned the technology strategy with business strategy and improved the digital experience for associates and customers.
Jake Schlicher, age 59, Senior Vice President of Strategic Development. Mr. Schlicher was named Senior Vice President of Strategic Development in February 2019. He focuses on developing strategies that help make our customers’ complex projects simple, successful and sustainable. Mr. Schlicher joined Ferguson in 1999 through the acquisition of L&H Supply. Since then, Mr. Schlicher has held numerous positions including Director of the Residential Business Group, Vice President of Private Label, Vice President of the Strategic Products Group, and Vice President of the Commercial Business. In March 2016, he was named Senior Vice President of Ferguson Facilities Supply and, in November 2017, he was named Senior Vice President Strategic Brand Development.
Bill Thees, age 56, Senior Vice President of Business and Sales. Mr. Thees was promoted to Senior Vice President of Business and Sales in 2018. He provides leadership and direction to the Waterworks and Fire & Fabrication customer groups, the Own Brand Business, enterprise-wide Sales, Operations and Wolseley Canada. Mr. Thees began his career with Ferguson in 1990 as a trainee at the Orlando, Florida Waterworks location. Since then, he has held several key positions, including Branch Manager, General Manager and District Manager. Mr. Thees assumed leadership for the Waterworks Business Group in 2007 and was promoted to Vice President in 2009.
Garland Williams, age 48, Senior Vice President. Mr. Williams serves as a Senior Vice President and previously served as the Senior Vice President of Customer Experience and Canada between 2021 and 2022. He is responsible for Ferguson’s Blended business and provides strategic leadership and has profit and loss (“P&L”) responsibilities for the Residential Trade, Residential Building & Remodel, Commercial/Mechanical, HVAC, Industrial and Facilities Supply businesses. Mr. Williams joined the organization as a trainee in July 1996 and has held several progressive roles over his 27-year career with Ferguson. This has included inside and outside sales, Branch and Area Manager, General Manager, District Manager, Vice President of Residential Trade, and, most recently, as Vice President of Customer Experience and Canada in 2020.
Part II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market information
The principal United States trading market for the Company’s ordinary shares is the NYSE, where the Company’s shares are traded under the symbol “FERG.” The Company’s principal foreign public trading market for the Company’s ordinary shares is the LSE, where the Company’s shares are traded under the symbol “FERG.”
Holders
As of September 11, 2023, there were 4,253 holders of record of our ordinary shares.
Dividends
The Company currently anticipates that cash dividends will continue to be paid on a quarterly basis in amounts comparable to dividends paid in prior periods.
Performance graph
This graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The performance graph below compares the cumulative total shareholder return of the Company’s ordinary shares since July 31, 2018, with the cumulative total return for the same period of the S&P 500 Stock Index and the S&P 500 Industrials Stock Index. The graph assumes the investment of $100 in our ordinary shares at the closing price of our ordinary shares on the LSE prior to the Company’s listing on the NYSE on March 11, 2021, and on the NYSE following such date, and in each of the indices as of the market close on July 31, 2018 and also assumes the reinvestment of dividends. Performance data for the Company is provided as of the last trading day of each relevant fiscal year. The share price performance graph is not necessarily indicative of future share price performance.
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| As of July 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 |
Ferguson plc(1) | $100 | | | $98 | | | $118 | | | $190 | | | $174 | | | $230 | |
| S&P 500 Stock Index | 100 | | 108 | | | 121 | | | 165 | | | 157 | | | 178 | |
| S&P 500 Industrials Stock Index | 100 | | 104 | | | 98 | | | 143 | | | 134 | | | 158 | |
(1)LSE data used from August 1, 2018 through March 10, 2021 with GBP values converted to USD using the daily foreign exchange rate. NYSE data used from March 11, 2021 onwards.
Unregistered sales of equity securities and use of proceeds
None.
Purchases of equity securities by the issuer and affiliated purchasers
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| (In millions, except share count and per share amount) | | (a) Total Number of Shares Purchased | | (b) Average Prices Paid per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Program(1) | | (d) Maximum Value of Shares that May Yet To Be Purchased Under the Program(1) |
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| May 1 - May 31, 2023 | | 327,968 | | $141.00 | | | 327,968 | | $618 | |
| June 1 - June 30, 2023 | | 311,055 | | 149.88 | | | 311,055 | | 571 | |
| July 1 - July 31, 2023 | | 202,063 | | 152.59 | | | 202,063 | | 540 | |
| | 841,086 | | | | 841,086 | | |
(1) In September 2021, the Company announced a program to repurchase up to $1.0 billion of shares with the aim of completing the purchases within 12 months. In March 2022, September 2022 and June 2023, the Company announced an increase of $1.0 billion, $0.5 billion and $0.5 billion, respectively, bringing the total authorized share repurchases to $3.0 billion.
Taxation
United Kingdom taxation
The following statements are intended only as a general guide to certain U.K. tax considerations and do not purport to be a complete analysis of all potential U.K. tax consequences of acquiring, holding or disposing of our ordinary shares. They are based on current U.K. law and what is understood to be the current practice of His Majesty’s Revenue and Customs (“HMRC”) as at the date of this Annual Report, both of which may change, possibly with retroactive effect. They apply only to shareholders who are resident, and in the case of individuals domiciled, for tax purposes in (and only in) the U.K. (except insofar as express reference is made to the treatment of non-U.K. residents), who hold their ordinary shares as an investment (other than where a tax exemption applies, for example where the ordinary shares are held in an individual savings account or pension arrangement) and who are the absolute beneficial owner of both the ordinary shares and any dividends paid on them. The tax position of certain categories of shareholders who are subject to special rules is not considered (except insofar as express reference is made to the treatment of exempt shareholders) and it should be noted that they may incur liabilities to U.K. tax on a different basis to that described below. This includes persons acquiring their ordinary shares in connection with employment, dealers in securities, insurance companies, collective investment schemes, charities, exempt pension funds, and temporary non-residents and non-residents carrying on a trade, profession or vocation in the U.K.
The statements summarize the current position and are intended as a general guide only. Shareholders who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction other than the U.K. are strongly recommended to consult their own professional advisers.
Income from ordinary shares
Ferguson is not required to withhold U.K. tax when paying a dividend. Liability to tax on dividends will depend upon the individual circumstances of a shareholder.
U.K. resident individual shareholders
Under current U.K. tax rules specific rates of tax apply to dividend income. These include a nil rate of tax (the “dividend allowance”) for the first £1,000 of non-exempt dividend income in any tax year and different rates of tax for dividend income that exceeds the dividend allowance. No tax credit attaches to dividend income. For these purposes “dividend income” includes U.K. and non-U.K. source dividends and certain other distributions in respect of shares.
An individual shareholder who is resident for tax purposes in the United Kingdom and who receives a dividend from Ferguson will not be liable to U.K. tax on the dividend to the extent that (taking account of any other non-exempt dividend income received by the shareholder in the same tax year) that dividend falls within the dividend allowance.
To the extent that (taking account of any other non-exempt dividend income received by the shareholder in the same tax year) the dividend exceeds the dividend allowance, it will be subject to income tax at 8.75% to the extent that it falls below the threshold for higher rate income tax. To the extent that (taking account of other non-exempt dividend income received by the shareholder in the same tax year) it falls above the threshold for higher rate income tax then the dividend will be taxed at 33.75% to the extent that it is within the higher rate band, or 39.35% to the extent that it is within the additional rate band. For the purposes of determining which of the taxable bands dividend income falls into, dividend income is treated as the highest part of a shareholder’s income. In addition, dividends within the dividend allowance which would (if there was no dividend allowance) have fallen within the basic or higher rate bands will use up those bands respectively for the purposes of determining whether the threshold for higher rate or additional rate income tax is exceeded.
U.K. resident corporate shareholders
It is likely that most dividends paid on the ordinary shares to U.K. resident corporate shareholders would fall within one or more of the classes of dividend qualifying for exemption from corporation tax. However, it should be noted that the exemptions are not comprehensive and are also subject to anti-avoidance rules.
U.K. resident exempt shareholders
U.K. resident shareholders who are not liable to U.K. tax on dividends, including exempt pension funds and charities, are not entitled to any tax credit in respect of dividends paid by the Company.
Non-U.K. resident shareholders
No tax credit will attach to any dividend paid by the Company. A shareholder resident outside the U.K. may also be subject to non-U.K. taxation on dividend income under local law. A shareholder who is resident outside the U.K. for tax purposes should consult his or her own tax adviser concerning his or her tax position on dividends received from the Company.
Disposal of shares
U.K. resident shareholders
A disposal or deemed disposal of ordinary shares by a shareholder who is resident in the U.K. for tax purposes may, depending upon the shareholder’s circumstances and subject to any available exemption or relief (such as the annual exempt amount for individuals), give rise to a chargeable gain or an allowable loss for the purposes of U.K. taxation of capital gains.
Non-U.K. resident shareholders
Shareholders who are not resident in the U.K. will not generally be subject to U.K. taxation of capital gains on the disposal or deemed disposal of ordinary shares unless they are carrying on a trade, profession or vocation in the U.K. through a branch or agency (or, in the case of a corporate shareholder, a permanent establishment) in connection with which the ordinary shares are used, held or acquired. Non-U.K. tax resident shareholders may be subject to non-U.K. taxation on any gain under local law.
An individual shareholder who has been resident for tax purposes in the U.K. but who ceases to be so resident or becomes treated as resident outside the U.K. for the purposes of a double tax treaty for a period of five years or less and who disposes of all or part of his or her ordinary shares during that period may be liable to capital gains tax on his or her return to the U.K., subject to any available exemptions or reliefs.
Stamp duty and SDRT
No U.K. stamp duty or Stamp Duty Reserve Tax (“SDRT”) will be payable in respect of transfers of the ordinary shares, provided that no written instrument of transfer is entered into (which should not be necessary). HMRC clearance was obtained by the Company confirming that agreements to transfer ordinary shares which are traded on the LSE and settled by way of depository interests (“DIs”) will not be subject to U.K. SDRT.
If the ordinary shares were transferred by way of written instrument, then U.K. stamp duty at the rate of 0.5% (rounded up to the next multiple of £5) of the amount or value of the consideration given would in principle be payable, if the instrument of transfer was executed in the U.K. or related “to any matter or thing done or to be done” in the U.K.
Inheritance tax
Liability to U.K. inheritance tax may arise in respect of ordinary shares on the death of, or on a gift of ordinary shares by, an individual holder of such ordinary shares who is domiciled, or deemed to be domiciled, in the U.K.
The ordinary shares, if held directly, rather than as DIs, should not be assets situated in the U.K. for the purposes of U.K. inheritance tax. Accordingly, neither the death of a holder of such ordinary shares nor a gift of such ordinary shares by a holder should give rise to a liability to U.K. inheritance tax if the holder is neither domiciled nor deemed to be domiciled in the U.K. However, DIs may be treated as assets situated in the U.K. for the purposes of U.K. inheritance tax. Accordingly, the death of a holder of DIs or a gift of DIs by a holder may give rise to a liability to U.K. inheritance tax, even if the holder is neither domiciled nor deemed to be domiciled in the U.K.
For inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift and particular rules apply to gifts where the donor reserves or retains some benefit. Special rules also apply to close companies and to trustees of settlements who hold ordinary shares, bringing them within the charge to inheritance tax. Shareholders should consult an appropriate tax adviser if they make a gift or transfer at less than full market value or if they intend to hold any ordinary shares or DIs through trust arrangements.
Jersey taxation
The following summary of the anticipated treatment of the Company and holders of ordinary shares (other than residents of Jersey) is based on Jersey taxation law and practice as they are understood to apply at the date of this Annual Report and is subject to changes in such taxation law and practice. It does not constitute legal or tax advice and does not address all aspects of Jersey tax law and practice. Holders of ordinary shares should consult their professional advisers on the implications of acquiring, buying, selling or otherwise disposing of ordinary shares under the laws of any jurisdiction in which they may be liable to taxation.
Taxation of the Company
The Company is not regarded as resident for tax purposes in Jersey. Therefore, the Company will not be liable to Jersey income tax other than on Jersey source income (except where such income is exempted from income tax pursuant to the Income Tax (Jersey) Law 1961, as amended) and dividends on ordinary shares may be paid by the Company without withholding or deduction for or on account of Jersey income tax.
The holders of ordinary shares (other than residents of Jersey) will not be subject to any tax in Jersey in respect of the holding, sale or other disposition of such ordinary shares.
There is no reciprocal tax treaty between the United States and Jersey regarding withholding tax.
Stamp duty
In Jersey, no stamp duty is levied on the issue or transfer of the ordinary shares except that stamp duty is payable on Jersey grants of probate and letters of administration, which will generally be required to transfer ordinary shares on the death of a holder of such ordinary shares.
In the case of a grant of probate or letters of administration, stamp duty is levied according to the size of the estate (wherever situated in respect of a holder of ordinary shares domiciled in Jersey, or situated in Jersey in respect of a holder of ordinary shares domiciled outside Jersey) and is payable on a sliding scale at a rate of up to 0.75% of such estate and such duty is capped at £100,000.
Jersey does not otherwise levy taxes upon capital, inheritances, capital gains or gifts nor are there other estate duties.
If you are in any doubt as to your tax position you should consult your professional tax adviser.
United States taxation
U.S. Holders
The following is a general summary based on present law of certain United States federal income tax considerations relevant to the ownership and disposition of our ordinary shares by a U.S. Holder (as defined below). It addresses only U.S. Holders (as defined below) that hold our ordinary shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”) and that use the U.S. dollar as their functional currency.
This summary is for general information only and is not a substitute for tax advice. It is not a complete description of all of the tax considerations that may be relevant to a particular U.S. Holder. It does not address all of the considerations relevant to U.S. Holders subject to special tax regimes, such as banks and other financial institutions, insurance companies, dealers in currencies and securities, traders in securities that elect mark-to-market treatment, regulated investment companies, real estate investment trusts, tax-exempt entities, retirement plans, individual retirement accounts or other tax-deferred accounts, pass-through entities (including S-corporations), entities or arrangements treated as partnerships for United States federal income tax purposes, United States expatriates, investors liable for alternative minimum tax, persons holding our ordinary shares as part of a hedge, straddle, conversion or other integrated financial transaction, persons holding ordinary shares through a permanent establishment or fixed base outside the United States, persons who acquired their ordinary shares through the exercise of an employee share option or otherwise as compensation, or persons that own directly, indirectly or constructively 5% or more (by voting power or value) of the equity interests of the Company. This summary does not address any United States federal taxes other than the income tax (such as estate and gift tax), any United States state and local tax considerations, any non-United States tax considerations, or any considerations relating to the Foreign Account Tax Compliance Act (“FATCA”) (by which we mean Sections 1471 through 1474 of the Code, the Treasury regulations and administrative guidance thereunder, and any intergovernmental agreement entered into in connection therewith). This summary also does not apply to any person other than a U.S. Holder (as defined below).
The discussion is based upon the provisions of the Code, the Treasury regulations promulgated thereunder, the administrative practices published by the United States Internal Revenue Service (the “IRS”) and U.S. judicial decisions, all of which are subject to change. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.
As used here, “U.S. Holder” means a beneficial owner of our ordinary shares that for United States federal income tax purposes is (i) an individual citizen or resident of the United States, (ii) a corporation organized in or under the laws of the United States, any State thereof, or the District of Columbia, (iii) a trust subject to the control of a United States person and the primary supervision of a United States court or (iv) an estate the income of which is subject to United States federal income taxation regardless of its source.
The United States federal tax consequences to a partner in a partnership generally will depend on the status of the partner and the activities of the partnership. U.S. Holders that are partnerships are urged to consult their own tax advisers about the tax consequences to their partners of owning or disposing of our ordinary shares.
The Company believes, and this discussion assumes, that the Company is not, nor has it been, a passive foreign investment company (“PFIC”) for United States federal income tax purposes. In addition, the Company believes, and this discussion assumes, that the Company will not be a PFIC for the current taxable year or in the foreseeable future. The Company’s status as a PFIC must be determined annually, and it therefore could change. If the Company has been a PFIC for any year during a U.S. Holder’s holding period, or if the Company were to be a PFIC in any year during any U.S. Holder’s holding period, such U.S. Holder could suffer material adverse tax consequences. Each current or potential investor who is a U.S. Holder should consult its own tax adviser regarding the application and tax consequences of the PFIC rules and the risk that the Company is or may become a PFIC.
The Company also believes, and this discussion also assumes, that the Company will be treated as a non-U.S. corporation for U.S. federal income tax purposes.
Dividends on ordinary shares
U.S. Holders generally must include dividends paid on our ordinary shares in their gross income as ordinary income from foreign sources. Generally, distributions in excess of a corporation’s current and accumulated earnings and profits are treated as a non-taxable return of capital to the extent of the shareholder’s basis in its shares, and thereafter as capital gain. However, the Company does not maintain calculations of its earnings and profits in accordance with United States federal income tax principles. U.S. Holders therefore should assume that any distribution by the Company with respect to our ordinary shares will be treated as ordinary dividend income. Dividends will not be eligible for the dividends-received deduction generally available to United States corporations. However, dividends should be eligible for the reduced rate on qualified dividend income available to certain eligible non-corporate U.S. Holders that satisfy a minimum holding period and other generally applicable requirements if the Company qualifies for benefits under the income tax treaty between the United Kingdom and the United States (the “US-UK Treaty”). The Company expects to qualify for benefits under the US-UK Treaty.
Dividends paid to U.S. Holders in a currency other than U.S. dollars will be includible in income in a U.S. dollar amount determined at the spot rate on the date of receipt whether or not converted into U.S. dollars at that time. A U.S. Holder will have a basis in the non-United States currency received equal to its U.S. dollar value on the date of receipt. Gain or loss on a subsequent conversion or other disposition of the non-United States currency for a different amount generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.
Dispositions of ordinary shares
U.S. Holders generally will recognize a capital gain or loss on the sale or other disposition of ordinary shares in an amount equal to the difference between their adjusted tax basis in the shares and the U.S. dollar value of the amount realized. Any gain will be a long-term gain if the U.S. Holder has held the ordinary shares for a period longer than one year. Any loss will be a long-term loss if the U.S. Holder has held the ordinary shares for a period longer than one year. Deductions for capital losses are subject to limitations. Any gain or loss generally will be treated as arising from United States sources. U.S. Holders should consult their tax advisers regarding any special rules relating to “extraordinary dividends” that may be potentially applicable to them if they have received a dividend from the Company in an amount greater than 10% of that U.S. Holder’s tax basis in its ordinary shares.
A U.S. Holder that receives a currency other than U.S. dollars in exchange for its shares will realize an amount equal to the U.S. dollar value of the currency received at the spot rate on the date of disposition (or, if the shares are traded on an established securities market and a U.S. Holder is a cash-basis or electing accrual basis taxpayer, at the spot rate on the settlement date). A U.S. Holder will have a tax basis in the currency received equal to the U.S. dollar value of the currency on the settlement date. Any currency gain or loss realized on the settlement date or on a subsequent conversion or other disposition of the currency for a different U.S. dollar amount generally will be United States source ordinary income or loss.
Gain or loss realized by a U.S. Holder on the sale or exchange of ordinary shares will generally be treated as US-source gain or loss for U.S. foreign tax credit purposes.
Medicare tax on net investment income
Certain non-corporate U.S. Holders whose income exceeds certain thresholds generally will be subject to a 3.8% surtax on their “net investment income” (which generally includes, among other things, dividends on, and capital and foreign currency gain from, the sale or other disposition of the ordinary shares). Non-corporate U.S. Holders should consult their own tax advisers regarding the possible effect of such tax on their ownership and disposition of the ordinary shares.
Information reporting and backup withholding
Dividends on our ordinary shares and proceeds from the disposition of such shares may be reported to the IRS. Backup withholding tax may apply to amounts subject to reporting if the holder fails to provide an accurate taxpayer identification number on a properly complete IRS Form W-9 or to meet other conditions (or, in the case of a beneficial owner of our ordinary shares that is not a United States person for U.S. federal income tax purposes, if such beneficial owner fails to properly certify its status as not a United States person, for example by providing an appropriate and properly completed IRS Form W-8, or to otherwise establish an exemption). The amount of any backup withholding tax may be credited against or refunded to the extent it exceeds the holder’s United States federal income tax liability, provided that the required information is timely furnished to the IRS.
Certain U.S. Holders are required to report to the IRS information about their investment in ordinary shares not held through an account with a domestic financial institution. Investors who fail to report required information could become subject to substantial penalties. U.S. Holders should consult their tax advisers about these and any other reporting requirements arising from their investment in our ordinary shares.
Item 6.[Reserved].
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to convey management’s perspective regarding operational and financial performance and should be read in conjunction with the consolidated financial statements and related notes contained in this Annual Report. The discussion in this Annual Report generally focuses on fiscal 2023 compared to fiscal 2022. A discussion of our results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 has been excluded from this report, but can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations of our Annual Report for fiscal 2022. The following discussion contains trend information and forward-looking statements. Actual results could differ materially from those discussed in these forward-looking statements, as well as from our historical performance, due to various factors, including, but not limited to, those discussed in the “Risk Factors” and “Forward-Looking Statements and Risk Factor Summary” sections and elsewhere in this Annual Report.
Overview
Ferguson is a value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. Ferguson is headquartered in the U.K., with its operations and associates solely focused on North America and managed from Newport News, Virginia.
The following table presents highlights of our annual performance:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions, except per share amounts) | 2023 | | 2022 | | 2021 |
| Net sales | $29,734 | | $28,566 | | $22,792 |
| Operating profit | 2,659 | | 2,820 | | 1,950 |
| Income from continuing operations | 1,889 | | 2,099 | | 1,630 |
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| | | | | |
| Earnings per share from continuing operations - Diluted | 9.12 | | 9.59 | | 7.25 |
| | | | | |
| Net cash provided by operating activities of continuing operations | 2,727 | | 1,149 | | 1,337 |
| | | | | |
Supplemental non-GAAP financial measures:(1) | | | | | |
| Adjusted operating profit | 2,917 | | 2,951 | | 2,092 |
| Adjusted earnings per share - diluted | 9.84 | | 9.76 | | 6.75 |
For fiscal 2023, net sales increased by 4.1%, which was primarily driven by price inflation (approximately 8%), as well as a 2.5% increase in sales from acquisitions, partially offset by lower volume compared with fiscal 2022.
For fiscal 2023, operating profit decreased 5.7% to $2.7 billion compared to $2.8 billion in fiscal 2022. This decline was primarily due to impairment and other charges related to a certain IT project and branch closures. Adjusted operating profit decreased by 1.2% to $2.9 billion compared to $3.0 billion in fiscal 2022.
For fiscal 2023, diluted earnings per share from continuing operations was $9.12 (adjusted diluted earnings per share: $9.84), decreasing 4.9% over the prior year due to lower income from continuing operations, partially offset by the impact of the $0.9 billion in share repurchases as part of the Company’s $3.0 billion share repurchase program. Adjusted diluted earnings per share increased 0.8%, primarily due to the slightly lower adjusted operating profit and higher interest expense, offset by the impact of the Company’s share repurchases.
Net cash provided by operating activities from continuing operations increased to $2.7 billion for fiscal 2023 compared to $1.1 billion for fiscal 2022, primarily reflecting improved working capital management, particularly inventory. During fiscal 2023, the Company invested $616 million in acquisitions and $441 million in capital expenditures to meet the Company’s strategic objectives.
Results of Operations
The table below summarizes the Company’s consolidated statements of earnings for the periods indicated.
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| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net sales | $29,734 | | | $28,566 | | | $22,792 | |
| Cost of sales | (20,709) | | | (19,810) | | | (15,812) | |
| Gross profit | 9,025 | | | 8,756 | | | 6,980 | |
| Selling, general and administrative expenses | (5,920) | | | (5,635) | | | (4,732) | |
| Impairments and other charges | (125) | | | — | | | — | |
| Depreciation and amortization | (321) | | | (301) | | | (298) | |
| Operating profit | 2,659 | | | 2,820 | | | 1,950 | |
| Interest expense, net | (184) | | | (111) | | | (98) | |
| Other (expense) income, net | (11) | | | (1) | | | 10 | |
| Income before income taxes | 2,464 | | | 2,708 | | | 1,862 | |
| Provision for income taxes | (575) | | | (609) | | | (232) | |
| Income from continuing operations | $1,889 | | | $2,099 | | | $1,630 | |
Net sales
Net sales were $29.7 billion in fiscal 2023, an increase of $1.2 billion, or 4.1%, compared with the same period in 2022. The increase in net sales was primarily driven by price inflation of approximately 8%, as well as a 2.5% increase in sales from acquisitions, partially offset by lower sales volume. The Company’s sales growth was driven by its United States segment, which grew 4.5%, mainly due to growth in the non-residential end markets, as well as growth in RMI related sales within the residential end market.
Gross profit
Gross profit was $9.0 billion in fiscal 2023, an increase of $0.3 billion, or 3.1%, compared with fiscal 2022, reflecting increased net sales. Gross profit as a percent of sales was 30.4% in fiscal 2023 compared with 30.7% in the prior year. The decrease of 0.3% primarily reflected the price realization benefit in fiscal 2022 due to price inflation that exceeded the weighted average cost of inventory sold in certain commodity categories.
Selling, general and administrative expenses (“SG&A”)
SG&A expenses were $5.9 billion in fiscal 2023, an increase of $285 million, or 5.1%, compared with fiscal 2022. SG&A as a percentage of sales was 19.9% and 19.7% in fiscal 2023 and fiscal 2022, respectively. The increase in SG&A as a percent of sales primarily reflects wage inflation that was offset, in part, by productivity and headcount management, as well as increased infrastructure costs.
Impairments and other charges
Internal use software
The Company has been upgrading portions of its IT systems to enhance customer experience and associate productivity. One of the solutions developed targeted certain branch transactional processes and was piloted at select locations. In the third quarter of fiscal 2023, the Company determined that this solution did not meet our customer service, speed and efficiency goals. As a result, the Company chose not to proceed with this component and recorded a non-cash impairment charge of $107 million of previously capitalized software costs in the United States.
Branch closures
During fiscal 2023, the Company recorded charges of $18 million related to the closure of certain smaller, underperforming branches in the United States, primarily related to impairment of lease assets and related fixed assets.
Net interest expense
Net interest expense was $184 million in fiscal 2023, an increase of $73 million, or 65.8% compared with fiscal 2022. The change in net interest expense was primarily due to an increase in average debt, and to a lesser extent, the higher interest expense compared to fiscal 2022 was due to increased interest rates on the Company’s variable rate debt.
Income tax expense
Income tax expense was $575 million for fiscal 2023, a decrease of $34 million, or 5.6%, compared with fiscal 2022. The Company’s effective tax rate for continuing operations was 23.3% for fiscal 2023 compared with 22.5% for fiscal 2022. The decrease in income tax expense was primarily driven by a decrease in pre-tax income in fiscal 2023 compared with fiscal 2022, partially offset by the increase in the effective tax rate. The increase in the effective tax rate was mainly due to discrete tax benefits recorded in fiscal 2022 related to prior year adjustments and releases of uncertain tax positions following the closure of tax audits, and to a lesser extent, an increase in our statutory tax rates in specific jurisdictions.
Net income
Net income from continuing operations for fiscal 2023 was $1.9 billion, a decrease of $210 million, or 10.0%, compared with fiscal 2022 due to the elements described in the sections above.
Segment results of operations for fiscal 2023 and fiscal 2022
The Company’s reportable segments are the United States and Canada based on how the Company manages its business and allocates resources, which is on a geographical basis. The Company’s measure of segment profit is adjusted operating profit which is defined as profit before tax, excluding central and other costs, restructuring costs, amortization of acquired intangible assets, net interest expenses, as well as other items typically recorded in net other (expense) income such as (loss)/gain on disposal of businesses, pension plan changes/closure costs and amounts recorded in connection with the Company’s interests in investees. For further segment information, see Note 2, Revenue and segment information of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Annual Report.
United States
| | | | | | | | | | | |
| | For the years ended July 31, |
| (In millions) | 2023 | | 2022 |
| Net sales | $28,291 | | | $27,067 | |
Adjusted operating profit | 2,892 | | | 2,893 | |
Net sales for the United States segment were $28.3 billion in fiscal 2023, an increase of $1.2 billion, or 4.5%, compared with the prior year. The increase in net sales was primarily driven by price inflation of 8% as well as a 2.6% increase in sales from acquisitions. These increases were partially offset by lower volume. Sales growth in the non-residential markets (comprising approximately 48% of segment sales), was 8.5%, with growth in each of the civil/infrastructure, commercial and industrial end markets. Sales growth in the residential markets (comprising approximately 52% of segment sales) increased by 1.1%, driven by higher RMI sales, partially offset by lower sales in new construction in light of housing starts and permit activity that were below prior year levels.
Adjusted operating profit in the United States of $2.9 billion was flat compared with the prior year, as sales growth was generally offset by higher SG&A costs, primarily reflecting wage inflation that was offset, in part, by productivity and headcount management, as well as increased infrastructure costs.
Canada
| | | | | | | | | | | |
| | For the years ended July 31, |
| (In millions) | 2023 | | 2022 |
| Net sales | $1,443 | | | $1,499 | |
Adjusted operating profit | 76 | | | 112 | |
Net sales for the Canada segment were $1.4 billion in fiscal 2023, a decrease of $56 million, or 3.7%, compared with the prior year. This decrease in net sales was primarily due to lower sales volumes, as well as a 5.5% unfavorable impact from foreign currency exchange rates. These impacts were partially offset by sales price inflation of approximately 8%.
Adjusted operating profit for the Canada segment decreased compared with the prior year, primarily due to lower sales and associated lower gross profit, as well as higher SG&A costs due to intentional infrastructure investments in new branches.
Non-GAAP Reconciliations and Supplementary Information
The Company reports its financial results in accordance with U.S. GAAP. However, the Company believes certain non-GAAP financial measures provide users of the Company’s financial information with additional meaningful information to assist in understanding financial results and assessing the Company’s performance from period to period. These non-GAAP financial measures include adjusted operating profit, adjusted net income, adjusted earnings per share (“adjusted EPS”) - diluted. Management believes these measures are important indicators of operations because they exclude items that may not be indicative of our core operating results and provide a better baseline for analyzing trends in our underlying businesses, and they are consistent with how business performance is planned, reported and assessed internally by management and the Company’s Board of Directors. Such non-GAAP adjustments include amortization of acquired intangible assets, discrete tax items, and any other items that are non-recurring. Non-recurring items may include business restructuring charges, corporate restructuring charges, which includes costs associated with the Company’s listing in the United States, gains or losses on the disposals of businesses which by their nature do not reflect primary operations, as well as certain other items deemed non-recurring in nature and/or that are not a result of the Company’s primary operations. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for results reported under U.S. GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with U.S. GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review the Company’s financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Reconciliation of net income to adjusted operating profit
The following table reconciles net income (U.S. GAAP) to adjusted operating profit (non-GAAP):
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net income | $1,889 | | | $2,122 | | | $1,472 | |
| (Income) loss, discontinued operations (net of tax) | — | | | (23) | | | 158 | |
| Income from continuing operations | 1,889 | | | 2,099 | | | 1,630 | |
| Provision for income taxes | 575 | | | 609 | | | 232 | |
| Interest expense, net | 184 | | | 111 | | | 98 | |
| Other expense (income), net | 11 | | | 1 | | | (10) | |
| Operating profit | 2,659 | | | 2,820 | | | 1,950 | |
Business restructurings(1) | — | | | — | | | (11) | |
Corporate restructurings(2) | — | | | 17 | | | 22 | |
Impairments and other charges(3) | 125 | | | — | | | — | |
| Amortization of acquired intangibles | 133 | | | 114 | | | 131 |
| Adjusted operating profit | $2,917 | | | $2,951 | | | $2,092 | |
(1)For fiscal 2021, business restructuring reflects the release of provisions in connection with previously anticipated COVID-19 cost actions recorded in fiscal 2020.
(2)For fiscal 2022 and 2021, corporate restructuring costs primarily related to the incremental costs of the Company’s listing in the United States.
(3)For fiscal 2023, impairments and other charges related to the $107 million in software impairment charges and $18 million in charges associated with the closure of certain smaller, underperforming branches in the United States.
Reconciliation of net income to adjusted net income and adjusted EPS - diluted
The following table reconciles net income (U.S. GAAP) to adjusted net income and adjusted EPS - diluted (non-GAAP):
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| For the years ended July 31, |
| (In millions, except per share amounts) | 2023 | | 2022 | | 2021 |
| | | per share(1) | | | | per share(1) | | | | per share(1) |
| Net income | $1,889 | | | $9.12 | | | $2,122 | | | $9.69 | | | $1,472 | | | $6.55 | |
| (Income) loss from discontinued operations (net of tax) | — | | | — | | | (23) | | | (0.10) | | | 158 | | | 0.70 | |
| Income from continuing operations | 1,889 | | | 9.12 | | | 2,099 | | | 9.59 | | | 1,630 | | 7.25 | |
Business restructurings(2) | — | | | — | | | — | | | — | | | (11) | | | (0.05) | |
Corporate restructurings(3) | — | | | — | | | 17 | | | 0.08 | | | 22 | | | 0.10 | |
Impairments and other charges(4) | 125 | | | 0.60 | | | — | | | — | | | — | | | — | |
| Amortization of acquired intangibles | 133 | | | 0.64 | | | 114 | | | 0.52 | | | 131 | | | 0.58 | |
Discrete tax adjustments(5) | (36) | | | (0.17) | | | (72) | | | (0.33) | | | (203) | | | (0.90) | |
Tax impact on non-GAAP adjustments(6) | (73) | | | (0.35) | | | (21) | | | (0.10) | | | (51) | | | (0.23) | |
| Adjusted net income | $2,038 | | | $9.84 | | | $2,137 | | | $9.76 | | | $1,518 | | | $6.75 | |
| | | | | | | | | | | |
| Diluted weighted average shares outstanding | 207.2 | | | 218.9 | | | 224.8 | |
(1)Per share on a dilutive basis.
(2)For fiscal 2021, business restructuring reflects the release of provisions in connection with previously anticipated COVID-19 cost actions recorded in fiscal 2020.
(3)For fiscal 2022 and 2021, corporate restructuring costs primarily related to the incremental costs of the Company’s listing in the United States.
(4)For fiscal 2023, impairments and other charges related to the $107 million in software impairment charges and $18 million in charges associated with the closure of certain smaller, underperforming branches in the United States.
(5)For fiscal 2023, discrete tax adjustments primarily related to the release of uncertain positions following the lapse of statute of limitations, as well as adjustments in connection with amended returns. In fiscal 2022, the discrete tax adjustments primarily related to the release of uncertain tax positions following the closure of tax audits and prior year adjustments, including amended tax return items. In fiscal 2021, the discrete tax adjustments primarily related to the release of uncertain tax positions following the closure of tax audits, as well as the impact of changes in tax rates.
(6)For fiscal 2023, the tax impact on non-GAAP adjustments primarily related to the impairments and other charges and amortization of acquired intangibles. For fiscal 2022 and 2021, the tax impact of non-GAAP adjustments primarily related to the amortization of acquired intangibles.
Liquidity and Capital Resources
The Company believes its current cash position coupled with cash flow anticipated to be generated from operations and access to capital should be sufficient to meet its operating cash requirements for the next 12 months and will also enable the Company to invest and fund capital expenditures, dividend payments, acquisitions, announced share repurchases, required debt payments and other contractual obligations through the next several fiscal years. The Company also anticipates that it has the ability to obtain alternative sources of financing, if necessary.
Cash flows
As of July 31, 2023 and 2022, the Company had cash and cash equivalents of $601 million and $771 million, respectively. In addition to cash, the Company had $2.4 billion of available liquidity from undrawn debt facilities as of July 31, 2023.
As of July 31, 2023, the Company’s total debt was $3.8 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.
Cash flows from operating activities
| | | | | | | | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net cash provided by operating activities | $2,723 | | | $1,149 | | | $1,382 | |
Net cash provided by operating activities was $2.7 billion in fiscal 2023 and $1.1 billion in fiscal 2022. The $1.6 billion increase was primarily driven by improved working capital management, particularly inventory and receivables, compared with fiscal 2022 when the Company made strategic investments in working capital to better serve customers during times of significant supply chain disruption. These improvements were partially offset by a net decrease in payables, due to the timing of vendor payments and obligations, as well as higher cash paid for interest.
Cash flows from investing activities
| | | | | | | | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net cash used in investing activities | ($1,054) | | | ($922) | | | ($125) | |
Net cash used in investing activities was $1.1 billion in fiscal 2023 compared with $0.9 billion in fiscal 2022.
Capital expenditure totaled $441 million and $290 million in fiscal 2023 and fiscal 2022, respectively. These investments were primarily for strategic projects to support future growth, such as new market distribution centers, our branch network and new technology. In addition, the Company invested $616 million and $650 million in new acquisitions in fiscal 2023 and fiscal 2022, respectively.
Cash flows from financing activities
| | | | | | | | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net cash used in financing activities | ($1,807) | | ($744) | | ($2,051) |
Net cash used in financing activities was $1.8 billion and $0.7 billion in fiscal 2023 and 2022, respectively.
Dividends paid to shareholders were $711 million and $538 million in fiscal 2023 and 2022, respectively.
Share repurchases under the Company’s announced share repurchase program were $908 million and $1,545 million in fiscal 2023 and 2022, respectively.
Net repayments of debt were $155 million compared to net proceeds from debt of $1,444 million in fiscal 2023 and 2022, respectively. In fiscal 2023, the Company borrowed $500 million of term loans, partially offset by the repayment of $250 million due to the maturity of certain Private Placement Notes (as defined below) and $405 million in net repayments of the Receivables Facility. In fiscal 2022, the Company received $989 million in connection with the issuance of its unsecured senior notes, as well as net proceeds of $455 million under the Receivables Facility.
Reinvestment of unremitted earnings
We consider foreign earnings of specific subsidiaries to be indefinitely reinvested. As of July 31, 2023 and 2022, these permanently reinvested earnings of foreign subsidiaries amounted to $725 million and $658 million, respectively. If at some future date, the Company ceases to be permanently reinvested in these specific foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference on these specific foreign subsidiaries.
Debt facilities
The following section summarizes certain material provisions of our long-term debt facilities and current obligations. The following description is only a summary, does not purport to be complete and is qualified in its entirety by reference to the documents governing such indebtedness.
| | | | | | | | | | | |
| | As of July 31, |
| (In millions) | 2023 | | 2022 |
| Short-term debt | $55 | | $250 |
| Long-term debt | 3,711 | | 3,679 |
| Total debt | $3,766 | | $3,929 |
Private Placement Notes
In June 2015 and November 2017, Wolseley Capital, Inc. (“Wolseley Capital”), a wholly-owned subsidiary of the Company, privately placed fixed rate notes in an aggregate principal amount of $800 million and $355 million, respectively (collectively, the “Private Placement Notes”). In September 2022, the Company repaid $250 million in maturing fixed rate notes. In November 2023, an additional $55 million of such notes will mature.
Unsecured Senior Notes
Ferguson Finance plc (“Ferguson Finance”) has issued $2.35 billion in various issuances of unsecured senior notes (collectively, the “Unsecured Senior Notes”) as follows:
•April 2022: $300 million of 4.25% notes due April 2027 and $700 million of 4.65% notes due April 2032. The combined net proceeds were $989 million;
•June 2020: $600 million of 3.25% notes due June 2030; and
•October 2018: $750 million of 4.50% notes due October 2028.
The Unsecured Senior Notes are fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis by the Company and generally carry the same terms and conditions with interest paid semi-annually. The Unsecured Senior Notes may be redeemed, in whole or in part, (i) at 100% of the principal amount on the notes being redeemed plus a “make-whole” prepayment premium at any time prior to three months before the maturity date (the “Notes Par Call Date”) or (ii) after the Notes Par Call Date at 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest on the principal being redeemed. The Unsecured Senior Notes include covenants, subject to certain exceptions, which include limitations on the granting of liens and on mergers and acquisitions.
Term Loan
In October 2022, the Company and Ferguson UK entered into, and Ferguson UK borrowed in full, the $500 million of term loans available under the Term Loan Agreement (as defined below). The proceeds of the term loans may be used for general corporate purposes. The Term Loan Agreement will mature on October 7, 2025. The benchmark rate is Term SOFR (as defined in the Term Loan Agreement) plus a credit spread adjustment of 10 basis points plus a margin ranging from 100 to 150 basis points, determined on the basis of the Company’s corporate credit ratings (or if public credit ratings are not published, senior unsecured debt ratings).
Revolving Credit Facility
The Company maintains a revolving credit facility (the “Revolving Facility”) under the Revolving Facility Agreement (as defined below) with aggregate total available credit commitments of $1.35 billion. The benchmark rate applicable to U.S. dollar denominated loans is Term SOFR (as defined in the Revolving Facility Agreement) plus a credit spread adjustment of 10 basis points plus a margin ranging from 20 to 75 basis points, determined on the basis of the Company’s corporate credit ratings (or if public credit ratings are not published, senior unsecured debt ratings)..
As of July 31, 2023, no borrowings were outstanding under the Revolving Facility.
Receivable Securitization Facility
The Company maintains a Receivables Securitization Facility (as amended from time to time, the “Receivables Facility”) with an aggregate total available amount of $1.1 billion, including a swingline for up to $100 million in same day funding. The Company has the ability to increase the aggregate total available amount under the Receivables Facility up to a total of $1.5 billion from time to time, subject to lender participation. The benchmark rate is Term SOFR (as defined in the Receivables Facility) plus a credit spread adjustment of 10 basis points.
As of July 31, 2023, $50 million in borrowings were outstanding under the Receivables Facility.
The Company was in compliance with all debt covenants for all facilities as of July 31, 2023.
See Note 9, Debt to the Consolidated Financial Statements contained in this Annual Report for further details regarding the Company’s debt.
There have been no significant changes during the fiscal year to the Company’s policies on accounting for, valuing and managing the risk of financial instruments.
Contractual obligations
The table below sets forth the Company’s anticipated contractual cash outflows on an undiscounted basis as of July 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of July 31, 2023 |
| (In millions) | Total | | Fiscal 2024 | | Fiscal 2025 & 2026 | | Fiscal 2027 & 2028 | | Fiscal 2028 & beyond |
Debt - principal(a) | $3,805 | | | $55 | | | $1,100 | | | $600 | | | $2,050 | |
Debt - interest only(b) | 1,037 | | | 178 | | | 301 | | | 211 | | | 347 | |
| Operating leases | 1,689 | | | 377 | | | 646 | | | 371 | | | 295 | |
| Leases not yet commenced | 223 | | | 174 | | | 49 | | | — | | | — | |
UK pension contributions(c) | 137 | | | 31 | | | 56 | | | 50 | | | — | |
Share repurchase liability(d) | 84 | | | 84 | | | — | | | — | | | — | |
Other purchase obligations(e) | 1,842 | | | 1,842 | | | — | | | — | | | — | |
| Total | $8,817 | | | $2,741 | | | $2,152 | | | $1,232 | | | $2,692 | |
(a)See Note 9, Debt to our consolidated financial statements contained in this Annual Report for further detail related to debt.
(b)Interest on debt is calculated using the prevailing spot interest rate as of the balance sheet date.
(c)As required by United Kingdom pensions regulation, the United Kingdom Plan completed its triennial actuarial valuation exercise, which is measured on a technical provisions basis, based on the United Kingdom Plan’s financial position as of April 30, 2022. The triennial valuation resulted in a need for deficit reduction contributions by the Company of £133 million spread over the period to January 31, 2026, of which the Company has paid £26 million as of July 31, 2023. The related obligations in the table above have been converted to U.S. dollars using a year-end spot rate, which may be different when amounts are actually paid.
(d)Share repurchases are being made under an authorization that allows up to $3.0 billion in share repurchases. The Company is currently purchasing shares under an irrevocable and non-discretionary arrangement with $84 million in accrued repurchases remaining, which is recorded as a current liability in the consolidated balance sheets.
(e)Other purchase obligations primarily include commitments to purchase inventory and other goods and services and uncompleted additions to property, buildings and equipment that are expected to be satisfied within the next 12 months. Purchase obligations are made in the normal course of business to meet operating needs. While purchase orders for both inventory purchases and non-inventory purchases are generally cancellable without penalty, certain vendor agreements provide for cancellation fees or penalties depending on the terms of the contract.
Tax obligations
At July 31, 2023, the Company had aggregate liabilities for unrecognized tax benefits totaling $144 million, none of which are expected to be paid in the next 12 months. The timing of payment, if any, associated with our long-term unrecognized tax benefit liabilities is unknown. See Note 4, Income Tax to the Consolidated Financial Statements in this Annual Report for further discussion of our unrecognized tax benefits.
Critical Accounting Estimates
In applying the Company’s accounting policies, various transactions and balances are valued using estimates or assumptions. Should these estimates or assumptions prove incorrect, there may be an impact on the following year’s financial statements. Management believes that the estimates and assumptions that have been applied would not give rise to a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year.
The Company’s significant accounting policies that require estimates include the allowance for doubtful accounts, inventories, considerations around goodwill impairment, leases and revenue recognition. These policies and related estimates are described in Note 1, Summary of significant accounting policies to the Consolidated Financial Statements. Some of these accounting policies may require management to make difficult, subjective or complex judgments about the Company’s estimates.
The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on the Company’s consolidated financial position and results. The Company has determined that its estimates around inventories and pension obligations represent its most critical accounting estimates.
Inventories
Inventory reserves are recorded against slow‐moving, obsolete and damaged inventories for which the net realizable value is estimated to be less than the cost. The reserve is estimated based on the Company’s current knowledge with respect to inventory levels, sales trends and historical experience.
Pensions
The Company considers that the most sensitive assumptions are the discount rate on the benefit obligation, the wage inflation growth rate and life expectancy in connection with the Company’s pension plan in the U.K. Changes in the assumption related to the pension plan in Canada do not result in significant changes.
The Company measures discount rates by reference to corporate bond yields, which can also vary significantly between reporting periods, particularly in light of macroeconomic factors that can impact corporate bond yields. The most senstitive assumption used for the Company’s U.K. pension plan were as follows:
| | | | | | | | | | | | | | | | | |
| Rate assumption: | 2023 | | 2022 | | 2021 |
| Discount rate, benefit obligation | 5.05% | | 3.45% | | 1.70% |
| | | | | |
The sensitivity analyses below show the (increase)/decrease in the Company’s defined benefit plan net asset/liability of reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
| | | | | | | | | | | |
| (In millions) | Change | | U.K. |
| Discount rate, benefit obligation | +0.25 | % | | ($39) | |
| (0.25) | % | | 42 | |
| Wage inflation growth rate, benefit obligation | +0.25 | % | | 37 | |
| (0.25) | % | | (30) | |
| Life expectancy | +1 year | | 51 | |
Accounting developments and changes
Refer to Note 1, Summary of significant accounting policies to the Consolidated Financial Statements for a discussion of new accounting pronouncements.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risks arising from changes in foreign currency exchange rates, interest rates and commodity prices. The Company has well-defined risk management policies, which have been consistently applied during fiscal years 2023, 2022 and 2021. We use derivative and non-derivative instruments to hedge a portion of our risks, none of which are for trading or speculative purposes. There have been no changes since the previous year in the major financial risks faced by the Company.
Foreign currency exchange rates risk
We are exposed to risks from foreign currency exchange rate fluctuations on the translation of our foreign operations into U.S. dollars and on the purchase of goods and services by these foreign operations that are not denominated in their local currencies. Our foreign currency related hedging arrangements outstanding at the end of fiscal 2023 and 2022 were not material. A hypothetical 10% change in the relative value of the U.S. dollar would not materially impact the Company’s net earnings for 2023.
Interest rate risks
The Company is exposed to interest rate risk on its debt. In connection with certain of its Private Placement Notes, the Company entered into interest rate swaps, designated as fair value hedges, to manage its exposure to interest rate movements on its debt. If short-term interest rates varied by 10%, the impact on the Company’s variable-rate debt obligations would not have a material impact on the Company’s net earnings.
Commodity price risk
Some of the Company’s products contain significant amounts of commodity-priced materials, predominantly plastic, copper and steel, and other components which are subject to price changes based upon fluctuations in the commodities market. The Company is also exposed to fluctuations in the price of fuel, which could affect transportation costs. This price volatility could potentially have a material impact on our financial condition and/or our results of operations. The Company regularly monitors commodity trends and has alternative sourcing plans in place to mitigate the risk of supplier concentration, passing commodity-related inflation to customers or suppliers, and continuing to scale its distribution networks, including its transportation infrastructure.
Safe harbor
Quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management’s opinion about risks associated with the Company’s operations, debt and derivative positions. Actual results may differ materially from these forward-looking statements due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currency exchange rates, prices of raw materials and the Company’s actual exposures and positions.
Item 8.Financial Statements and Supplementary Data
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Ferguson plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Ferguson plc and subsidiaries (the “Company”) as of July 31, 2023, the related consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows for the year ended July 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2023, and the results of its operations and its cash flows for the year ended July 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of July 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 26, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the 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 audit 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 financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory Reserves— Refer to Note 1 to the financial statements
Critical Audit Matter Description
The Company had inventories of $3.9 billion as of July 31, 2023.
Inventory reserves are recorded against slow-moving, obsolete, and damaged inventories for which the net realizable value is estimated to be less than the cost. The reserve is estimated based on the Company’s current knowledge with respect to inventory levels, sales trends, and historical experience.
We identified certain components of the inventory reserve as a critical audit matter due to the inherent uncertainty and higher degree of auditor judgment and effort needed to evaluate sales trends and experience that were used in determining the inventory reserve.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to certain components of the inventory reserve included the following:
•tested the Company’s process for determining the inventory reserve by recalculating the inventory reserve for a sample of certain inventory items;
•developed an independent expectation of the inventory reserve at year end based on historical ratios and compared the inventory reserve against our expectation; and
•for a selection of prior year inventory items, evaluated management’s estimated sales activity by comparing actual subsequent sales activity to management’s prior year estimate of sales used in developing certain inventory reserves
/s/ Deloitte & Touche LLP
Richmond, VA
September 26, 2023
We have served as the Company's auditor since 2022.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Ferguson plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Ferguson plc and subsidiaries (the "Company") as of July 31, 2022, the related consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows, for each of the two years in the period ended July 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended July 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the 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 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte LLP
London, United Kingdom
September 27, 2022
We began serving as the Company's auditor in 2016. In 2022 we became the predecessor auditor.
Ferguson plc
Consolidated Statements of Earnings
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| For the years ended July 31, |
| (In millions, except per share amounts) | 2023 | | 2022 | | 2021 |
| Net sales | $29,734 | | | $28,566 | | | $22,792 | |
| Cost of sales | (20,709) | | | (19,810) | | | (15,812) | |
| Gross profit | 9,025 | | | 8,756 | | | 6,980 | |
| Selling, general and administrative expenses | (5,920) | | | (5,635) | | | (4,732) | |
| Impairments and other charges | (125) | | | — | | | — | |
| Depreciation and amortization | (321) | | | (301) | | | (298) | |
| Operating profit | 2,659 | | | 2,820 | | | 1,950 | |
| Interest expense, net | (184) | | | (111) | | | (98) | |
| Other (expense) income, net | (11) | | | (1) | | | 10 | |
| Income before income taxes | 2,464 | | | 2,708 | | | 1,862 | |
| Provision for income taxes | (575) | | | (609) | | | (232) | |
| Income from continuing operations | 1,889 | | | 2,099 | | | 1,630 | |
| Income (loss) from discontinued operations (net of tax) | — | | | 23 | | | (158) | |
| Net income | $1,889 | | | $2,122 | | | $1,472 | |
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| Earnings per share - Basic: | | | | | |
| Continuing operations | $9.15 | | | $9.64 | | | $7.29 | |
| Discontinued operations | — | | | 0.11 | | | (0.70) | |
| Total | $9.15 | | | $9.75 | | | $6.59 | |
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| Earnings per share - Diluted: | | | | | |
| Continuing operations | $9.12 | | | $9.59 | | | $7.25 | |
| Discontinued operations | — | | | 0.10 | | | (0.70) | |
| Total | $9.12 | | | $9.69 | | | $6.55 | |
| | | | | |
| Weighted average number of shares outstanding: | | | | | |
| Basic | 206.4 | | | 217.7 | | | 223.5 | |
| Diluted | 207.2 | | | 218.9 | | | 224.8 | |
See accompanying Notes to the Consolidated Financial Statements.
Ferguson plc
Consolidated Statements of Comprehensive Income
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net income | $1,889 | | | $2,122 | | | $1,472 | |
| Other comprehensive (loss) income: | | | | | |
| Foreign currency translation adjustments | (9) | | | (24) | | | 170 | |
Pension (loss) income, net of tax benefit (expense) of $16, ($11) and ($17), respectively. | (49) | | | (10) | | | 79 | |
| Total other comprehensive (loss) income, net of tax | (58) | | | (34) | | | 249 | |
| Comprehensive income | $1,831 | | | $2,088 | | | $1,721 | |
See accompanying Notes to the Consolidated Financial Statements.
Ferguson plc
Consolidated Balance Sheets
| | | | | | | | | | | |
| As of July 31, |
| (In millions, except share amounts) | 2023 | | 2022 |
| Assets | | | |
| Cash and cash equivalents | $601 | | | $771 | |
Accounts receivable, less allowances of $27 and $27, respectively | 3,597 | | | 3,610 | |
| Inventories | 3,898 | | | 4,333 | |
| Prepaid and other current assets | 953 | | | 834 | |
| Assets held for sale | 28 | | | 3 | |
| Total current assets | 9,077 | | | 9,551 | |
| Property, plant and equipment, net | 1,595 | | | 1,376 | |
| Operating lease right-of-use assets | 1,474 | | | 1,200 | |
| Deferred income taxes, net | 300 | | | 177 | |
| Goodwill | 2,241 | | | 2,048 | |
| Other intangible assets, net | 783 | | | 782 | |
| Other non-current assets | 524 | | | 527 | |
| Total assets | $15,994 | | | $15,661 | |
| | | |
| Liabilities and shareholders' equity | | | |
| Accounts payable | $3,408 | | | $3,607 | |
| Short-term debt | 55 | | | 250 | |
| Current portion of operating lease liabilities | 366 | | | 321 | |
| Share repurchase liability | 84 | | | 324 | |
| Other current liabilities | 1,516 | | | 1,297 | |
| Total current liabilities | 5,429 | | | 5,799 | |
| Long-term debt | 3,711 | | | 3,679 | |
| Long-term portion of operating lease liabilities | 1,126 | | | 878 | |
| Other long-term liabilities | 691 | | | 640 | |
| Total liabilities | 10,957 | | | 10,996 | |
| | | |
| Shareholders’ equity: | | | |
Ordinary shares, par value 10 pence: 500,000,000 shares authorized, 232,171,182 shares issued | $30 | | | $30 | |
| Paid-in capital | 809 | | | 760 | |
| Retained earnings | 8,557 | | | 7,594 | |
Treasury shares, 27,893,680 and 21,078,577 shares, respectively at cost | (3,425) | | | (2,782) | |
Employee Benefit Trust, 274,031 and 846,491 shares, respectively at cost | (46) | | | (107) | |
| Accumulated other comprehensive loss | (888) | | | (830) | |
| Total shareholders' equity | 5,037 | | | 4,665 | |
| Total liabilities and shareholders' equity | $15,994 | | | $15,661 | |
See accompanying Notes to the Consolidated Financial Statements.
Ferguson plc
Consolidated Statements of Shareholders’ Equity
| | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) | Ordinary Shares | Paid-in Capital | Retained Earnings | Treasury Shares | Employee Benefit Trust | Accumulated Other Comprehensive Loss | Total Shareholders’
Equity |
Balance at July 31, 2020 | $30 | | $624 | | $5,658 | | ($570) | | ($88) | | ($1,045) | | $4,609 | |
| Share-based compensation | — | | 80 | | — | | — | | — | | — | | 80 | |
| Net income | — | | — | | 1,472 | | — | | — | | — | | 1,472 | |
| Other comprehensive loss | — | | — | | — | | — | | — | | 249 | | 249 | |
Cash dividends: $4.611 per share | — | | — | | (1,034) | | — | | — | | — | | (1,034) | |
| Share repurchases | — | | — | | — | | (400) | | — | | — | | (400) | |
| Shares issued under employee share plans | — | | — | | (51) | | 39 | | 30 | | — | | 18 | |
| Other | — | | — | | 9 | | — | | — | | — | | 9 | |
Balance at July 31, 2021 | $30 | | $704 | | $6,054 | | ($931) | | ($58) | | ($796) | | $5,003 | |
| Share-based compensation | — | | 56 | | — | | — | | — | | — | | 56 | |
| Net income | — | | — | | 2,122 | | — | | — | | — | | 2,122 | |
| Other comprehensive income | — | | — | | — | | — | | — | | (34) | | (34) | |
Cash dividends: $2.505 per share | — | | — | | (550) | | — | | — | | — | | (550) | |
| Share repurchases | — | | — | | — | | (1,872) | | (92) | | — | | (1,964) | |
| Shares issued under employee share plans | — | | — | | (51) | | 21 | | 43 | | — | | 13 | |
| Other | — | | — | | 19 | | — | | — | | — | | 19 | |
Balance at July 31, 2022 | $30 | | $760 | | $7,594 | | ($2,782) | | ($107) | | ($830) | | $4,665 | |
| Share-based compensation | — | | 49 | | — | | — | | — | | — | | 49 | |
| Net income | — | | — | | 1,889 | | — | | — | | — | | 1,889 | |
| Other comprehensive loss | — | | — | | — | | — | | — | | (58) | | (58) | |
Cash dividends: $4.160 per share | — | | — | | (858) | | — | | — | | — | | (858) | |
| Share repurchases | — | | — | | — | | (667) | | — | | — | | (667) | |
| Shares issued under employee share plans | — | | — | | (68) | | 24 | | 61 | | — | | 17 | |
| | | | | | | |
Balance at July 31, 2023 | $30 | | $809 | | $8,557 | | ($3,425) | | ($46) | | ($888) | | $5,037 | |
See accompanying Notes to the Consolidated Financial Statements.
Ferguson plc
Consolidated Statements of Cash Flows
| | | | | | | | | | | | | | | | | |
| (In millions) | For the years ended July 31, |
| 2023 | | 2022 | | 2021 |
| Cash flows from operating activities: | | | | | |
| Net income | $1,889 | | | $2,122 | | | $1,472 | |
| (Income) loss from discontinued operations | — | | | (23) | | | 158 | |
| Income from continuing operations | 1,889 | | | 2,099 | | | 1,630 | |
| Depreciation and amortization | 321 | | | 301 | | | 298 | |
| Share-based compensation | 51 | | | 57 | | | 77 | |
| Non-cash impact of impairments | 125 | | | 15 | | | — | |
| Changes in deferred income taxes | (104) | | | 41 | | | (185) | |
| Decrease (increase) in inventories | 607 | | | (927) | | | (748) | |
| Increase in receivables and other assets | (1) | | | (780) | | | (756) | |
| (Decrease) increase in accounts payable and other liabilities | (196) | | | 436 | | | 1,012 | |
| Increase (decrease) in income taxes payable | 24 | | | (103) | | | 15 | |
| Other operating activities | 11 | | | 10 | | | (6) | |
| Net cash provided by operating activities of continuing operations | 2,727 | | | 1,149 | | | 1,337 | |
| Net cash (used in) provided by operating activities of discontinued operations | (4) | | | — | | | 45 | |
| Net cash provided by operating activities | 2,723 | | | 1,149 | | | 1,382 | |
| | | | | |
| Cash flows from investing activities: | | | | | |
| Purchase of businesses acquired, net of cash acquired | (616) | | | (650) | | | (286) | |
| | | | | |
| Capital expenditures | (441) | | | (290) | | | (241) | |
| Other investing activities | 3 | | | (6) | | | 12 | |
| Net cash used in investing activities of continuing operations | (1,054) | | | (946) | | | (515) | |
| Net cash provided by investing activities of discontinued operations | — | | | 24 | | | 390 | |
| Net cash used in investing activities | (1,054) | | | (922) | | | (125) | |
| | | | | |
| Cash flows from financing activities: | | | | | |
| Purchase of own shares by Employee Benefit Trust | — | | | (92) | | | — | |
| Purchase of treasury shares | (908) | | | (1,545) | | | (400) | |
| Proceeds from sale of treasury shares | 17 | | | 13 | | | 18 | |
| Repayments of debt | (2,930) | | | (575) | | | (375) | |
| Proceeds from debt | 2,775 | | | 2,019 | | | 4 | |
| Change in bank overdrafts | (15) | | | (4) | | | (213) | |
| Cash dividends | (711) | | | (538) | | | (1,036) | |
| Other financing activities | (35) | | | (22) | | | (49) | |
| Net cash used in financing activities | (1,807) | | | (744) | | | (2,051) | |
| Change in cash, cash equivalents and restricted cash | (138) | | | (517) | | | (794) | |
| Effects of exchange rate changes | 22 | | | (40) | | | 6 | |
| Cash, cash equivalents and restricted cash, beginning of period | 785 | | | 1,342 | | | 2,130 | |
| Cash, cash equivalents and restricted cash, end of period | $669 | | | $785 | | | $1,342 | |
| | | | | |
| Supplemental Disclosures: | | | | | |
| Cash paid for income taxes | $656 | | | $670 | | | $404 | |
| Cash paid for interest | 182 | | | 94 | | | 104 | |
| Accrued capital expenditures | 17 | | | 16 | | | 10 | |
| Accrued dividends | 152 | | | — | | | — | |
See accompanying Notes to the Consolidated Financial Statements.
Ferguson plc
Notes to the Consolidated Financial Statements
Note 1: Summary of significant accounting policies
Background
Ferguson plc (the “Company”) (NYSE: FERG; LSE: FERG) is a public company limited by shares incorporated in Jersey under the Companies (Jersey) Law 1991 (as amended). The Company is a value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. We exist to make our customers’ complex projects simple, successful and sustainable. Ferguson is headquartered in the U.K., with its operations and associates solely focused on North America and managed from Newport News, Virginia. The Company’s registered office is 13 Castle Street, St Helier, Jersey, JE1 1ES, Channel Islands.
Basis of consolidation
These consolidated financial statements include the results of the Company and its wholly-owned subsidiaries. All intercompany transactions are eliminated from the consolidated financial statements.
In the current year, the Company has disaggregated the Increase (decrease) in income taxes within Cash flows from operating activities into Changes in deferred income taxes and Increase (decrease) in income taxes payable. Prior year amounts have also been disaggregated to conform to current year presentation. The disaggregation did not result in any changes to total Cash flows from operating activities.
Fiscal year
Except as otherwise specified, references to years indicate our fiscal year ended July 31 of the respective year. For example, references to “fiscal 2023” or similar references refer to the fiscal year ended July 31, 2023.
Use of estimates
The preparation of the Company's consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
Accounts receivables
Accounts receivables are stated at their estimated net realizable value. An allowance for doubtful accounts is estimated based on historical write-offs, the age of past due receivables, as well as consideration for forward-looking expectations where appropriate. Accounts receivables are written off when recoverability is assessed as being remote. The charges associated with the allowance for doubtful accounts are recognized in selling, general and administrative expenses (“SG&A”). Subsequent recoveries of amounts previously written off are credited to SG&A.
Advertising and marketing costs
Advertising costs, including digital, television, radio and print, are expensed when the advertisement first appears. Certain marketing, or co-op, contributions are received to fund marketing activities of specific, incremental, and identifiable costs incurred to promote suppliers’ products or activities, which are recorded in SG&A as reductions of the related marketing costs. The following table presents net advertising expenses included in SG&A:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net advertising and marketing costs | $403 | | | $389 | | | $299 | |
Business combinations
The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits with banks with original maturities of three months or less and overdrafts to the extent there is a legal right of offset and practice of net settlement with cash balances.
Restricted cash consists of deferred consideration for business combinations, subject to various settlement agreements, as well as funds used to collateralize certain letters of credit. These amounts are recorded in prepaid and other current assets and other non-current assets in the Company’s consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| Cash and cash equivalents | $601 | | | $771 | |
| Restricted cash | 68 | | | 14 | |
| Total cash, cash equivalents and restricted cash | $669 | | | $785 | |
Concentrations of credit risk
The Company monitors credit risk associated with those financial institutions with which it conducts significant business. Credit risk, including but not limited to counterparty non-performance under derivative instruments and our credit facilities, is not considered significant, as we primarily conduct business with large, well-established financial institutions. This risk is managed by setting credit and settlement limits for approved counterparties. In addition, the Company has established guidelines that it follows regarding counterparty credit ratings which are monitored regularly, seeking to limit its exposure to any individual counterparty. The concentration of credit risk was deemed not significant as of July 31, 2023 and 2022.
Cost of sales
Cost of sales includes the cost of goods purchased for resale, net of earned rebates, and the cost of bringing inventory to a sellable location and condition. As the Company does not produce or manufacture products, its inventories are finished goods and therefore depreciation related to warehouse facilities and equipment is presented separately within operating expenses.
Derivative instruments and hedging activity
Derivative financial instruments, in particular interest rate swaps and foreign exchange swaps, are used to manage the financial risks arising from the Company’s business activities and the financing of those activities. Derivatives are not used for speculative purposes or trading activities and have generally not been significant.
Derivatives are measured at their fair values and included in other assets and other liabilities in the consolidated balance sheets.
When the hedging relationship is classified as an effective fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the change in its fair value attributable to the hedged risk and the resulting gain or loss is recognized in the consolidated statements of earnings where it will be offset by the change in the fair value of the hedging instrument.
When the hedging relationship is classified as an effective cash flow hedge or as a net investment hedge, changes in the fair value of the hedging instrument arising from the hedged risk are recorded in other comprehensive income. When the hedged item is recognized in the financial statements, the unrealized gains and losses in accumulated other comprehensive loss are either recognized in the consolidated statements of earnings or, if the hedged item results in a non-financial asset, are recognized as an adjustment to its initial carrying amount.
Discontinued operations
When the Company has disposed of, or classified as held for sale, a business component that represents a strategic shift with significant effect on the Company’s operations and financial results, it classifies that business component as a discontinued operation and retrospectively presents discontinued operations for the comparable periods. The post-tax income, or loss, of discontinued operations are shown as a single line on the face of the consolidated statements of earnings. The disposal of the discontinued operation would also result in a gain or loss upon final disposal.
Fair value measurements
The applicable accounting guidance for fair value measurements established a fair value hierarchy. The fair value hierarchy established under this guidance prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted prices, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value from the perspective of a market participant.
Foreign currency
The consolidated financial statements are presented in U.S. dollars.
Results of operations of foreign subsidiaries are translated into U.S. dollars using average exchange rates during the year. The assets and liabilities of those subsidiaries are translated into U.S. dollars using exchange rates at the current rate of exchange on the last day of the reporting period. These foreign currency translation adjustments are included in accumulated other comprehensive loss. Foreign currency transaction gains and losses are not material.
In the event that the Company disposes of a subsidiary that uses a non-U.S. dollar functional currency, the gain or loss on disposal recognized in the consolidated statements of earnings includes the cumulative currency translation adjustments attributable to the subsidiary.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is not amortized but is carried at cost less accumulated impairment losses. The Company performs an annual impairment assessment in the fourth quarter of each fiscal year, or more frequently if changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
The annual impairment assessment begins with an option to assess qualitative factors to determine whether a quantitative evaluation is appropriate for determining potential goodwill impairment. The quantitative impairment assessment compares the fair value of the reporting unit to its carrying value. The reporting units represent the lowest level within the Company at which the associated goodwill is monitored for management purposes and are based on the markets where the business operates.
The fair value of a reporting unit is determined using the income approach, which requires significant assumptions regarding future operations and the ability to generate cash flows. These assumptions include a forecast of future operating cash flows, capital requirements and a discount rate. Where the carrying value of a reporting unit exceeds the fair value, an impairment loss is recorded in the consolidated statements of earnings.
Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold.
Other intangible assets
Definite-lived intangible assets are primarily comprised of customer relationships, trade names and other intangible assets, acquired as part of business combinations and are capitalized separately from goodwill and carried at cost less accumulated amortization and accumulated impairment losses.
Computer software that is not integral to an item of property, plant and equipment is recognized separately as an intangible asset and is carried at cost less accumulated amortization and accumulated impairment losses. Costs may include software licenses and external and internal costs directly attributable to the development, design and implementation of the computer software. Costs in respect of training and data conversion are expensed as incurred.
Customer relationship amortization is calculated using a systematic, accelerated approach based on the timing of future expected cash flows. The straight-line method is used for all other intangible assets.
The estimated useful life of the respective intangible assets are as follows:
| | | | | |
| Customer relationships | 4 – 15 years |
| Trade names and brands | 1 – 15 years |
| Software | 3 – 5 years |
| Other | 1 – 5 years |
Impairment of long-lived assets
The recoverability of long-lived assets, including property, plant and equipment, right of use assets and definite-lived intangible assets, is evaluated when events or changes in circumstances indicate that the carrying amounts of an asset group may not be recoverable. Long-lived depreciable and amortizable assets are tested for impairment in asset groups, which are defined as the lowest level of assets that generate identifiable cash flows that are largely independent of the cash flows of other asset groups. A potential impairment has occurred for an asset group if projected future undiscounted cash flows expected to result from the use and eventual disposition of the assets are less than the carrying amounts of the assets.
During fiscal 2023, the Company recorded charges of $18 million related to the closure of certain smaller, underperforming branches in the United States, primarily related to impairment of lease assets and related fixed assets. This item was included in the Impairments and other charges line of the Company’s consolidated statements of earnings.
Inventories
Inventories, which comprise goods purchased for resale, are stated at the lower of cost or net realizable value. Cost is primarily determined using the average cost method. The cost of goods purchased for resale includes import and custom duties, transport and handling costs, freight and packing costs and other attributable costs less trade discounts and rebates. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Inventory reserves are recorded against slow‐moving, obsolete and damaged inventories for which the net realizable value is estimated to be less than the cost. The reserve is estimated based on the Company’s current knowledge with respect to inventory levels, sales trends and historical experience.
Leases
The Company enters into contractual arrangements for the utilization of certain non-owned assets. These principally relate to property for the Company’s branches, distribution centers and offices which have varying terms including extension and termination options and periodic rent reviews.
The Company determines if an arrangement is a lease at inception. Leases are evaluated at commencement to determine proper classification as an operating lease or a finance lease. The Company’s leases primarily consist of operating leases. The Company recognizes a right-of-use (“ROU”) asset and lease liability at lease commencement based on the present value of lease payments over the lease term.
The Company generally uses its incremental borrowing rate as the discount rate as most of the Company’s lease arrangements do not provide an implicit borrowing rate. The incremental borrowing rate is estimated using a combination of U.S. Treasury note rates corresponding to lease terms, as well as a blended credit risk spread.
For operating leases, fixed lease payments are recognized on a straight-line basis over the lease term. The Company has elected to not separate lease and non-lease components. Certain lease agreements include variable lease payments that depend on an index, as well as payments for non-lease components, such as common area maintenance, and certain pass-through operating expenses such as real estate taxes and insurance. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligations for those payments are incurred. The Company’s leases do not contain any material residual value guarantees or payments under purchase and termination options which are reasonably certain to be exercised.
Lease terms are initially determined as the non-cancelable period of a lease adjusted for options to extend or terminate a lease that are reasonably certain to be exercised. Generally, the Company’s real estate leases have initial terms of three to 10 years and up to four extension periods that range from two to five years each. Renewal options are typically not included in the lease term as it is not reasonably certain at commencement date that the Company would exercise the extension options. Lease liabilities are subsequently measured at amortized cost using the effective interest method.
Right of use assets are carried at cost less accumulated amortization, impairment losses, and any subsequent remeasurement of the lease liability. Initial cost comprises the lease liability adjusted for lease payments at or before the commencement date, lease incentives received, initial direct costs and an estimate of restoration costs. The Company recognizes minimum rent expense on a straight-line basis over the lease term.
Leases that have an original term of 12 months or less are not recognized on the Company’s consolidated balance sheet, and the lease expense related to those short-term leases is recognized over the lease term.
Property, plant and equipment (“PPE”)
PPE is recorded at cost less accumulated depreciation. Cost includes expenditures necessary to acquire and prepare PPE for its intended use. In addition, subsequent costs that increase the productive capacity or extend the useful life of PPE are capitalized. The cost of repairs and maintenance are expensed as incurred.
Assets are depreciated to their estimated residual value using the straight-line method over their estimated useful lives as follows:
| | | | | |
| Owned buildings | 20 - 50 years |
| Leasehold improvements | Period of lease |
| Plant and machinery | 10 years |
| Computer hardware | 3 - 5 years |
| Furniture, fixtures, equipment | 5 - 7 years |
| Vehicles | 4 years |
Rebates
The Company has agreements (“supplier rebates”) with a number of its suppliers whereby volume-based rebates and other discounts are received in connection with the purchase of goods for resale from those suppliers.
The majority of volume-based supplier rebates are determined by reference to guaranteed rates of rebate. These calculations require minimal judgment. A small proportion of volume-based supplier rebates are subject to tiered targets where the rebate percentage increases as volumes purchased reach agreed targets within a set period of time. The Company estimates supplier rebates based on forecasts which are informed by historical trading patterns, current performance and trends.
Rebates relating to the purchase of goods for resale are accrued as earned and are recorded initially as a deduction to the cost of inventory with a subsequent reduction in cost of sales when the related goods are sold. When the Company has the right to offset and net settles with the supplier, the supplier rebate receivables are offset with amounts owed to the supplier at the balance sheet date and are included within accounts payable. When the Company does not have the legal right of offset, the supplier rebate receivables are recorded in prepaid and other current assets in the consolidated balance sheets.
Revenue recognition
The Company recognizes revenue when a sales arrangement with a customer exists (e.g., contract, purchase orders, others), the transaction price is fixed or determinable, collection of consideration is probable and the Company has satisfied its performance obligation per the sales arrangement. The majority of the Company’s revenue originates from sales arrangements with a single performance obligation to deliver products, whereby performance obligations are satisfied when control of the product is transferred to the customer which is the point they are delivered to, or collected by, the customer. Therefore, shipping and handling activities are not deemed a separate performance obligation. Payment terms between the Company and its customers vary by the type of customer, country of sale and the products sold. The Company does not have significant financing components in its contracts and the payment due date is typically shortly after sale.
In some limited cases, the Company’s contracts contain services and products that are deemed one performance obligation as the services are highly interdependent and interrelated with the products or are significantly integrated with the products. Contracts in which services provided are a separately identifiable performance obligation are not material.
In some instances, goods are delivered directly to the customer by the supplier. The Company has concluded that it is the principal in these transactions as it is primarily responsible to the customer for fulfilling the obligation and has the responsibility for identifying and directing the supplier to deliver the goods to the customer.
The Company offers a right of return to its customers for most goods sold. Revenue is reduced by the amount of expected returns in the period in which the related revenue is recorded with a corresponding liability recorded in other current liabilities. The Company also recognizes a returned asset in prepaid and other current assets with a corresponding adjustment to cost of sales, for the right to recover the returned goods, measured at the former carrying value, less any expected recovery costs.
Share-based compensation
Share-based incentives are provided to associates under the Company’s long-term incentive plans and all-employee sharesave plans. The Company recognizes a compensation cost in respect of these plans that is primarily based on the fair value of the awards. For equity-settled plans, the fair value is determined at the date of grant and is not subsequently remeasured unless the conditions on which the award was granted are modified. For liability-settled plans, the fair value is initially determined at the date of grant and is remeasured at each balance sheet date until the liability is settled. The related liability is recorded in other current liabilities and other long-term liabilities. Generally, the compensation cost is recognized on a straight-line basis over the vesting period, utilizing cumulative catch-up for changes in the liability-settled plans. Estimates of expected forfeitures are made at the date of grant based on historical experience to appropriately reduce expense for those grants expected not to satisfy service conditions, or based on expected performance for non-market performance conditions. The estimated forfeitures are adjusted when facts and circumstances indicate the prior estimate is no longer appropriate.
Tax
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.
The Company recognizes DTAs to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. If the Company determines that it would be able to realize our DTAs in the future in excess of their net recorded amount, the DTA valuation allowance would be appropriately adjusted, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with Accounting Standard Codification (“ASC”) 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
Recently issued accounting pronouncements
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04, “Liabilities—Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations.” The standard aims to enhance transparency of supplier finance programs used in connection with the purchase of goods and services. The standard requires entities to disclose the key terms, including a description of payment terms, the confirmed amount outstanding under such programs, a description of where those obligations are presented on the balance sheet, and an annual rollforward, including the amount of obligations confirmed and the amount paid during the period. The guidance does not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. ASU No. 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the required rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company will adopt ASU No. 2022-04 as of August 1, 2023. As of July 31, 2023, activity under the Company’s supplier finance agreements was not material. The Company will continue to evaluate for future disclosure.
Recent accounting pronouncements pending adoption that are not discussed above are either not applicable, or will not have, or are not expected to have, a material impact on our consolidated financial condition, results of operations or cash flows.
Note 2: Revenue and segment information
The Company reports its financial results of operations on a geographical basis in the following two reportable segments: United States and Canada. Each segment generally derives its revenues in the same manner as described in Note 1, Summary of significant accounting policies. The Company uses adjusted operating profit as its measure of segment profit. Adjusted operating profit is defined as profit before tax, excluding central and other costs, restructuring costs, amortization of acquired intangible assets, net interest expenses, as well as other items typically recorded in net other (expense) income such as (loss)/gain on disposal of businesses, pension plan changes/closure costs and amounts recorded in connection with the Company’s interests in investees. Certain income and expenses are not allocated to the Company’s segments and, thus, the information that management uses to make operating decisions and assess performance does not reflect such amounts.
Segment results were as follows:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net sales: | | | | | |
| United States | $28,291 | | | $27,067 | | | $21,478 | |
| Canada | 1,443 | | | 1,499 | | | 1,314 | |
| Total net sales | $29,734 | | | $28,566 | | | $22,792 | |
| Adjusted operating profit: | | | | | |
| United States | $2,892 | | | $2,893 | | | $2,070 | |
| Canada | 76 | | | 112 | | | 76 | |
| | | | | |
| Central and other costs | (51) | | | (54) | | | (54) | |
Business restructurings(1) | — | | | — | | | 11 | |
Corporate restructurings(2) | — | | | (17) | | | (22) | |
Impairment and other charges(3) | (125) | | | — | | | — | |
| Amortization of acquired intangible assets | (133) | | | (114) | | | (131) | |
| Interest expense, net | (184) | | | (111) | | | (98) | |
| Other (expense) income, net | (11) | | | (1) | | | 10 | |
| Income before income taxes | $2,464 | | | $2,708 | | | $1,862 | |
(1)For fiscal 2021, business restructuring reflects the release of provisions in connection with previously anticipated COVID-19 cost actions recorded in fiscal 2020.
(2)For fiscal 2022 and 2021, corporate restructuring costs primarily related to the incremental costs of the Company’s listing in the United States.
(3)See Note 8, Other intangible assets for further information.
An additional disaggregation of net sales by end market for continuing operations is as follows:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| United States: | | | | | |
| Residential | $14,820 | | | $14,657 | | | $11,990 | |
| Non-residential: | | | | | |
| Commercial | 9,213 | | | 8,600 | | | 6,661 | |
| Civil/Infrastructure | 2,344 | | | 2,163 | | | 1,506 | |
| Industrial | 1,914 | | | 1,647 | | | 1,321 | |
| Total Non-residential | 13,471 | | | 12,410 | | | 9,488 | |
| Total United States | 28,291 | | | 27,067 | | | 21,478 | |
| Canada | 1,443 | | | 1,499 | | | 1,314 | |
| Total net sales | $29,734 | | | $28,566 | | | $22,792 | |
No sales to an individual customer accounted for more than 10% of net sales during any of the last three fiscal years.
The Company is a value-added distributor in North America of products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. We offer a broad line of products, and items are regularly added to and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed, and the dynamic nature of the inventory offered.
Capital expenditures and depreciation and amortization by segment were as follows:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Capital expenditures: | | | | | |
| United States | $423 | | | $283 | | | $232 | |
| Canada | 18 | | | 7 | | | 9 | |
| | | | | |
| Total capital expenditures | $441 | | | $290 | | | $241 | |
| | | | | |
| Depreciation and amortization: | | | | | |
United States(1) | $313 | | | $292 | | | $288 | |
| Canada | 8 | | | 9 | | | 9 | |
| Corporate | — | | | — | | | 1 | |
| Total depreciation and amortization | $321 | | | $301 | | | $298 | |
(1) Includes amortization of acquired intangible assets of $133 million, $114 million and $131 million in 2023, 2022 and 2021, respectively. These amounts are not included in the United States segment adjusted operating profit. |
Assets by segment included:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | 2022 |
| Assets: | | | |
| United States | $14,167 | | | $13,747 | |
| Canada | 795 | | | 802 | |
| Corporate | 1,032 | | | 1,112 | |
| Total assets | $15,994 | | | $15,661 | |
As of July 31, 2023 and 2022, long-lived assets located in the United States were $1,545 million and $1,336 million, respectively.
Note 3: Earnings per share
Basic earnings per share is calculated using our weighted average outstanding common shares. Diluted earnings per share is calculated using our weighted average outstanding common shares including the dilutive effect of share awards as determined under the treasury stock method.
The following table shows the calculation of diluted shares:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions, except per share amounts) | 2023 | | 2022 | | 2021 |
| Income from continuing operations | $1,889 | | | $2,099 | | | $1,630 | |
| Income (loss) from discontinued operations (net of tax) | — | | | 23 | | | (158) | |
| Net income | $1,889 | | | $2,122 | | | $1,472 | |
| | | | | |
| Weighted average number of shares outstanding: | | | | | |
| Basic weighted average shares | 206.4 | | | 217.7 | | | 223.5 | |
| Effect of dilutive shares | 0.8 | | | 1.2 | | | 1.3 | |
| Diluted weighted average shares | 207.2 | | | 218.9 | | | 224.8 | |
| | | | | |
| Earnings per share - Basic: | | | | | |
| Continuing operations | $9.15 | | | $9.64 | | | $7.29 | |
| Discontinued operations | — | | | 0.11 | | | (0.70) | |
| Total | $9.15 | | | $9.75 | | | $6.59 | |
| | | | | |
| Earnings per share - Diluted: | | | | | |
| Continuing operations | $9.12 | | | $9.59 | | | $7.25 | |
| Discontinued operations | — | | | 0.10 | | | (0.70) | |
| Total | $9.12 | | | $9.69 | | | $6.55 | |
| | | | | |
| Excluded anti-dilutive shares | 0.1 | | | 0.1 | | | 0.1 | |
Note 4: Income tax
Income before income tax by geographical area consisted of the following:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| United Kingdom | $80 | | | $102 | | | $123 | |
| United States | 2,011 | | | 2,222 | | | 1,385 | |
| International | 373 | | | 384 | | | 354 | |
| Total | $2,464 | | | $2,708 | | | $1,862 | |
Provision for income taxes consisted of the following:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Current: | | | | | |
| United Kingdom | $— | | | ($18) | | | $5 | |
| Federal and state (U.S.) | 624 | | | 528 | | | 364 | |
| International | 55 | | | 58 | | | 48 | |
| Total current | $679 | | | $568 | | | $417 | |
| | | | | |
| Deferred: | | | | | |
| United Kingdom | $17 | | | $20 | | | ($8) | |
| Federal and state (U.S.) | (120) | | | 20 | | | (176) | |
| International | (1) | | | 1 | | | (1) | |
| Total deferred | ($104) | | | $41 | | | ($185) | |
| | | | | |
| Provision for income taxes | $575 | | | $609 | | | $232 | |
The following is a reconciliation of income tax expense with income taxes at the U.K. statutory rate:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
Provision for income taxes at U.K. statutory rate(1) | $518 | | 21.0 | % | | $515 | | 19.0 | % | | $354 | | 19.0 | % |
| Non-U.K. tax rate differentials | 68 | | 2.8 | | | 127 | | 4.7 | | | 68 | | 3.7 | |
| Impact of change in reserves | 8 | | 0.3 | | | 8 | | 0.2 | | | (138) | | (7.4) | |
| Tax rate change | — | | — | | | — | | — | | | (29) | | (1.6) | |
| Tax credits | (15) | | (0.6) | | | (9) | | (0.3) | | | (12) | | (0.6) | |
| Non-taxable income | (6) | | (0.2) | | | (9) | | (0.3) | | | (18) | | (1.0) | |
| Other | 2 | | — | | | (23) | | (0.8) | | | 7 | | 0.4 | |
| Income tax expense | $575 | | 23.3 | % | | $609 | | 22.5 | % | | $232 | | 12.5 | % |
(1)Ferguson plc is tax resident in the U.K. Therefore, the Company has utilized the U.K. statutory rate. Since the change in statutory rate transitioned between fiscal years, the Company utilized a prorated statutory rate during fiscal 2023.
Deferred Taxes
Significant components of the Company’s deferred tax assets and liabilities are as follows:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| Assets: | | | |
| Deferred compensation | $69 | | | $48 | |
| Tax loss carryforwards | 186 | | | 184 | |
| Lease liabilities | 378 | | | 306 | |
| Sales returns and other liabilities | 123 | | | 103 | |
| Inventory | 46 | | | 50 | |
| Capitalized research and development | 44 | | | — | |
| Other | 48 | | | 51 | |
| Total deferred tax assets | 894 | | | 742 | |
| Valuation allowance | (81) | | | (77) | |
| Total deferred tax assets, net of valuation allowance | $813 | | | $665 | |
| | | |
| Liabilities: | | | |
| Right of use assets | ($374) | | | ($306) | |
| Goodwill and intangible assets | (118) | | | (119) | |
| Property, plant and equipment | (21) | | | (14) | |
| Tax method change | — | | | (49) | |
| Total deferred tax liabilities | (513) | | | (488) | |
| Net deferred tax assets | $300 | | | $177 | |
We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Our valuation allowance at July 31, 2023 and 2022 relates to foreign net capital loss carryforwards in the U.K. and Canada which are not expected to be realizable. For the year ended July 31, 2023, there was a $4 million change in the valuation allowance (2022: $0 million and 2021: $30 million).
As of July 31, 2023, the Company had $720 million of loss carryforwards related to the United Kingdom operations. At July 31, 2023, the Company had U.S. federal and state operating loss carryforwards for income tax purposes of $15 million and $19 million, respectively. Some of the loss carryforwards may expire at various dates through 2039. At July 31, 2023, the Company had $8 million of loss carryforwards related to international operations. A portion of these losses related to capital losses were offset with valuation allowances.
Unrecognized Tax Benefits
The following table reconciles the beginning and ending amount of our gross unrecognized tax benefits:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Unrecognized tax benefits at beginning of fiscal year | $140 | | | $132 | | | $245 | |
| Additions based on tax positions related to current year | 27 | | | 27 | | | 28 | |
| Additions for tax positions of prior years | 2 | | | 11 | | | 2 | |
| Reductions for tax positions of prior years | — | | | — | | | (8) | |
| | | | | |
| Reductions due to lapse of statute of limitations | (25) | | | (30) | | | (135) | |
| Unrecognized tax benefits | $144 | | | $140 | | | $132 | |
As of July 31, 2023, the unrecognized tax benefits that, if recognized, would impact the effective tax rate were $144 million (2022: $140 million and 2021: $132 million). The Company recognizes interest and penalties in the income tax provision in its consolidated statements of earnings. As of July 31, 2023, the Company had accrued interest of $23 million (2022: $17 million and 2021: $16 million). For the year end July 31, 2023, the interest included in income tax expense was an expense of $6 million (2022: expense $1 million and 2021: benefit $42 million). Penalties related to these positions were not material for all periods presented.
The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlement of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. The Company anticipates that the balance of gross unrecognized tax benefits, excluding interest and penalties, will be reduced by $12 million during the next 12 months, primarily due to the anticipated settlement of tax examinations and statute of limitation expirations. However, the outcomes and timing of such events are highly uncertain and changes in the occurrence, expected outcomes and timing of such events could cause the Company’s current estimate to change materially in the future.
Reinvestment of Unremitted earnings
We consider foreign earnings of specific subsidiaries to be indefinitely reinvested. These permanently reinvested earnings of foreign subsidiaries at July 31, 2023 amounted to $725 million (2022: $658 million). The Company is not recording a deferred tax liability, if any, on such amounts. If at some future date, the Company ceases to be permanently reinvested in these specific foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference on these specific foreign subsidiaries.
Tax Return Examination Status
The Company files income tax returns in the U.K., U.S. and in various foreign, state and local jurisdictions. We are subject to tax audits in the various jurisdictions until the respective statutes of limitation expire. The Company is no longer subject to U.K. examinations by tax authorities for fiscal years before 2020 and U.S. federal income tax examinations by tax authorities for fiscal years before 2020. There are ongoing U.S. state and local audits and other foreign audits covering fiscal 2008-2020. We do not expect the results from any ongoing income tax audit to have a material impact on our consolidated financial condition, results of operations or cash flows.
Note 5: Property, plant and equipment
Property, plant and equipment consisted of the following:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| Land | $348 | | | $273 | |
| Buildings | 1,134 | | | 1,103 | |
| Leasehold improvements | 529 | | | 455 | |
| Plant and machinery | 834 | | | 719 | |
| Other equipment | 156 | | | 146 | |
| Property, plant and equipment | 3,001 | | | 2,696 | |
| Less: Accumulated depreciation | (1,406) | | | (1,320) | |
| Property, plant and equipment, net | $1,595 | | | $1,376 | |
Depreciation related to property, plant and equipment included in operating costs for fiscal 2023 was $148 million (2022: $140 million and 2021: $130 million).
Note 6: Leases
Lease-related assets and liabilities consisted of the following:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| Assets: | | | |
| Operating lease right-of-use assets | $1,474 | | | $1,200 | |
| | | |
| Liabilities: | | | |
| Current portion of operating lease liabilities | $366 | | | $321 | |
| Long-term portion of operating lease liabilities | 1,126 | | | 878 | |
| Total lease liabilities | $1,492 | | | $1,199 | |
The components of leasing costs, included in SG&A, consisted of the following:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Operating lease costs | $390 | | | $349 | | | $318 | |
| Variable lease costs | 85 | | | 72 | | | 62 | |
| Short-term lease costs | 23 | | | 14 | | | 1 | |
| Total lease costs | $498 | | | $435 | | | $381 | |
Variable lease costs represent costs incurred in connection with non-lease components, such as common area maintenance, and certain pass-through operating expenses such as real estate taxes and insurance.
The weighted average remaining lease terms and discount rates for the Company’s operating leases were as follows:
| | | | | | | | | | | |
| As of July 31, |
| 2023 | | 2022 |
| Weighted average remaining lease term (years) | 5.5 | | 5.1 |
| Weighted average discount rate | 4.0 | % | | 3.3 | % |
The future minimum rental payments under operating lease obligations, having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:
| | | | | |
| As of July 31, |
| (In millions) | 2023 |
| 2024 | $377 | |
| 2025 | 357 | |
| 2026 | 289 | |
| 2027 | 214 | |
| 2028 | 157 | |
| Thereafter | 295 | |
| Total undiscounted lease payments | 1,689 | |
| Less: imputed interest | (197) | |
| Present value of liabilities | $1,492 | |
The future minimum lease payments in the table above exclude payments for leases that have not yet commenced.
Supplemental cash flow information related to leases from continuing operations consisted of the following:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Cash paid for operating leases (operating cash flows) | $379 | | | $337 | | | $321 | |
Lease assets obtained in exchange for new operating lease liabilities (non-cash) | 309 | | | 362 | | | 158 | |
As of July 31, 2023, the Company had $223 million of non-cancelable operating leases with terms similar to the Company’s current operating leases that have not yet commenced. Of this amount, $174 million is expected to commence in fiscal year 2024 with the remaining $49 million expected to commence in fiscal year 2025.
Note 7: Goodwill
The Company completed its annual impairment analysis for goodwill during the fourth quarter of fiscal 2023. Based on the results of the Company’s analysis, the Company concluded that the fair value of each reporting unit was substantially in excess of its respective carrying value. There were no impairment charges related to goodwill in fiscal 2023, 2022 or 2021.
The following table presents the changes in the net carrying amount of goodwill allocated by reportable segment for the years ended July 31, 2023 and 2022:
| | | | | | | | | | | | | | | | | |
| (In millions) | United States | | Canada | | Total |
Balance as of July 31, 2021 | $1,670 | | | $158 | | | $1,828 | |
| Acquisitions | 224 | | | — | | | 224 | |
| Effect of currency translation adjustment | — | | | (4) | | | (4) | |
Balance as of July 31, 2022 | 1,894 | | | 154 | | | 2,048 | |
| Acquisitions | 198 | | | — | | | 198 | |
| Effect of currency translation adjustment | — | | | (5) | | | (5) | |
Balance as of July 31, 2023 | $2,092 | | | $149 | | | $2,241 | |
Cumulative goodwill impairment as of July 31, 2023 | $108 | | | $11 | | | $119 | |
Cumulative balance of historical goodwill impairments as of July 31, 2023, as shown above, was the same for all periods presented herein. See Note 16, Acquisitions for further information on the additions to goodwill in fiscal 2023 and 2022.
Note 8: Other intangible assets
The Company's major categories of definite-lived intangible assets and the respective weighted average remaining useful lives consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of July 31, 2023 | | As of July 31, 2022 |
| (In millions, except remaining useful life) | Weighted average remaining useful life (years) | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
| Software | 4 | $283 | | | ($197) | | | $370 | | | ($198) | |
| Customer relationships* | 8 | 1,345 | | | (750) | | | 1,138 | | | (662) | |
| Tradenames and brands* | 4 | 268 | | | (200) | | | 258 | | | (171) | |
| Other* | 3 | 209 | | | (175) | | | 206 | | | (159) | |
| Total intangible assets | $2,105 | | | ($1,322) | | | $1,972 | | | ($1,190) | |
* Acquired intangible assets |
Amortization expense of intangible assets for the year ended July 31, 2023 was $173 million (2022: $161 million and 2021: $168 million). As of July 31, 2023, expected amortization expense for the unamortized definite-lived intangible assets for the next five years and thereafter is as follows:
| | | | | |
| As of July 31, |
| (In millions) | 2023 |
| 2024 | $164 | |
| 2025 | 160 | |
| 2026 | 123 | |
| 2027 | 103 | |
| 2028 | 85 | |
| Thereafter | 148 | |
| Total | $783 | |
Impairments
The Company has been upgrading portions of its IT systems to enhance customer experience and associate productivity. One of the solutions developed targeted certain branch transactional processes and was piloted at select locations. In the third quarter of fiscal 2023, the Company determined that this solution did not meet its customer service, speed and efficiency goals. As a result, the Company chose not to proceed with this component and recorded a non-cash charge of $107 million of previously capitalized software costs in the United States. This item was included in the Impairments and other charges line of the Company’s consolidated statements of earnings.
In the second quarter of fiscal 2022, the Company recorded a $15 million non-cash impairment charge in SG&A related to internal use software projects in the United States as the Company determined the benefits of the work capitalized would not be realized.
Note 9: Debt
The Company’s debt obligations consisted of the following:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| Variable-rate debt: | | | |
| Receivables Facility | $50 | | | $455 | |
| Term Loan | 500 | | | — | |
| Private Placement Notes: | | | |
3.43% due September 2022 | — | | | 250 | |
3.30% due November 2023 | 55 | | | 55 | |
3.44% due November 2024 | 150 | | | 150 | |
3.73% due September 2025 | 400 | | | 400 | |
3.51% due November 2026 | 150 | | | 150 | |
3.83% due September 2027 | 150 | | | 150 | |
| Unsecured Senior Notes: | | | |
4.50% due October 2028 | 750 | | | 750 | |
3.25% due June 2030 | 600 | | | 600 | |
4.25% due April 2027 | 300 | | | 300 | |
4.65% due April 2032 | 700 | | | 700 | |
| Subtotal | $3,805 | | | $3,960 | |
| Less: current maturities of debt | (55) | | | (250) | |
| Unamortized discounts and debt issuance costs | (22) | | | (24) | |
| Interest rate swap - fair value adjustment | (17) | | | (7) | |
| Total long-term debt | $3,711 | | | $3,679 | |
Private Placement Notes
In June 2015 and November 2017, Wolseley Capital, Inc. (“Wolseley Capital”), a wholly owned subsidiary of the Company, privately placed fixed rate notes in an aggregate principal amount of $800 million and $355 million, respectively (collectively, the “Private Placement Notes”). Interest on the Private Placement Notes is payable semi-annually. During the first quarter of fiscal 2023, the 3.43% notes due in September 2022 were repaid at maturity.
As of July 31, 2023 and 2022, the Company had interest rate swaps with a notional value of $355 million in connection with the Private Placement Notes entered into in November 2017. See Note 10, Fair value measurements for further information.
Wolseley Capital’s obligations under the note and guarantee agreements are unconditionally guaranteed by the Company and Ferguson UK Holdings Limited (“Ferguson UK”). Wolseley Capital may repay the outstanding Private Placement Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid plus a “make-whole” prepayment premium.
The note and guarantee agreements relating to the Private Placement Notes contain certain customary affirmative covenants, as well as certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s non-guarantor subsidiaries’ ability to incur indebtedness and the Company’s ability to enter into affiliate transactions, grant liens on its assets, sell assets, or engage in acquisitions, mergers or consolidations. In addition, subject to certain exceptions, the note and guarantee agreements require us to maintain a leverage ratio.
The outstanding Private Placement Notes also contain customary events of default. Upon an event of default and an acceleration of the Private Placement Notes, the Company must repay the outstanding Private Placement Notes plus a make-whole premium and accrued and unpaid interest.
Unsecured Senior Notes
Ferguson Finance, plc (“Ferguson Finance”) has issued $2.35 billion in unsecured senior notes (collectively, the “Unsecured Senior Notes”) which are guaranteed by the Company and Ferguson UK.
The Unsecured Senior Notes are fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis by the Company and generally carry the same terms and conditions with interest paid semi-annually. The Unsecured Senior Notes may be redeemed, in whole or in part (i) at 100% of the principal amount on the notes being redeemed plus a “make-whole” prepayment premium at any time prior to three months before the maturity date (the “Notes Par Call Date”) or (ii) after the Notes Par Call Date at 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest on the principal being redeemed. The Unsecured Senior Notes include covenants, subject to certain exceptions, which include limitations on the granting of liens and on mergers and acquisitions.
Term Loan Agreement
The Credit Agreement, dated October 7, 2022, among the Company, Ferguson UK, the lenders party thereto and the agent of the lenders party thereto (the “Term Loan Agreement”) provides for term loans in an aggregate principal amount of $500 million, the proceeds of which may be used for general corporate purposes. The Term Loan Agreement will mature on October 7, 2025.
Term loans will bear interest at a rate per annum of the Term SOFR Rate, as defined in the Term Loan Agreement, plus a credit spread adjustment of 10 basis points plus a margin ranging from 100 to 150 basis points, determined on the basis of the Company’s corporate credit ratings (or if public credit ratings are not published, senior unsecured debt ratings). Interest rates for the term loans ranged from 4.4% to 6.4% during fiscal 2023.
Ferguson UK may voluntarily prepay the term loans, in whole or in part, without premium or penalty, but subject to reimbursement of funding losses with respect to certain prepayments. Term loans that are prepaid may not be reborrowed.
The Term Loan Agreement contains representations and warranties and affirmative and negative covenants and events of default, including, but not limited to, restrictions on the incurrence of non-guarantor subsidiary indebtedness, additional liens, mergers and sales of assets and changes in nature of business, in each case, subject to certain conditions, exceptions and thresholds. The Term Loan Agreement also requires the Company to maintain on a consolidated basis, as of the last day of each fiscal quarter, a maximum net leverage ratio of 3.50 to 1.00, with a step-up to 4.00 to 1.00 with respect to each of the four fiscal quarters ending immediately after certain material acquisitions. The Company unconditionally and irrevocably guarantees the term loans.
Revolving Credit Facility
The Company maintains a revolving credit facility (the “Revolving Facility”) under the Amendment and Restatement Agreement, dated October 7, 2022, among the Company, Ferguson UK, the lenders party thereto, and the agent of the lenders party thereto (as amended from time to time, the “Revolving Facility Agreement”). The Revolving Facility has aggregate total available credit commitments of $1.35 billion. Borrowings under the Revolving Facility bear interest at a per annum rate of Term SOFR (as defined in the Revolving Facility Agreement) plus a credit spread adjustment of 10 basis points plus a margin ranging from 20 to 75 basis points, determined on the basis of the Company’s corporate credit ratings (or if public credit ratings are not published, senior unsecured debt ratings).
The Company is required to pay a quarterly commitment fee and utilization fee in certain circumstances. All obligations under the Revolving Facility Agreement are unconditionally guaranteed by the Company and Ferguson UK, to the extent each entity is not the borrower with respect to such obligation.
The Revolving Facility Agreement contains affirmative and negative covenants that, among other things, restrict, subject to certain conditions, exceptions and thresholds, the ability of the Company and its subsidiaries to incur indebtedness, grant liens on present or future assets or revenues, sell assets or engage in mergers or consolidations. The Revolving Facility Agreement also contains events of default, including, among others, cross-default and cross-acceleration provisions, in each case, subject to grace periods and thresholds. The Revolving Facility terminates in March 2026.
As of July 31, 2023 and 2022, no borrowings were outstanding under the Revolving Facility.
Receivables Securitization Facility
The Company maintains a Receivables Securitization Facility (the “Receivables Facility”) which is primarily governed by the Receivables Purchase Agreement, dated July 31, 2013, as amended from time to time, among the Company, Ferguson Enterprises, LLC and certain of its subsidiaries; the conduit purchasers, committed purchasers, and letter of credit banks from time to time party thereto; and Royal Bank of Canada, as administrative agent.
The Receivables Facility consists of funding for up to $1.1 billion, including a swingline for up to $100 million in same day funding, terminating on October 7, 2025. The Company has available to it an accordion feature whereby the facility may be increased up to $1.5 billion subject to lender participation. Interest is payable under the Receivables Facility at a rate of Term SOFR (as defined in the Receivables Facility) plus a credit spread adjustment of 10 basis points plus a margin or, in the case of the lending banks that fund, through a conduit, by the issuance of commercial paper, at a rate equal to the per annum rate payable of the related commercial paper issued by such conduit plus a margin. Interest rates under the Receivables Facility ranged from 3.4% to 6.2% during fiscal 2023. The Company does not factor its accounts receivable.
The Receivables Facility contains affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries party thereto from granting additional liens on the accounts receivable, selling certain assets or engaging in acquisitions, mergers or consolidations, or, in the case of the borrower, incurring other indebtedness.
The Receivables Facility also contains events of default and cross-default provisions, including requirements that our performance in relation to accounts receivable remains at set levels (specifically, among other things, relating to timely payments being received from debtors on the accounts receivable and to the amount of accounts receivable written off as bad debt) and that a required level of accounts receivable be generated and available to support the borrowings under the arrangements.
The Company pays customary fees regarding unused amounts to maintain the availability under the Receivables Facility.
The Company was in compliance with all debt covenants for all of these debt obligations and facilities that were in effect as of July 31, 2023.
Debt maturities, exclusive of unamortized original issue discounts, unamortized debt issuance costs, fair-value hedge adjustments, and finance lease obligations, for the next five fiscal years and thereafter are as follows:
| | | | | |
| As of July 31, |
| (In millions) | 2023 |
| 2024 | $55 | |
| 2025 | 150 | |
| 2026 | 950 | |
| 2027 | 450 | |
| 2028 | 150 | |
| Thereafter | 2,050 | |
| Total | $3,805 | |
Note 10: Fair value measurements
Derivative Instruments
The Company’s derivatives relate principally to interest rate swaps, designated as fair value hedges, to manage its exposure to interest rate movements on its debt. They are measured at fair value on a recurring basis through profit and loss using forward interest curves which are Level 2 inputs. The Company’s derivatives are not material. The notional amount of the Company’s outstanding fair value hedges as of July 31, 2023 and 2022 was $355 million.
Equity investments
The fair value of the Company’s equity investments is measured on a recurring basis using market derived valuation methods upon occurrence of orderly transactions for identical or similar assets which is deemed a Level 3 input. The fair value of equity investments was $34 million and $26 million as of July 31, 2023 and 2022, respectively, and the activity during fiscal 2023 was not material.
Other Fair Value Disclosures
Due to their short maturities, or their insignificance, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt approximated their fair values at July 31, 2023 and 2022.
Non-recurring fair value measurements
Fair value estimates are made in connection with the Company’s acquisitions. See Note 16, Acquisitions for further details.
Liabilities for which fair value is only disclosed
Carrying amounts and the related estimated fair value of the Company’s long-term debt were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of July 31, |
| 2023 | | 2022 |
| (In millions) | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| Unsecured Senior Notes | $2,330 | | | $2,195 | | | $2,328 | | | $2,350 | |
| Private Placement Notes | 904 | | | 871 | | | 1,153 | | | 1,142 | |
The difference in fair values results from changes, since issuance, in the corporate debt markets and investor preferences. The fair value of the Unsecured Senior Notes and Private Placement Notes are classified as Level 2 fair value measurements, and were estimated using observable market prices as provided in secondary markets that consider the Company’s credit risk and market-related conditions.
Note 11: Commitments and contingencies
The Company is, from time to time, involved in various legal proceedings considered to be normal course of business in relation to, among other things, the products that we supply, contractual and commercial disputes and disputes with employees. Provision is made if, on the basis of current information and professional advice, liabilities are considered probable. In the case of unfavorable outcomes, the Company may benefit from applicable insurance protection. The Company does not expect any of its pending legal proceedings to have a material adverse effect on its results of operations, financial position or cash flows.
Note 12: Accumulated other comprehensive loss
The change in accumulated other comprehensive loss was as follows:
| | | | | | | | | | | | | | | | | |
| (In millions, net of tax) | Foreign currency translation | | Pensions | | Total |
Balance at July 31, 2020 | ($566) | | | ($479) | | | ($1,045) | |
| Other comprehensive income before reclassifications | 35 | | | 66 | | | 101 | |
| Amounts reclassified from accumulated other comprehensive loss | 135 | | | 13 | | | 148 | |
| Other comprehensive income | 170 | | | 79 | | | 249 | |
Balance as of July 31, 2021 | ($396) | | | ($400) | | | ($796) | |
| Other comprehensive loss before reclassifications | (24) | | | (18) | | | (42) | |
| Amounts reclassified from accumulated other comprehensive loss | — | | | 8 | | | 8 | |
| Other comprehensive loss | (24) | | | (10) | | | (34) | |
Balance as of July 31, 2022 | ($420) | | | ($410) | | | ($830) | |
| Other comprehensive loss before reclassifications | (9) | | | (57) | | | (66) | |
| Amounts reclassified from accumulated other comprehensive loss | — | | | 8 | | | 8 | |
| Other comprehensive loss | (9) | | | (49) | | | (58) | |
Balance as of July 31, 2023 | ($429) | | | ($459) | | | ($888) | |
Amounts reclassified from accumulated other comprehensive loss related to pension and other post-retirement items include the related income tax impacts. Such amounts consisted of the following:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Amortization of actuarial losses | $11 | | | $10 | | | $18 | |
| Tax benefit | (3) | | | (2) | | | (5) | |
| Amounts reclassified from accumulated other comprehensive loss, net of tax | $8 | | | $8 | | | $13 | |
Note 13: Retirement benefit obligations
The Company provides various retirement benefits to eligible employees, including pension benefits associated with defined benefit plans, contributions to defined contribution plans, post-retirement benefits and other benefits. Eligibility requirements and benefit levels vary depending on associate location.
The Company provides defined benefit plans to its employees in Canada. In the United Kingdom there is a legacy defined benefit plan which is closed to further benefit accrual.
The majority of the Canadian defined benefit plans are funded. Post-retirement benefit obligations are not material and have been included in all amounts presented herein.
The principal U.K. defined benefit plan is the Wolseley Group Retirement Benefits Plan which provides benefits based on final pensionable salaries. The assets are held in separate trustee administered funds. The plan was closed to new entrants in 2009, closed to future service accrual in December 2013 and closed to future non-inflationary salary accrual on the disposal of the U.K. business in 2021.
In 2017, the Company secured a buy-in insurance policy with Pension Insurance Corporation for the U.K. defined benefit plan. This policy covers all benefit payments to a certain portion of participants in the plan. The insurance asset is exactly equal to the related insured liabilities.
In 2021, prior to the disposal of the U.K. business, Wolseley UK Limited, the liabilities of the disposed entities to the U.K. defined benefit plan were transferred to Ferguson UK Holdings Limited.
The funded status of the Company’s plans was as follows, valued with a measurement date of July 31 for each year:
| | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 |
| Change in net benefit obligations: | | | |
| Beginning balance | $1,402 | | | $2,208 | |
| | | |
| Interest cost | 51 | | | 41 | |
| Actuarial gain | (245) | | | (554) | |
| Benefits paid | (57) | | | (71) | |
| Exchange rate adjustment | 67 | | | (222) | |
| Ending balance | $1,218 | | | $1,402 | |
| Change in assets at fair value: | | | |
| Beginning balance | $1,508 | | | $2,304 | |
| Actual return on plan assets | (279) | | | (506) | |
| Company contributions | 24 | | | 15 | |
| Benefits paid | (57) | | | (71) | |
| Exchange rate adjustment | 74 | | | (234) | |
| Ending balance at fair value | $1,270 | | | $1,508 | |
| Funded status of plans | $52 | | | $106 | |
As required by United Kingdom pensions regulation, the United Kingdom Plan completed its triennial actuarial valuation exercise, which is measured on a technical provisions basis, based on the United Kingdom Plan’s financial position as of April 30, 2022. The triennial valuation resulted in required contributions by the Company of £133 million to be spread over the period to January 31, 2026, of which the Company has paid £26 million as of July 31, 2023.
Total expected employer contributions to the defined benefit plans for the year ending July 31, 2024 are estimated to be $35 million, which includes amounts due from the triennial funding valuation.
Amounts recognized in the consolidated balance sheets consisted of:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| Non-current asset | $55 | | | $114 | |
| Non-current liability | (3) | | | (8) | |
Amounts recognized in accumulated other comprehensive loss:
| | | | | | | | | | | |
| As of July 31, |
| (In millions) | 2023 | | 2022 |
| | | |
| Net actuarial loss | $602 | | | $537 | |
| Income tax impact | (143) | | | (127) | |
| Accumulated other comprehensive loss | $459 | | | $410 | |
Components of other comprehensive loss (income) consisted of the following:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Net actuarial loss (gain) | $83 | | | ($3) | | | ($78) | |
| Amortization of net actuarial loss | (11) | | | (10) | | | (18) | |
| Impact of exchange rates | (7) | | | 12 | | | — | |
| Income tax impact | (16) | | | 11 | | | 17 | |
| Other comprehensive loss (income), net of tax | $49 | | | $10 | | | ($79) | |
The components of net periodic pension costs associated with all of the Company’s plans were as follows:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Selling, general and administrative expenses | | | | | |
| Service costs | $— | | | $— | | | $3 | |
| Other expense (income), net | | | | | |
| Amortization of net actuarial losses | 11 | | | 10 | | | 18 | |
| Interest cost | 51 | | | 41 | | | 32 | |
| Expected return on plan assets | (49) | | | (45) | | | (60) | |
| Net periodic cost (income) | $13 | | | $6 | | | ($7) | |
| | | | | |
| Weighted average assumptions: | | | | | |
| Discount rate, net periodic benefit cost | 3.53 | % | | 1.78 | % | | 1.56 | % |
| Discount rate, benefit obligations | 5.05 | % | | 3.53 | % | | 1.78 | % |
| Expected return on plan assets | 3.41 | % | | 2.12 | % | | 2.60 | % |
| Wage inflation growth rate | 2.50 | % | | 2.35 | % | | 2.13 | % |
The Company determines the discount rate primarily by reference to rates on high-quality, long-term corporate and government bonds that mature in a pattern similar to the expected payments to be made under the various plans.
The Company has established strategic asset allocation percentage targets for significant asset classes with the aim of achieving an appropriate balance between risk and return. The Company periodically revises asset allocations, where appropriate, in an effort to improve return and/or manage risk. The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the market-related value of plan assets. The market-related value of plan assets is based on long-term expectations given current investment objectives and historical results.
Investment Strategy
The Company’s investment strategy for its funded post-employment plans is decided locally and, if relevant, by the trustees of the plan and takes account of the relevant statutory requirements. The Company’s objective for the investment strategy is to achieve a target rate of return in excess of the increase in the liabilities, while taking an acceptable amount of investment risk relative to the liabilities. This objective is implemented by using specific allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return.
For the U.K. plan, the guaranteed insurance policy represents approximately 35% of the plan assets. For the remaining assets, the strategy is to invest in a mix of equities, bonds and other income-generating asset classes so that expected cash flows broadly match a high proportion of the cash flows of the plan’s expected liabilities. The investment strategy is subject to regular review by the trustees of the plan in consultation with the Company.
For the plans in Canada, the investment strategy is to invest predominantly in equities and bonds.
The Company’s weighted average asset allocations by asset category were as follows:
| | | | | | | | | | | |
| As of July 31, |
| 2023 | | 2022 |
| Asset category: | | | |
| Equity securities | 3 | % | | 2 | % |
| Fixed income securities | 61 | | | 67 | |
| Cash, cash equivalents and other short-term investments | 2 | | | 2 | |
| Guaranteed insurance policies | 34 | | | 29 | |
| Total | 100 | % | | 100 | % |
The following tables present the fair value of the Company’s plan assets using the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of July 31, 2023 |
| (In millions) | Total | | Level 1 | | Level 2 | | Level 3 |
| U.K. Plan assets: | | | | | | | |
| | | | | | | |
| Fixed income securities: | | | | | | | |
| Corporate | $319 | | | $2 | | | $224 | | | $93 | |
| Asset backed | 1 | | | — | | | 1 | | | — | |
| Government | 410 | | | 406 | | | 4 | | | — | |
| Cash, cash equivalents and other short-term investments | 29 | | | 28 | | | 1 | | | — | |
| Insurance policies | 417 | | | — | | | — | | | 417 | |
| | | | | | | |
| Canada Plan assets: | | | | | | | |
| Equity securities | 33 | | | 33 | | | — | | | — | |
| Fixed income securities: | | | | | | | |
| Corporate | 9 | | | — | | | 9 | | | — | |
| Government | 32 | | | — | | | 32 | | | — | |
| Cash and cash equivalents | 1 | | | 1 | | | — | | | — | |
| Other | 19 | | | 11 | | | 8 | | | — | |
| $1,270 | | | $481 | | | $279 | | | $510 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of July 31, 2022 |
| (In millions) | Total | | Level 1 | | Level 2 | | Level 3 |
| U.K. Plan assets: | | | | | | | |
| | | | | | | |
| Fixed income securities: | | | | | | | |
| Corporate | $639 | | | $8 | | | $492 | | | $139 | |
| Asset backed | 80 | | | 16 | | | 58 | | | 6 | |
| Government | 246 | | | — | | | 239 | | | 7 | |
| Cash and cash equivalents | 25 | | | 22 | | | 3 | | | — | |
| Insurance policies | 418 | | | — | | | — | | | 418 | |
| | | | | | | |
| Canada Plan assets: | | | | | | | |
| Equity securities | 35 | | | 35 | | | — | | | — | |
| Fixed income securities: | | | | | | | |
| Corporate | 7 | | | — | | | 7 | | | — | |
| Government | 32 | | | — | | | 32 | | | — | |
| Cash and cash equivalents | 1 | | | 1 | | | — | | | — | |
| Other | 25 | | | 14 | | | 11 | | | — | |
| $1,508 | | | $96 | | | $842 | | | $570 | |
The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):
| | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 |
| Beginning balance | $570 | | | $786 | |
| Transfers into Level 3 | 67 | | | — | |
| Transfers out of Level 3 | (131) | | | — | |
| Actual returns | 1 | | | (108) | |
| Purchases, sales and settlements, net | (24) | | | (20) | |
| Impact of exchange rates | 27 | | | (88) | |
| Ending balance | $510 | | | $570 | |
The Company expects the following benefit payments related to its defined benefit pension plans over the next 10 years:
| | | | | |
| As of July 31, |
| (In millions) | 2023 |
| 2024 | $60 | |
| 2025 | 61 | |
| 2026 | 63 | |
| 2027 | 64 | |
| 2028 | 66 | |
| 2029-2033 | 351 | |
| Total | $665 | |
Defined Contribution Plans
The principal plans operated for employees in the United States are defined contribution plans, which are established in accordance with 401(k) rules in the United States. The Company’s Canadian employees are covered by defined contribution plans including a Post Retirement Benefit Plan and Supplemental Executive Retirement Plan. Under the Canadian plans, the Company’s employees are able to make personal contributions.
Total expense related to defined contribution plans in fiscal 2023 was $93 million (2022: $87 million and 2021: $74 million).
In addition, Ferguson Enterprises, LLC, a subsidiary of the Company, sponsors a non-qualified deferred compensation plan for the benefit of U.S.-based executives and certain other senior associates. For the year ended July 31, 2023, the Company’s obligations related to the plan total $323 million (2022: $297 million), including a current portion of the liability of $16 million (2022: $29 million). The Company has investments in Company-owned life insurance policies that are intended to fund these obligations, however, these assets are subject to the general claims of the Company’s creditors. The assets are recorded at cash surrender value with changes recognized in earnings. The non-current assets total $322 million (2022: $295 million).
Note 14: Shareholders’ equity
The following table presents a summary of the Company’s share activity:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| 2023 | | 2022 | | 2021 |
| Ordinary shares: | | | | | |
| Balance at beginning of period | 232,171,182 | | | 232,171,182 | | | 232,171,182 | |
| Change in shares issued | — | | | — | | | — | |
| Balance at end of period | 232,171,182 | | | 232,171,182 | | | 232,171,182 | |
| | | | | |
| Treasury shares: | | | | | |
| Balance at beginning of period | (21,078,577) | | | (9,862,816) | | | (7,280,222) | |
| Repurchases of ordinary shares | (7,022,242) | | | (11,413,180) | | | (3,020,368) | |
| Treasury shares used to settle share-based compensation awards | 207,139 | | | 197,419 | | | 437,774 | |
| Balance at end of period | (27,893,680) | | | (21,078,577) | | | (9,862,816) | |
| | | | | |
| Employee Benefit Trust: | | | | | |
| Balance at beginning of period | (846,491) | | | (833,189) | | | (1,277,347) | |
| New shares purchased | — | | | (600,000) | | | — | |
| Employee Benefit Trust shares used to settle share-based compensation awards | 572,460 | | | 586,698 | | | 444,158 | |
| Balance at end of period | (274,031) | | | (846,491) | | | (833,189) | |
| Total shares outstanding at end of period | 204,003,471 | | | 210,246,114 | | | 221,475,177 | |
Two Employee Benefit Trusts have been established in connection with the Company’s discretionary share option plans and long-term incentive plans. Dividends due on shares held by the Employee Benefit Trusts are waived in accordance with the provisions of the trust deeds. At July 31, 2023, the shares held in trusts had a market value of $44 million (2022: $107 million).
Share Repurchases
Share repurchases are being made under an authorization that allows up to $3.0 billion in share repurchases. As of July 31, 2023, the Company has completed $2.5 billion of the total announced $3.0 billion share repurchase program. The Company is currently purchasing shares under an irrevocable and non-discretionary arrangement with $84 million in accrued repurchases remaining as of July 31, 2023, which is recorded as a current liability in the consolidated balance sheet.
Note 15: Share-based compensation
Background
The Ferguson Group International Sharesave Plan 2019 (the “2019 ISP”), the Ferguson Group Ordinary Share Plan 2019 (the “OSP”), the Ferguson Group Performance Ordinary Share Plan 2019 (the “POSP”), and the Ferguson Group Long Term Incentive Plan 2019 (the “LTIP”) were amended by the Board in July 2023 to include specific limits on the number of ordinary shares that can be awarded under the subject plan. As amended, the number of ordinary shares that can be awarded under the 2019 ISP, the OSP, the POSP and the LTIP are 12,000, 300,000, 1,200,000, and 200,000 ordinary shares, respectively. Additionally, notwithstanding these share limits, the Ferguson Group International Sharesave Plan 2011, the 2019 ISP and the LTIP provide guidelines to determine the maximum number of ordinary shares that can be granted under each plan. Under these plans, the Company cannot grant equity awards that would result in the issuance of ordinary shares that, when aggregated with awards issued and outstanding under all of the Company’s other equity plans, would exceed 10% of the Company’s issued ordinary share capital (adjusted for share issuance and cancellation) in any rolling 10-year period. In addition, as applicable, the Company is committed to not issuing new shares or reissuing treasury shares to executives under these equity plans that, when aggregated with issued and outstanding awards held by executives under all of the Company’s other equity plans, would exceed 5% of the issued ordinary share capital of the Company (adjusted for share issuance and cancellation) in any rolling 10-year period.
Share-based compensation awards
Awards granted under the OSP vest over a period of time (“time vested”), typically three years. Dividends do not accrue during the vesting period. The fair value of the award is derived from the closing share price on the date of grant.
Awards granted under the POSP vest at the end of a three-year performance cycle (“performance vested”). The number of ordinary shares that vest vary with the Company’s performance against an adjusted operating profit measure. Dividends do not accrue during the vesting period. The fair value of the award is derived from the share price on the date of grant.
Awards granted under the LTIP vest at the end of a three-year performance period. For grants awarded prior to fiscal 2023, the number of ordinary shares that vest will vary based on Company measures of inflation-indexed earnings per share (“EPS”), cash flow and total shareholder return (“TSR”) compared to a peer company set. Based on the performance conditions of these awards granted prior to fiscal 2023, these LTIP grants are treated as liability-settled awards. As such, the fair value of these awards is initially determined at the date of grant, and is remeasured at each balance sheet date until the liability is settled. Dividends accrue during the vesting period. As of July 31, 2023 and 2022, the total liability recorded in connection with these grants was $13 million and $11 million, respectively.
In the first quarter of fiscal 2023, the Company granted awards under the LTIP in which the ordinary shares to be issued upon vesting vary based on fixed measures of Company defined EPS and return on capital employed (“ROCE”), as well as TSR compared to a peer company set. Dividend equivalents accrue during the vesting period. Based on these defined performance conditions, these grants are treated as equity-settled awards (“LTIP, equity-settled”) with the fair value determined on the date of grant. Specifically, the fair value of such awards that vest based on achievement of the EPS and ROCE measures was equal to the closing share price on the date of grant. The fair value of the awards that vest based on TSR was determined using a Monte-Carlo simulation, which estimated the fair value based on the Company's share price activity relative to the peer comparative set over the expected term of the award, risk-free interest rate, expected dividends, and the expected volatility of the shares of the Company and that of the peer company set.
The following table summarizes the share-based incentive awards activity for fiscal 2023:
| | | | | | | | | | | |
| Number of Shares | | Weighted Average grant date fair value |
Outstanding as July 31, 2022 | 1,576,554 | | | $100.03 | |
| Time vested grants | 119,470 | | | 100.71 | |
| Performance vested grants | 279,310 | | | 100.71 | |
| LTIP, equity settled grants | 37,676 | | | 91.84 | |
| Share adjustments based on performance | (138,795) | | | 103.24 | |
| Vested | (620,200) | | | 75.74 | |
| Forfeited | (95,342) | | | 112.83 | |
Outstanding at July 31, 2023 | 1,158,673 | | | $111.57 | |
The following table relates to time vested, performance vested and long-term incentive awards activity:
| | | | | | | | | | | | | | | | | | | |
| For the years ended July 31, | | |
| (In millions, except per share amounts) | 2023 | | 2022 | | 2021 | | |
| Fair value of awards vested | $67 | | | $94 | | | $60 | | | |
| Weighted average grant date fair value per share granted | $99.95 | | | $134.88 | | | $98.53 | | | |
The following table relates to all share-based compensation awards:
| | | | | | | | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 | | 2021 |
| Share-based compensation expense (within SG&A) | $51 | | | $57 | | | $77 | |
| Income tax benefit | 11 | | | 20 | | | 20 | |
Total unrecognized share-based payment expense for all share-based payment plans was $52 million at July 31, 2023, which is expected to be recognized over a weighted average period of 1.5 years.
Employee share purchase plan
The Ferguson Group Employee Share Purchase Plan 2021 provides for a limit of 20 million ordinary shares that can be awarded under the plan subject to certain guidelines set forth in the plan that are consistent with the limits as described above.
As of July 31, 2023, 19.6 million ordinary shares remain available for allotment under the rules of the Ferguson Group Employee Share Purchase Plan 2021. The exercise price per ordinary share will be prescribed by the Board for each offering period and may not be less than 85% of the lesser of the market value of an ordinary share on the date of grant and the market value of an ordinary share on the date of exercise. During fiscal 2023, there were approximately 151,034 shares purchased under the employee share purchase plan at an average price of $111.75.
Note 16: Acquisitions
The Company acquired the following businesses during fiscal 2023. Each of the acquired businesses are engaged in the distribution of plumbing and heating products and was acquired to support growth, primarily in the United States. While many of our acquisitions are structured as asset transactions, the Company substantially purchased the acquiree's business and therefore all transactions have been accounted for as a business combination pursuant to ASC 805.
| | | | | | | | | | | |
| Name | Date of acquisition | Country of
incorporation | Acquired % |
| Monark Premium Appliance | August 2022 | USA | 100 | % |
| Guarino Distributing Company, L.L.C. | November 2022 | USA | 100 | % |
| Airefco, Inc. | December 2022 | USA | 100 | % |
| Power Process Equipment, Inc. | December 2022 | USA | 100 | % |
| Pipelines, Inc. | January 2023 | USA | 100 | % |
| S.G. Torrice, LLC | June 2023 | USA | 100 | % |
| Bruce Supply Corp. | July 2023 | USA | 100 | % |
| Kennedy Culvert & Supply Company | July 2023 | USA | 100 | % |
The following table summarizes the preliminary purchase price allocations for the assets acquired and liabilities assumed in regards to the Company's acquisitions occurring in fiscal 2023 and 2022: | | | | | | | | | | | |
| Acquisitions occurring in |
| (In millions) | 2023 | | 2022 |
| Intangible assets: | | | |
| Trade names and brands | $9 | | | $27 | |
| Customer relationships | 207 | | | 282 | |
| Other | 4 | | | 17 | |
| Operating lease right-of-use assets | 66 | | | 65 | |
| Property, plant and equipment | 11 | | | 11 | |
| Inventories | 180 | | | 139 | |
| Receivables and other assets | 134 | | | 91 | |
| Cash and cash equivalents | 3 | | | 18 | |
| Lease liabilities | (66) | | | (65) | |
| Trade and other payables | (80) | | | (68) | |
| Deferred tax | — | | | (17) | |
| Provisions | (4) | | | (1) | |
| Total | 464 | | | 499 | |
| Goodwill | 198 | | | 224 | |
| Consideration | $662 | | | $723 | |
| Satisfied by: | | | |
| Cash | $619 | | | $668 | |
| Deferred consideration | 43 | | | 55 | |
| Total consideration | $662 | | | $723 | |
The fair values of the assets acquired in fiscal 2023 are considered preliminary and are based on management’s best estimates. Further adjustments may be necessary in connection with acquisitions completed in fiscal 2023 when additional information becomes available about events that existed at the date of acquisition. Amendments to fair value estimates may be made to these figures during the measurement period following the date of acquisition. There were no material adjustments in fiscal 2023 related to the closing of the measurement period of acquisitions made in fiscal 2022. As of the date of this Annual Report, the Company has made all known material adjustments related to acquisitions in fiscal 2023.
The fair value estimates of intangible assets are considered non-recurring, Level 3 measurements within the fair value hierarchy and are estimated as of each respective acquisition date.
The goodwill on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Company has gained access and additional profitability, operating efficiencies and other synergies available in connection with existing markets. All goodwill acquired during fiscal 2023 is in the United States segment with all goodwill expected to be deductible for tax purposes.
Deferred consideration represents the expected payout due to certain sellers of acquired businesses that is subject to either 1) a contractual settle-up period or 2) a contingency related to contractually defined performance metrics. If the deferred consideration is contingent on achieving performance metrics, the liability is estimated using assumptions regarding the expectations of an acquiree’s ability to achieve the contractually defined performance metrics over a period of time that typically spans one to three years. When ultimately paid, deferred consideration is reported as a cash outflow from financing activities.
The businesses acquired in fiscal 2023 contributed $238 million to net sales and $3 million to the Company’s income before income tax, including acquired intangible asset amortization, transaction and integration costs for the period between the date of acquisition and July 31, 2023. Acquisition costs in fiscal 2023 was $5 million (2022: $10 million). Acquisition costs are expensed as incurred and included in SG&A in the Company’s consolidated statements of earnings.
The net outflow of cash in respect of the purchase of businesses is as follows:
| | | | | | | | | | | |
| For the years ended July 31, |
| (In millions) | 2023 | | 2022 |
| Purchase consideration | $619 | | | $668 | |
| Cash and cash equivalents acquired | (3) | | | (18) | |
| Cash consideration paid, net of cash acquired | 616 | | | 650 | |
Deferred and contingent consideration paid for prior years’ acquisitions(1) | 34 | | | 22 | |
| Net cash outflow in respect of the purchase of businesses | $650 | | | $672 | |
(1) Included in other financing activities in the consolidated statements of cash flows
Pro forma disclosures
If each acquisition had been completed on the first day of the prior fiscal year, the Company’s unaudited pro forma net sales would have been: | | | | | | | | | | | |
| Year ended July 31, |
| (In millions) | 2023 | | 2022 |
| Pro forma net sales | $30,299 | | | $29,354 | |
The impact on income before income tax in fiscal 2023 and 2022, including additional intangible asset amortization, transaction and integration costs, would not be material.
The unaudited pro forma results presented herein do not necessarily represent financial results that would have been achieved had the acquisition actually occurred at the beginning of the prior fiscal year.
Note 17: Discontinued operations and disposals
On January 29, 2021, the Company disposed of the shares in its U.K. business, Wolseley UK Limited. As such, the disposal group has been presented as a discontinued operation.
The results from discontinued operations, which have been included in the consolidated statements of earnings are as follows:
| | | | | | | | | | | |
| Year ended July 31, |
| (In millions, except per share amounts) | 2022 | | 2021 |
| Net sales | $— | | | $1,138 | |
| Cost of sales | — | | | (879) | |
| Gross profit | — | | | 259 | |
| Selling, general and administrative expenses | — | | | (194) | |
| Depreciation and amortization | — | | | (11) | |
| | | |
| | | |
| Gain (loss) on disposal of business, net | 23 | | | (200) | |
| Income (loss) before income tax | 23 | | | (146) | |
| Provision for income taxes | — | | | (12) | |
| Income (loss) from discontinued operations | $23 | | | ($158) | |
| | | |
| Earnings per share - Basic | $0.11 | | | ($0.70) | |
| Earnings per share - Diluted | $0.10 | | | ($0.70) | |
In fiscal 2022, the gain on disposal of business comprised a gain on the sale of land in connection with the Company’s former Nordic operations that were disposed of in a prior year, generating $24 million in cash flow from investing activities.
In fiscal 2021, the net loss on disposal of business primarily related to the disposal of the U.K. business, Wolseley UK Limited, comprising a loss on disposal of $449 million of the U.K. business, partially offset by a $235 million gain from the reclassification of currency translation adjustments from accumulated other comprehensive loss into income following the abandonment of former financing subsidiaries, as well as a $14 million gain on a prior year’s disposal of assets.
The Company had no material activity related to discontinued operations in fiscal 2023.
Note 18: Related party transactions
For fiscal 2023, the Company purchased $27 million (2022: $22 million and 2021: $24 million) of delivery, installation and related administrative services from companies that are, or are indirect wholly owned subsidiaries of companies that are, controlled or significantly influenced by a Ferguson Non-Employee Director. No material amounts are due to such companies. The services are purchased on an arm’s-length basis.
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.Controls and Procedures
As of the end of the period covered by this Annual Report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act as of July 31, 2023. The term “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the disclosure controls and procedures are met.
Based on their evaluation as of the end of the period covered by this Annual Report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level.
Management’s report on internal controls over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of July 31, 2023 based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of July 31, 2023 in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
The effectiveness of our internal control over financial reporting as of July 31, 2023 has been audited by Deloitte LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended July 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Ferguson plc
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Ferguson plc and subsidiaries (the “Company”) as of July 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended July 31, 2023, of the Company and our report dated September 26, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal controls over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Richmond, VA
September 26, 2023
Item 9B.Other Information
None.
Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Part III
Item 10.Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
Information required by this item will be contained in the 2023 Proxy Statement under the headings “Board Committees and Oversight” and “Resolution 1: Election of Directors,” which information is incorporated herein by reference.
Item 11.Executive Compensation
Information required by this item will be contained in the 2023 Proxy Statement under the headings “Board Committees and Oversight” and “Executive Compensation,” which information is incorporated herein by reference.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item will be contained in the 2023 Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation— Equity Compensation Plan Information,” which information is incorporated herein by reference.
Item 13.Certain Relationships and Related Transactions
Information required by this item will be contained in the 2023 Proxy Statement under the headings “Corporate Governance—Director Independence” and “Board Committees and Oversight—Related Party Transactions,” which information is incorporated herein by reference.
Item 14.Principal Accountant Fees and Services
Information required by this item will be contained in the 2023 Proxy Statement under the heading “Independent Registered Accountants,” which information is incorporated herein by reference.
Part IV
Item 15.Exhibits, Financial Statement Schedules
| | | | | | | | |
| | (a) | The following documents are filed as part of this Annual Report: |
The following Consolidated Financial Statements of Ferguson plc and Report of Independent Registered Public Accounting Firm are included in this Annual Report under Item 8:
•Report of Independent Registered Public Accounting Firm.
•Consolidated Statements of Earnings, Comprehensive Income, Shareholders’ Equity and Cash Flows for the years ended July 31, 2023, 2022 and 2021.
•Consolidated Balance Sheets as of July 31, 2023 and 2022.
•Notes to the Consolidated Financial Statements
| | | | | | | | |
| | (2) | Financial Statement Schedules: |
All schedules are omitted as the required information is inapplicable or the information is presented in the Company’s audited consolidated financial statements or notes thereto.
The exhibits listed below are filed or incorporated by reference as part of this Annual Report.
| | | | | |
| 3.1 | |
| 4.1* | |
| 10.1 | Amendment and Restatement Agreement, dated October 7, 2022, by and among Ferguson plc, Ferguson UK Holdings Limited, each of the lenders party thereto, and ING Bank N.V., London Branch, as agent of the lenders (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (File No. 001-40066), filed with the SEC on October 13, 2022). |
| 10.2 | Credit Agreement, dated October 7, 2022, by and among Ferguson plc, as parent guarantor, Ferguson UK Holdings Limited, as borrower, each of the lenders party thereto and PNC Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (File No. 001-40066), filed with the SEC on October 13, 2022). |
| 10.3 | Receivables Purchase Agreement, dated as of July 31, 2013, among Ferguson plc, Ferguson Receivables, LLC as seller, Ferguson Enterprises, Inc. as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks, and facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent (as further amended, supplemented and restated, the “Receivables Purchase Agreement”) (incorporated by reference to Exhibit 4.3 of the Registrant’s 20FR12B (File No. 001-39301), filed with the SEC on February 12, 2021). |
| 10.4 | Purchase and Contribution Agreement, dated as of July 31, 2013, among Ferguson Receivables, LLC as purchaser, Ferguson Enterprises, Inc., as servicer, and its various subsidiaries party thereto as originators (as further amended, supplemented or restated, the “Purchase and Contribution Agreement”) (incorporated by reference to Exhibit 4.4 of the Registrant’s 20FR12B (File No. 001-39301), filed with the SEC on February 12, 2021). |
| 10.5 | First Amendment to Receivables Purchase Agreement, dated as of December 6, 2013, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.6 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.6 | Omnibus Amendment to Receivables Purchase Agreement and Purchase and Contribution Agreement, dated as of September 23, 2014, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.7 | Third Amendment to Receivables Purchase Agreement, dated as of December 22, 2014, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.8 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.8 | Omnibus Amendment to Receivables Purchase Agreement and Purchase and Contribution Agreement, dated as of September 11, 2015, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.9 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.9 | Second Omnibus Amendment to Receivables Purchase Agreement and Purchase and Contribution Agreement, dated as of December 31, 2015, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.10 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| | | | | |
| 10.10 | Fifth Amendment to Receivables Purchase Agreement, dated as of December 16, 2016, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Wolseley plc, as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.11 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.11 | Sixth Amendment to Receivables Purchase Agreement, dated as of December 8, 2017, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.12 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.12 | Seventh Amendment to Receivables Purchase Agreement, dated as of December 20, 2018, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, Inc., as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.13 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.13 | Eighth Amendment to Receivables Purchase Agreement and Consent to Assignment by Parent, dated as of May 10, 2019, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, SunTrust Bank, as co-administrative agent, and Ferguson Holdings Limited, as assignor parent, and Ferguson plc, as assignee parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.14 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.14 | Ninth Amendment to Receivables Purchase Agreement, dated as of April 17, 2020, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, Truist Bank (formerly SunTrust Bank), as co-administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.15 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.15 | Tenth Amendment to Receivables Purchase Agreement, dated as of July 22, 2020, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer, the originators, the facility agents party each thereto, Royal Bank of Canada, as administrative agent, Truist Bank (formerly SunTrust Bank), as co-administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.16 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.16 | Omnibus Amendment and Consent, dated as of May 19, 2021, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, Truist Bank (formerly SunTrust Bank), as co-administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.17 | Omnibus Amendment to Receivables Purchase Agreement and Purchase and Contribution Agreement, dated as of December 8, 2021, among Ferguson Receivables, LLC as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.) as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.18 of the Registrant’s Annual Report on Form 10-K (File No. 001-40066), filed with the SEC on September 27, 2022). |
| 10.18† | Thirteenth Amendment to Receivables Purchase Agreement, dated October 7, 2022, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K (File No. 001-40066), filed with the SEC on October 13, 2022). |
| 10.19 | Omnibus Amendment to Receivables Purchase Agreement and Purchase and Contribution Agreement, dated December 29, 2022, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-40066), filed with the SEC on March 8, 2023). |
| | | | | |
| 10.20 | Omnibus Amendment to Receivables Purchase Agreement and Purchase and Contribution Agreement, dated February 10, 2023, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC (formerly Ferguson Enterprises, Inc.), as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks and facility agents party each thereto, Royal Bank of Canada, as administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-40066), filed with the SEC on March 8, 2023). |
| 10.21* | Omnibus Amendment and Consent (Ferguson Receivables, LLC), dated as of June 23, 2023, among Ferguson Receivables, LLC, as seller, Ferguson Enterprises, LLC, as servicer, the originators, the conduit purchasers, committed purchasers, letters of credit banks, and facility agents party each thereto, Royal Bank of Canada, as administrative agent, and Ferguson plc (formerly Wolseley plc), as parent, amending the Receivables Purchase Agreement and the Purchase and Contribution Agreement. |
| 10.22+* | |
| 10.23+* | |
| 10.24+* | |
| 10.25+* | |
| 10.26+* | |
| 10.27+* | |
| 10.28+* | |
| 10.29+* | |
| 10.30+* | |
| 10.31+* | |
| 10.32+* | |
| 10.33+* | |
| 10.34+* | |
| 10.35+* | |
| 10.36+ | |
| 10.37+ | |
| 10.38+ | |
| 10.39+* | |
| 10.40+* | |
| 10.41+* | |
| 10.42+* | |
| 10.43+* | |
| 10.44+* | |
| 10.45+* | |
| 10.46+* | |
| 10.47+* | |
| 10.48+* | |
| 10.49+* | |
| 21.1* | |
| 23.1* | |
| 23.2* | |
| 24.1* | Power of Attorney (included on signature page). |
| 31.1* | |
| | | | | |
| 31.2* | |
| 32.1** | |
| 32.2** | |
| 97* | |
| 101.INS* | Inline XBRL Instance Document—this instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
** Furnished herewith
† Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
+ Indicates a management contract or compensatory plan or arrangement
The Registrant agrees to furnish to the SEC, upon request, copies of any instruments that define the rights of holders of long-term debt of the Registrant that are not filed as exhibits to this Annual Report.
Item 16.Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
September 26, 2023
| | | | | | | | |
| Ferguson plc
|
| | /s/ William Brundage |
| Name: | William Brundage |
| Title: | Chief Financial Officer |
| | (Principal Financial Officer) |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that each person whose signature appears below hereby constitutes and appoints Kevin Murphy and William Brundage as his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys and agents full power and authority to do any and all acts and things necessary or advisable in connection with such matters, and hereby ratifying and confirming all that the attorneys and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of September 26, 2023.
| | | | | |
| Name | Position |
| |
/s/ Kevin Murphy | Chief Executive Officer and Executive Director |
| Kevin Murphy | (Principal Executive Officer) |
| |
/s/ William Brundage | Chief Financial Officer and Executive Director |
| William Brundage | (Principal Financial Officer) |
| |
/s/ Richard Winckler | Chief Accounting Officer |
| Richard Winckler | (Principal Accounting Officer) |
| |
/s/ Geoffrey Drabble | Chairman |
| Geoffrey Drabble | |
| |
/s/ Kelly Baker | Director |
| Kelly Baker | |
| |
/s/ Catherine Halligan | Director |
| Catherine Halligan | |
| |
/s/ Brian May | Director |
| Brian May | |
| |
/s/ James S. Metcalf | Director |
| James S. Metcalf | |
| |
/s/ Alan Murray | Director |
| Alan Murray | |
| |
/s/ Thomas Schmitt | Director |
| Thomas Schmitt | |
| |
/s/ Nadia Shouraboura | Director |
| Nadia Shouraboura | |
| |
/s/ Suzanne Wood | Director |
| Suzanne Wood | |
DESCRIPTION OF SECURITIES REGISTERED
UNDER SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
The following is a summary of the rights of the ordinary shares of 10 pence each (the “Ordinary Shares”) of Ferguson plc (the “Company”, “we”, “us” or “our”), which is the only class of securities of the Company registered under Section 12 of the Securities Exchange Act of 1934, as amended.
This description is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Memorandum and Articles of Association (the “Articles”), as amended, which are incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part.
All of the allotted and issued Ordinary Shares are registered shares and are fully paid or credited as fully paid.
Basic Rights of our Shares
Subject to the provisions of the Companies (Jersey) Law 1991, as amended (the “Jersey Companies Law”) relating to authority to allot, pre-emption rights or otherwise and to any resolution of the Company in a general meeting passed pursuant to those provisions and any provision of the Articles, all unissued shares for the time being in the capital of the Company are at the disposal of the Company’s board of directors (the “Board”). The Board may allot such shares on any terms and conditions, grant options over them, offer them for sale or otherwise dispose of them in any other way. The Board may issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the holder on such terms as provided by the Articles subject to the provisions of Jersey Companies Law.
There are no restrictions on the transfer of shares by a shareholder under the Articles or Jersey Companies Law although the board of directors can impose restrictions (including on certain transfers) for failure to comply with a disclosure notice (see “Disclosure of Shareholdings’” below).
Voting Rights
Subject to any rights or restrictions as to voting attached to any shares, on a show of hands, every member present in person or (subject to certain conditions) by proxy shall have one vote, and, on a poll, every member present in person or by proxy has one vote for every share of which he or she is the holder.
If at the time of any general meeting or class meeting, a member owes the Company any money in relation to his or her share, he or she will not be entitled to vote that share (either in person or by proxy) or exercise any other right attached to that share at that general meeting or class meeting. A member may not (amongst other things) exercise voting rights in the Company in respect of shares which are the subject of a restriction notice served after failure to provide the Company with information concerning interests in certain shares required to be provided by the Company, in accordance with the Articles.
In accordance with the Articles, all directors shall hold office until the next following annual general meeting and are subject to a vote for re-election each year at the annual general meeting.
Voting Thresholds
A special resolution of the Company is a resolution passed by two-thirds of the members who (being entitled to do so) vote in person, or by proxy, at a general meeting of the Company or at a separate meeting of a class of members of the Company (as the case may be). An ordinary resolution of the Company is a resolution passed by a simple majority of the members who (being entitled to do so) vote in person, or by proxy, at a general meeting of the Company or at a separate meeting of a class of members of the Company (as the case may be). Except as otherwise provided by applicable law, rule or regulation, by the rules or regulations of any securities exchange applicable to the Company or its securities, or the Articles, all matters shall be decided by the members by ordinary resolution.
Quorum Requirements
A member who holds, or members together who hold, a majority of the shares entitled to be voted at the meeting are a quorum.
Dividends and other distributions
Subject to the provisions of Jersey Companies Law, the members may, by ordinary resolution, declare dividends, but no dividend shall exceed the amount recommended by the Board. Subject to the provisions of Jersey Companies Law, the Board may pay interim dividends if it appears to the Board that it is justified by the financial position of the Company.
Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during the whole period in respect of which the dividend is paid. Any amount paid on a share in advance of the date on which a call is payable will not be treated as paid up for these purposes.
The Company does not have to pay interest on any dividend or other money due to a member in respect of his or her shares, unless the rights of the share state otherwise. If a dividend or other money payable in respect of a share remains unclaimed for 12 years from the date it was declared or became due for payment, the Board can pass a resolution to forfeit the payment and the member will lose the right to the dividend.
If recommended by the Board, members can pass an ordinary resolution to direct that a dividend will be satisfied in whole or in part by distributing assets instead of cash. This includes, amongst other things, paid up shares or debentures of another company. The Board can make any arrangements it wishes to settle any difficulties which may arise in connection with the distribution, including for example (i) the valuation of the assets, or (ii) the payment of cash to any member on the basis of that value in order to adjust the rights of members, and (iii) the transfer of any asset to a trustee. The Board may, if authorized by an ordinary resolution of the Company, offer members the right to elect to receive shares by way of scrip dividend (which are credited as fully paid) instead of cash in respect of some or all of their dividend.
Lien and Forfeiture
The Company has the right to any unpaid money on a partly paid share. This covers any money which is owed to the Company by the member, where the money has been called for or is payable under the terms on which the share was issued. The Company has the right to sell any partly paid share if a member fails to pay any money due on the partly paid share within 14 clear days of notice of the amount of money owed being given to the holder of the share or to the person entitled to the share by transmission.
The Board can call at any time on members on one or more occasions to pay any money which they owe to the Company on a share, provided that there must be at least one month between the payment dates of two consecutive calls and that the call is made in accordance with the Articles and the terms of allotment of the relevant share. Members must be given at least one month’s notice of a requirement to pay and the notice must state when and where the payment is to be made. If a member does not pay the money due under a call or any instalment of a call by the due date, he or she must pay interest on the amount due from the due date until it is actually paid. If the terms of any allotment of any share require money to be paid when the share is allotted or on a fixed date, the amount payable will be treated in the same way as if a valid call had been made for that money the same date the money is due. If the money is not paid, the provisions of the Articles relating to calls and forfeiture will apply as if the member had been notified of a valid call for that amount on that date.
Ownership of Shares by Non-UK Persons
There are no provisions in the Articles that restrict non-UK residents or overseas shareholders from holding shares or from exercising voting rights attaching to shares.
Pre-emption Rights
If the Company issues certain specific kinds of additional securities, current members will generally have pre-emption rights to those securities on a pro rata basis. Pre-emption rights are transferable during the subscription period relating to a particular offering. The members may, by way of special resolution, grant authority to the Board to allot shares as if the pre-emption rights did not apply.
Liquidation Rights
If the Company is wound up, the liquidator can, with the approval of a special resolution passed by the members and any other sanction required by Jersey Companies Law, divide some or all of the Company’s assets among the members. The liquidator may determine the value of such assets and how they are to be divided between the members.
Disclosure of Shareholdings
Pursuant to the Articles, the provisions of chapter five of the United Kingdom Disclosure Guidance and Transparency Rules are deemed to be incorporated by reference in the Articles as if the Company were a UK issuer. Accordingly, the Articles require members to notify the Company if the voting rights attached to shares held by them (subject to some exceptions) reach, exceed or fall below 3% and each 1% threshold thereafter up to 100%. In addition, pursuant to the Articles, the Company may also send a notice to any person whom it knows or believes to be interested in its shares, requiring such person to confirm whether he or she has such an interest and, if so, details of that interest. Under the Articles, if a member fails to supply the information requested in the notice or provides information that is materially inaccurate, the Board may serve a restriction notice on such person stating amongst other things that the member may not attend or vote at any general meeting or class meeting in respect of some or all of his or her shares.
Rights to Share in the Company's Profits
If authorized by an ordinary resolution or a special resolution of the Company’s shareholders, the Board can pass a resolution to capitalize any undistributed profits (unless required for paying a preferential dividend) or other sum in any reserve or fund. The amount capitalized must be distributed to the members or holders of shares of any class on the record date as if it were distributed by way of dividend.
Changes in capital and allotment of securities
The Company, may, by special resolution of its shareholders, alter its Memorandum of Association to increase or reduce the number of shares that it is authorized to issue, to consolidate all or any of its shares (whether issued or not) into fewer shares or to divide all or any of our shares (whether issued or not) into more shares, in each case in compliance with the Jersey Companies Law. The Articles specify that a special resolution of the Company is required to be passed by two-thirds of the shareholders who (being entitled to do so) vote in person, or by proxy.
Subject to the provisions of the Jersey Companies Law, the Board has the discretion to issue authorized but unissued shares.
Variation of Rights
Subject to the provisions of Jersey Companies Law, rights attached to any class of shares in the capital of the Company may be varied or abrogated either with the written consent of the holders of at least two-thirds in nominal value of the issued shares of the class, or with the sanction of a special resolution passed at a separate class meeting of the class of members affected. While the Company’s shares are divided into different classes, the rights of a share will be treated as varied if either (i) the capital paid up on that share or class of shares is reduced (unless this results from the Company buying back or redeeming its own shares), or (ii) another share is allotted which has (a) priority for payment of a dividend, (b) priority on a return of capital or (c) voting rights more favorable than those attached to that share or class of shares.
Change of Control
There are no provisions in the Articles which would have an effect of delaying, deferring or preventing a change in the control of the Company.
Other Jersey, Channel Islands Law Considerations
Purchase or redemption of own shares
The Company may not buy back or redeem its shares unless its directors who are to authorize the buy back or redemption have made a statutory solvency statement that, immediately following the date on which the buy back or redemption is proposed, the Company will be able to discharge its liabilities as they fall due and, having regard to prescribed factors, the Company will be able to continue to carry on business and discharge its liabilities as they fall due for the 12 months immediately following the date on which the buy back or redemption is proposed (or until the company is dissolved on a solvent basis, if earlier).
If the above conditions are met, the Company may purchase shares in the manner described below.
It may purchase on a stock exchange its own fully paid shares pursuant to a special resolution of its shareholders. The resolution authorizing the purchase must specify:
•the maximum number of shares to be purchased;
•the maximum and minimum prices which may be paid; and
•a date, not being later than 18 months after the passing of the resolution, on which the authority to purchase is to expire.
It may purchase its own fully paid shares otherwise than on a stock exchange pursuant to a special resolution of its shareholders but only if the purchase is made on the terms of a written purchase contract which has been approved by an ordinary resolution of its shareholders. The shareholder from whom the Company proposes to purchase or redeem shares is not entitled to take part in such shareholder vote in respect of the shares to be purchased.
The Company may fund a redemption or purchase of its own shares from any source. The Company cannot purchase its shares if, as a result of such purchase, only redeemable shares would remain in issue.
If authorized by a resolution of its shareholders, any shares that it redeems or purchases may be held by the Company as treasury shares. Any shares held by the Company as treasury shares may be cancelled, sold, transferred for the purposes of or under an employee share scheme or held without cancelling, selling or transferring them. Shares redeemed or purchased by the Company are cancelled where the Company has not been authorized to hold these as treasury shares.
Mandatory Bids
The United Kingdom City Code on takeovers and mergers (the “City Code”) applies to the Company. Under the City Code, if an acquisition of an interest in the Company’s ordinary shares were to increase the aggregate holding of an acquirer and its “concert parties” to an interest in the Company’s ordinary shares carrying 30% or more of the voting rights in the Company, the acquirer and, depending upon the circumstance, its concert parties, would be required (except with the consent of the UK Takeover Panel) to make an offer in cash (or accompanied by a cash alternative) for the outstanding ordinary shares in the Company at a price not less than the highest price paid for any interest in the Company’s ordinary shares by the acquirer or its concert parties during the 12 months prior to the announcement of the offer. A similar obligation to make such a mandatory offer would also arise on the acquisition of the Company’s ordinary shares by a person (together with its concert parties) interested in the Company’s ordinary shares carrying between 30% and 50% of the voting rights in the Company if the effect of such acquisition were to increase the percentage of shares carrying voting rights in which he or she is interested.
Squeeze-Out and Sell-Out
Jersey Companies Law provides that where a person (the “Offeror”) makes a takeover offer to acquire all of the shares (or all of the shares of any class) in a Jersey company (other than any shares already held by the Offeror at the date of the offer), if the Offeror has by virtue of acceptances of the offer acquired or contracted to acquire not less than 90% in nominal value of the shares (or class of shares) to which the offer relates, the Offeror may (subject to the requirements of Jersey Companies Law), by notice to the holders of the shares (or class of shares) to which the offer relates which the Offeror has not already acquired or contracted to acquire, compulsorily acquire those shares. A holder of any shares who receives a notice of compulsory acquisition may (within six weeks from the date on which such notice was given) apply to the Royal Court of Jersey for an order that the Offeror not be entitled and bound to purchase the holder’s shares or that the Offeror purchase the holder’s shares on terms different to those of the offer.
Where before the end of the period within which the takeover offer can be accepted, the Offeror has by virtue of acceptances of the offer acquired or contracted to acquire not less than 90% in nominal value of all of the shares (or all of the shares of a particular class) of the Jersey company, the holder of any such shares (or class of shares) who has not accepted the offer may, by written notice to the Offeror, require the Offeror to acquire the holder’s shares. The Offeror shall (subject to the requirements of Jersey Companies Law) be entitled and bound to acquire the holder’s shares on the terms of the offer or on such other terms as may be agreed. Where a holder gives the Offeror a notice of compulsory acquisition, each of the Offeror and the holder of the shares is entitled to apply to the Royal Court of Jersey for an order that the terms on which the Offeror is entitled and bound to acquire the holder’s shares shall be such as the court thinks fit.
Differences in Corporate Law between United States (Delaware) and Jersey, Channel Islands
Set forth below is a comparison of certain shareholder rights and corporate governance matters under Delaware law and Jersey law:
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Special Meetings of Shareholders | Shareholders generally do not have the right to call meetings of shareholders unless that right is granted in the certificate of incorporation or bylaws. However, if a corporation fails to hold its annual meeting within a period of 30 days after the date designated for the annual meeting, or if no date has been designated for a period of 13 months after its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Delaware Court of Chancery may order a meeting to be held upon the application of a shareholder or a director. | Shareholders holding 10% or more of a Jersey company's voting rights and entitled to vote at the relevant meeting may legally require our directors to call a meeting of shareholders. The Jersey Financial Services Commission (“JFSC”) may, at the request of any officer, secretary or shareholder, call or direct the calling of an annual general meeting. Failure to call an annual general meeting in accordance with the requirements of the Jersey Companies Law is a criminal offence on the part of a Jersey company and its directors and secretary. |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Interested Director Transactions | Interested director transactions are permissible and may not be legally voided if: •either a majority of disinterested directors, or a majority in interest of holders of shares of the corporation's capital stock entitled to vote upon the matter, approves the transaction in good faith upon disclosure of all material facts; or •the transaction is determined to have been fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee thereof or the shareholders. | An interested director must disclose to the company the nature and extent of any interest in a transaction with the company, or one of its subsidiaries, which to a material extent conflicts or may conflict with the interests of the company and of which the director is aware. Failure to disclose an interest entitles the company or a shareholder to apply to the court for an order setting aside the transaction concerned and directing that the director account to the company for any profit. A transaction is not voidable and a director is not accountable notwithstanding a failure to disclose an interest if the transaction is confirmed by special resolution and the nature and extent of the director's interest in the transaction are disclosed in reasonable detail in the notice calling the meeting at which the resolution is passed. Although it may still order that a director account for any profit, a court will not set aside a transaction unless it is satisfied that the interests of third parties who have acted in good faith would not thereby be unfairly prejudiced and the transaction was not reasonable and fair in the interests of the company at the time it was entered into. Our Articles set out a limited number of transactions and matters in which a director may be interested and in which he or she may vote and be counted in the quorum in relation to a resolution on the matter. |
| Cumulative Voting | The certificate of incorporation of a Delaware corporation may provide that shareholders of any class or classes or of any series may vote cumulatively either at all elections of directors or at elections under specified circumstances. | There are no provisions in the Jersey Companies Law relating to cumulative voting. |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Approval of Corporate Matters by Written Consent | Unless otherwise specified in a corporation's certificate of incorporation, shareholders may take action permitted to be taken at an annual or special meeting, without a meeting, notice or a vote, if consents, in writing, setting forth the action, are signed by shareholders with not less than the minimum number of votes that would be necessary to authorize the action at a meeting. All consents must be dated and are only effective if the requisite signatures are collected within 60 days of the earliest dated consent delivered. | If permitted by the articles of association of a company, a written consent signed and passed by the specified majority of members may affect any matter that otherwise may be brought before a shareholders' meeting, except for the removal of a company's auditors. Such consent shall be deemed effective when the instrument, or the last of several instruments, is signed by the specified majority of members or on such later date as is specified in the resolution. Our Articles do not contain provisions regarding shareholder resolutions in writing. |
| Business Combinations | With certain exceptions, a merger, consolidation or sale of all or substantially all of the assets of a Delaware corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. | A sale or disposal of all or substantially all the assets of a Jersey company must be approved by the board of directors and, only if the articles of association of the company require, by the shareholders in a general meeting. A merger involving a Jersey company must be generally documented in a merger agreement which must be approved by special resolution of that company. In the case of a merger requiring approval by special resolution, our Articles specify that a special resolution of the Company must be passed by two-thirds of the shareholders who (being entitled to do so) vote in person, or by proxy. The Articles do not contain provisions regarding shareholder resolutions in writing. Further, in certain scenarios, the UK listing rules to which we are subject also require shareholder approval for dispositions and business combination transactions. |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Limitations on Director’s Liability and Indemnification of Directors and Officers | A Delaware corporation may include in its certificate of incorporation provisions limiting the personal liability of its directors or officers to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer. However, these provisions may not limit liability for any breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (for directors) the authorization of unlawful dividends, stock purchases, or redemptions, any transaction from which a director or officer derived an improper personal benefit, or (for officers) any action by or in right of the corporation. Moreover, these provisions would not be likely to bar claims arising under U.S. federal securities laws. A Delaware corporation may indemnify a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of his or her position if (i) the director or officer 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 (ii) with respect to any criminal action or proceeding, the director or officer had no reasonable | The Jersey Companies Law does not contain any provision permitting Jersey companies to limit the liabilities of directors for breach of fiduciary duty. However, a Jersey company may exempt from liability, and indemnify directors and officers, for liabilities: •incurred in defending any civil or criminal legal proceedings where: – judgment is given in the person's favor or the person is acquitted; –the proceedings are discontinued other than by reason of such person (or someone on their behalf) giving some benefit or suffering some detriment; or –the proceedings are settled on terms that such person (or someone on their behalf) gives some benefit or suffers some detriment but in the opinion of a majority of the disinterested directors, the person was substantially successful on the merits in the person's resistance to the proceedings; •incurred to anyone other than to the company if the person acted in good faith with a view to the best interests of the company; •incurred in connection with an application made to the court for relief from liability for negligence, default, breach of duty or breach of trust under |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| cause to believe his or her conduct was unlawful. | Article 212 of the Jersey Companies Law in which relief is granted to the person by the court; or •incurred in a case in which the company normally maintains insurance for persons other than directors. Our Articles provide that the Company is required to indemnify every director or other officer of the Company (other than any person (whether an officer or not) engaged by the Company as auditor) out of its assets against any liability incurred by him or her for negligence, default, breach of duty, breach of trust or otherwise in relation to the affairs of the Company. The extent of such indemnities shall be limited in accordance with the provisions of the Jersey Companies Law. |
| Appraisal Rights | A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights under which the shareholder may receive cash in the amount of the fair value of the shares held by that shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction. | There are no appraisal rights under the Jersey Companies Law. |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Shareholder Suits | Class actions and derivative actions generally are available to the shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action. | Under Article 141 of the Jersey Companies Law, a shareholder may apply to court for relief on the ground that the conduct of a company's affairs, including a proposed or actual act or omission by a company, is “unfairly prejudicial” to the interests of shareholders generally or of some part of shareholders, including at least the shareholder making the application. There may also be customary law personal actions available to shareholders. Under Article 143 of the Jersey Companies Law (which sets out the types of relief a court may grant in relation to an action brought under Article 141 of the Jersey Companies Law), the court may make an order regulating the affairs of a company, requiring a company to refrain from doing or continuing to do an act complained of, authorizing civil proceedings and providing for the purchase of shares by a company or by any of its other shareholders. |
| Inspection of Books and Records | All shareholders of a Delaware corporation have the right, upon written demand, to inspect or obtain copies of the corporation's shares ledger and its other books and records for any purpose reasonably related to such person's interest as a shareholder. | The register of shareholders and books containing the minutes of general meetings or of meetings of any class of shareholders of a Jersey company must during business hours be open to the inspection of a shareholder of the company without charge. The register of directors and secretaries must during business hours (subject to such reasonable restrictions as the company may by its articles of association or in general meeting impose, but so that not less than two hours in each business day be allowed for inspection) be open to the inspection of a shareholder or director of the company without charge. |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Amendments to Charter | Amendments to the certificate of incorporation of a Delaware corporation require the affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon or such greater vote as is provided for in the certificate of incorporation. A provision in the certificate of incorporation requiring the vote of a greater number or proportion of the directors or of the holders of any class of shares than is required by Delaware corporate law may not be amended, altered or repealed except by such greater vote. | The memorandum of association and the articles of association of a Jersey company may only be amended by special resolution (being a two-thirds majority if the articles of association of the company do not specify a greater majority) passed by shareholders in general meeting or by written resolution signed by all the shareholders entitled to vote. Our Articles specify that a special resolution of the Company is required to be passed by two-thirds of the shareholders who (being entitled to do so) vote in person, or by proxy. The Articles do not contain provisions regarding shareholder resolutions in writing. |
| Blank Check Preferred Stock/Shares | Under Delaware law, the certificate of incorporation of a corporation may give the board of directors the right to issue new classes of preferred shares with voting, conversion dividend distribution, and other rights to be determined by the board of directors at the time of issuance, which could prevent a takeover attempt and thereby preclude shareholders from realizing a potential premium over the market value of their shares. In addition, Delaware law does not prohibit a corporation from adopting a shareholder rights plan, or “poison pill,” which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares. | The City Code requires a target company shareholders’ consent in general meeting before the target company can take any action (other than seeking alternative bids) that may result in the frustration of a takeover bid. Moreover, the City Code provides that the board of directors of an offeree company must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on merits of a takeover bid. |
| | | | | | | | |
| Corporate Law Issue | Delaware Law | Jersey Law |
| Distributions and Dividends: Repurchases and Redemptions | Under Delaware law, subject to any restrictions contained in the certificate of incorporation, a corporation may pay dividends out of capital surplus or, if there is no surplus, out of net profits for the current and/or the preceding fiscal year in which the dividend is declared, as long as the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by issued and outstanding shares having a preference upon the distribution of assets. Surplus is defined in Delaware law as the excess of the net assets over capital, as such capital may be adjusted by the board of directors. A Delaware corporation may purchase or redeem shares of any class except when its capital is impaired or would be impaired by the purchase or redemption, and it may not purchase, for more than the price at which they may be redeemed, any of its shares which are redeemable at the option of the corporation. A corporation may, however, purchase or redeem out of capital shares that are entitled upon any distribution of its assets to a preference over another class or series of its shares if the shares are to be retired and the capital reduced. | Under Jersey Companies Law, a Jersey company may make a distribution at any time and out of any source provided that the directors the company who authorize the distribution make an immediate and 12 month forward looking cashflow solvency statement. Likewise, authorizing directors must also make a solvency statement in the event of redeeming or purchasing the company's shares. A description of Repurchase and Redemptions provisions under Jersey Companies Law is set out above under the heading “Other Jersey, Channel Islands Law Considerations—Purchase or redemption of own shares.” |
Exhibit 10.21
EXECUTION COPY
OMNIBUS AMENDMENT
AND CONSENT
(FERGUSON RECEIVABLES, LLC)
This Omnibus Amendment and Consent (this “Amendment”) is entered into by the undersigned parties as of June 23, 2023, and amends the Receivables Purchase Agreement dated as of July 31, 2013, as previously amended, supplemented or modified prior to the date hereof (the “Existing Receivables Purchase Agreement”), among FERGUSON RECEIVABLES, LLC, a Delaware limited liability company (the “Seller”), FERGUSON ENTERPRISES, LLC (“Ferguson”), a Virginia limited liability company (in such capacity, the “Servicer”), the Originators party thereto from time to time, the Conduit Purchasers listed on Schedule I thereto from time to time, the Committed Purchasers listed on Schedule I thereto from time to time, the LC Banks listed on Schedule III thereto from time to time, the Facility Agents listed on Schedule I thereto from time to time, ROYAL BANK OF CANADA, as the administrative agent (in such capacity, the “Administrative Agent”), and FERGUSON PLC (formerly Wolseley plc), a company incorporated in Jersey and having registration number 128484 (the “Parent”) and the Purchase and Contribution Agreement dated as of July 31, 2013, as previously amended, supplemented or modified prior to the date hereof (the “Existing Purchase and Contribution Agreement”), between the Seller, Ferguson and the other Originators.
Preliminary Statements
(1) Ferguson Fire Design, LLC (“FFD”), a subsidiary of Ferguson, has notified the Seller, the Administrative Agent and the Facility Agents that it desires as of the date hereof (i) to be added as an Originator party to the Existing Purchase and Contribution Agreement (as amended and modified on the date hereof pursuant to the terms herein, the “Purchase and Contribution Agreement”) and the Existing Receivables Purchase Agreement (as amended and modified on the date hereof pursuant to the terms herein, the “Receivables Purchase Agreement”), and (ii) for its Receivables to no longer be treated as Excluded Receivables (as defined in the Existing Receivables Purchase Agreement);
(2) FFD and Ferguson have requested that the Seller, the Administrative Agent and the Facility Agents hereby consent to the addition of FFD as an Originator party to the Purchase and Contribution Agreement and the Receivables Purchase Agreement, and the Seller, the Administrative Agent and the Facility Agents are willing to so consent on the terms set forth herein;
(3) The Seller and Ferguson have also requested certain other amendments to the Existing Receivables Purchase Agreement and to the Existing Purchase and Contribution Agreement, and the Facility Agents are willing to consent to such amendments; and
(4) The parties hereto desire to amend (a) the Existing Receivables Purchase Agreement to (i) increase the permissible Delinquency Ratio and Dilution Ratio, (ii) add FFD as an Originator and to no longer treat the Receivables of FFD as Excluded Receivables (as defined in the Existing Receivables Purchase Agreement) and (iii) make certain other amendments, (b) the Existing Purchase and Contribution Agreement to add FFD as an Originator and make certain other changes and (c) the Subordinated Notes delivered by the Seller to each of the Originators (other than FFD) (the “Subordinated Notes”) to make some modifications to the relating to the LIBOR transition.
Therefore, the parties hereto agree as follows:
Defined Terms; References. Unless otherwise defined in this Amendment or set forth herein, each capitalized term used but not otherwise defined herein has the meaning given such term in the Receivables Purchase Agreement, as amended by this Amendment. The Receivables Purchase Agreement, the Purchase and Contribution Agreement and the Subordinated Notes are sometimes collectively referred to herein as the “Amendment Documents”. Unless the context of this Amendment otherwise clearly requires, references to the plural include the singular, references to the part include the whole and the words “include”, “including” and “includes” shall be deemed to be followed by “without limitation”. Each reference to “hereof”, “hereunder”, “herein” and “hereby”, and similar terms in this Amendment refer to this Amendment as a whole and not to any particular provision of this Amendment. All references to an Amendment Document in any other document or instrument shall be deemed to mean the applicable Amendment Document, as amended by this Amendment. This Amendment shall not constitute a novation of either any Amendment Document, but shall constitute an amendment to each of them. The parties hereto agree to be bound by the terms and obligations of the Amendment, as amended by this Amendment, as though the terms and obligations of each Agreement were set forth herein.
1. Joinder of Additional Originator; Eligibility of FFD’s Receivables.
(a) By executing and delivering this Amendment, FFD agrees that it shall be bound by all of the terms, conditions and provisions of, and shall be deemed to be a party to (as if it were an original signatory to), the Purchase and Contribution Agreement, the Receivables Purchase Agreement and each of the other relevant Transaction Documents. From and after the Amendment Effective Date (defined below), FFD shall be an Originator for all purposes of the Purchase and Contribution Agreement, the Receivables Purchase Agreement and all other Transaction Documents. FFD hereby acknowledges that it has received copies of the Purchase and Contribution Agreement, the Receivables Purchase Agreement and the other Transaction Documents.
(b) FFD hereby makes all of the representations and warranties set forth in Article VI (to the extent applicable and as to itself) of the Purchase and Contribution Agreement and Section 6.01 of Receivables Purchase Agreement as of the Amendment Effective Date (unless such representations or warranties relate to an earlier date, in which case as of such earlier date), as if such representations and warranties were fully set forth herein.
(c) Schedule I to the Purchase and Contribution Agreement is hereby updated to set forth information about FFD after giving effect to the joinder in this Section 1.
(d) The Parent hereby acknowledges that the Obligations of FFD are and will be guaranteed by it pursuant to the provisions of Article V of the Receivables Purchase Agreement.
(e) The parties hereto acknowledge and agree that the joinder described in this Section 1 shall satisfy any and all of the requirements in Section 3.02 of the Purchase and Contribution Agreement and Section 3.04 of the Receivables Purchase Agreement applicable to the addition of an Originator and hereby consent to the joinder of FFD as an Originator under the Purchase and Contribution Agreement and the Receivables Purchase Agreement and.
(f) On and after the Amendment Effective Date, the Receivables of FFD shall cease to be treated as Excluded Receivables.
2. Amendments to Receivables Purchase Agreement. The parties to the Receivables Purchase Agreement (after giving effect to the actions provided in Section 1 of this Amendment) hereby amend the Receivables Purchase Agreement by making the additions which appear with computer generated underscoring and making the deletions which appear with computer generated strike-throughs, in each case, in the composite copy of the Receivables Purchase Agreement attached hereto as Annex A. The amendments to the Receivables Purchase Agreement provided for in this Amendment constitute the sixteenth amendment to the Receivables Purchase Agreement.
3. Amendments to Purchase and Contribution Agreement; Consent. The parties to the Purchase and Contribution Agreement (after giving effect to the actions provided in Section 1 of this Amendment) hereby amend the Purchase and Contribution Agreement by making the additions which appear with computer generated underscoring and making the deletions which appear with computer generated strike-throughs, in each case, in the composite copy of the Purchase and Contribution Agreement attached hereto as Annex B. The amendments to the Purchase and Contribution Agreement provided for in this Amendment constitute the eighth amendment to the Purchase and Contribution Agreement. In accordance with Section 9.02 of the Purchase and Contribution Agreement, each of the Facility Agents hereby consents to the amendment of the Purchase and Contribution Agreement.
4. Amendment of Subordinated Notes; Consent. The Seller and each Originator (other than FFD) hereby consent to the following amendments to each of their respective Subordinated Notes:
(a) The following new definitions are hereby added to Section 2 of each Subordinated Note:
“Term SOFR”: The meaning set forth in the Receivables Purchase Agreement.
“Term SOFR Replacement Event”: The meaning set forth in the Receivables Purchase Agreement.
(b) The definitions of “Benchmark Transition Event” and “Eurodollar Rate” in Section 2 of each Subordinated Note are hereby deleted.
(c) The first sentence of Section 3. of each Subordinated Note is hereby deleted in its entirety and replaced with the following:
The aggregate unpaid Purchase Price owing to the Originator under the Purchase and Contribution Agreement from time to time outstanding shall bear interest at a rate per annum equal to (i) Term SOFR plus 2.00% or (ii) on and after a Term SOFR Replacement Event, the Benchmark Replacement.
As required by Section 10(a) of each Subordinated Note, each of the Facility Agents hereby consents to the amendment of each Subordinated Note.
5. Conditions to Effectiveness. The effectiveness of this Amendment shall occur on the date (the “Amendment Effective Date”) when the Administrative Agent and the Facility Agents shall have received (i) duly executed counterparts of this Amendment from each party hereto, (ii) all other documents and instruments (duly executed, if applicable) listed on the Closing Index attached hereto as Annex C and (iii) all necessary credit approvals of their respective Purchase Groups.
Upon the effectiveness of this Amendment, each of Seller, the Administrative Agent, each of the current Originators and FFD, as applicable, authorizes the filing by the Administrative Agent (or its designee) of the UCC-1 and UCC-3 financing statements described on the Closing Index attached hereto as Annex C. The fees and expenses incurred in connection with all such filings shall be paid by the Seller or Ferguson, as appropriate.
6. Representations and Warranties. In order to induce the Facility Agents, the Purchasers and the Administrative Agent to execute, deliver and perform this Amendment, each of the Ferguson Parties, as to itself (and, if so specified, its Subsidiaries) hereby represents and warrants to the other parties to this Amendment as of the Amendment Effective Date that:
(a) prior to and after giving effect to this Amendment, the representations and warranties of such Person (other than those representations and warranties that were made only on and as of a specified date and then as of such specified date)) set forth in the Receivables Purchase Agreement and the Purchase and Contribution Agreement are true and correct in all material respects;
(b) this Amendment has been duly authorized, executed and delivered by such Person and constitutes a legal, valid and binding obligation of such Person enforceable in accordance with its terms (subject to usual and customary bankruptcy exceptions); and
(c) prior to and immediately after giving effect to this Amendment, no Termination Event or Potential Termination Event exists on and as of the date hereof.
7. Affirmation and Ratification. The Parent hereby (a) agrees and acknowledges that the execution, delivery, and performance of this Amendment shall not in any way release, diminish, impair, reduce, or, except as expressly stated herein, otherwise affect its obligations under the Transaction Documents to which it is a party, which Transactions Documents shall remain in full force and effect, (b) ratifies and affirms its obligations under the Receivables Purchase Agreement as amended hereby and the other Transaction Documents to which it is a party (including by the addition of FFD as an Originator), and (c) acknowledges, renews and extends its continued liability under the Receivables Purchase Agreement as amended hereby and the other Transaction Documents to which it is a party.
8. Scope of Amendment. Article and Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment. Except as expressly amended hereby, each Amendment Document remains in full force and effect in accordance with its terms and this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the other terms, conditions, obligations, covenants or agreements contained in the Amendment Documents, all of which are ratified and affirmed in all respects and shall continue in full force and effect.
9. Governing Law. This Amendment and the rights and obligations of the parties under this Amendment shall be governed by and construed in accordance with the laws of the State of New York. The provisions of Section 11.17 (Governing Law; Submission to Jurisdiction) of the Receivables Purchase Agreement are hereby incorporated by reference.
10. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by emailed pdf, facsimile transmission or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart hereof. The parties acknowledge and agree that they may execute this Amendment and any Transaction Document and any variation or amendment to the same, by electronic instrument. The parties agree that the electronic signatures appearing on the document shall have the same effect as handwritten signatures and the use of an electronic signature on this Amendment and any Transaction Document shall have the same validity and legal effect as the use of a signature affixed by hand (to the extent permitted by applicable law) and is made with the intention of authenticating this Amendment and any such Transaction Document, applicable and evidencing the parties’ intention to be bound by the terms and conditions contained herein and therein. For the purposes of using an electronic signature, the parties authorize each other to the lawful processing of personal data of the signers for contract performance and their legitimate interests including contract management.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date hereof.
FERGUSON RECEIVABLES, LLC, as Seller
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Treasurer
FERGUSON ENTERPRISES, LLC, as an Originator and Servicer
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Assistant Treasurer
ENERGY & PROCESS CORPORATION, as an Originator
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Assistant Treasurer
FERGUSON FIRE & FABRICATION, INC., as an Originator
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Assistant Treasurer
[Signature Page – Ferguson Omnibus Amendment June 2023]
DBS HOLDINGS, INC., as an Originator
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Assistant Treasurer
HP PRODUCTS CORPORATION, as an Originator
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Assistant Treasurer
FERGUSON FIRE DESIGN, LLC, as an Originator
By: /s/ Brenda L. Crowder
Name: Brenda L. Crowder
Title: Assistant Treasurer
FERGUSON PLC, as Parent
By: /s/ William S. Brundage
Name: William S. Brundage
Title: Chief Financial Officer
[Signature Page – Ferguson Omnibus Amendment June 2023]
ROYAL BANK OF CANADA, as a Committed Purchaser, a Facility Agent and Administrative Agent
By: /s/ Veronica L. Gallagher
Name: Veronica L. Gallagher
Title: Authorized Signatory
THUNDER BAY FUNDING, LLC, as a Conduit
Purchaser
By: Royal Bank of Canada, is Attorney-in-Fact
By: /s/ Veronica L. Gallagher
Name: Veronica L. Gallagher
Title: Authorized Signatory
[Signature Page – Ferguson Omnibus Amendment June 2023]
TRUIST BANK, as a Committed Purchaser and a Facility Agent
By: /s/ Jason Meyer
Name: Jason Meyer
Title: Managing Director
[Signature Page – Ferguson Omnibus Amendment June 2023]
GTA FUNDING LLC, as a Conduit Purchaser
By: /s/ Kevin J. Corrigan
Name: Kevin J. Corrigan
Title: Vice President
RELIANT TRUST, as a Conduit Purchaser
By: Computershare Trust Company of Canada, in its capacity as trustee of Reliant Trust, by its U.S. Financial Services Agent,
The Toronto-Dominion Bank
By: /s/ Luna Mills
Name: Luna Mills
Title: Managing Director
THE TORONTO-DOMINION BANK, as a Committed Purchaser and a Facility Agent
By: /s/ Luna Mills
Name: Luna Mills
Title: Managing Director
[Signature Page – Ferguson Omnibus Amendment June 2023]
SMBC NIKKO SECURITIES AMERICA, INC., as a Facility Agent
By: /s/ Yukimi Konno
Name: Yukimi Konno
Title: Managing Director
SUMITOMO MITSUI BANKING CORPORATION, as a Committed Purchaser
By: /s/ Jun Ashley
Name: Jun Ashley
Title: Director
[Signature Page – Ferguson Omnibus Amendment June 2023]
PNC BANK, NATIONAL ASSOCIATION, as a Committed Purchaser, the Swingline Purchaser and a Facility Agent
By: /s/ Eric Bruno
Name: Eric Bruno
Title: Senior Vice President
[Signature Page – Ferguson Omnibus Amendment June 2023]
STARBIRD FUNDING CORPORATION, as a Conduit Purchaser
By: /s/ David V. DeAngelis
Name: David V. DeAngelis
Title: Vice President
BNP PARIBAS, as a Committed Purchaser and a Facility Agent
By: /s/ Advait Joshi
Name: Advait Joshi
Title: Director
By: /s/ Chris Fukuoka
Name: Chris Fukuoka
Title: Director
[Signature Page – Ferguson Omnibus Amendment June 2023]
Showing Changes from Conformed Copy
as of February 10, 2023
| | |
ANNEX A TO OMNIBUS AMENDMENT AND CONSENT DATED AS OF JUNE 23, 2023 |
|
RECEIVABLES PURCHASE AGREEMENT
dated as of July 31, 2013
among
FERGUSON RECEIVABLES, LLC,
as Seller,
FERGUSON ENTERPRISES, LLC,
as Servicer,
THE ORIGINATORS PARTY HERETO FROM TIME TO TIME,
THE CONDUIT PURCHASERS LISTED ON SCHEDULE I FROM TIME TO TIME,
THE COMMITTED PURCHASERS LISTED ON SCHEDULE I FROM TIME TO TIME,
THE LC BANKS LISTED ON SCHEDULE III FROM TIME TO TIME,
THE FACILITY AGENTS LISTED ON SCHEDULE I FROM TIME TO TIME,
ROYAL BANK OF CANADA,
as Administrative Agent,
and
FERGUSON PLC,
as Parent
TABLE OF CONTENTS
| | | | | | | | | | | | | | | | | |
| | | | PAGE |
| | | | | |
ARTICLE I | DEFINITIONS; CONSTRUCTION | 2 |
| Section 1.01. | Certain Definitions | 2 |
| Section 1.02. | Interpretation and Construction | 36 |
| Section 1.03. | [Reserved] | 36 |
| Section 1.04. | Use of Historical Data | 36 |
| | | | | |
ARTICLE II | PURCHASES AND SETTLEMENTS | 36 |
| Section 2.01. | General Assignment and Conveyance; Intent of the Parties. | 36 |
| Section 2.01A. | Certain Reconveyances. | 38 |
| Section 2.01B.Reconveyance of FFD Receivables. | 38 |
| Section 2.02. | Incremental Purchases | 39 | 38 |
| Section 2.03. | Purchase Price | 39 |
| Section 2.04. | Payments to Seller | 40 |
| Section 2.05. | Reinvestment Purchases | 40 |
SECTION 2.06. | BENCHMARK REPLACEMENT\F C\L | 41 | 40 |
| Section 2.07. | Yield, Fees and Costs | 42 | 41 |
| Section 2.08. | Settlements and Other Payment Procedures | 43 | 42 |
| Section 2.09. | Mandatory Reduction of Aggregate Exposure Amount | 45 | |
| Section 2.10. | Letters of Credit | 46 | 45 |
| Section 2.11. | Letter of Credit Reimbursements; Payments | 49 | 48 |
| Section 2.12. | Defaulting Purchasers | 51 | |
| Section 2.13. | Payments and Computations, Etc. | 52 | 51 |
| Section 2.14. | Increased Costs | 52 | |
| Section 2.15. | Optional Reduction of Maximum Net Investment; Optional Reduction of Aggregate Net Investment | 53 | 52 |
| Section 2.16. | Increase in Maximum Net Investment | 53 | |
| Section 2.16. | Procedures for Extension of Scheduled Termination Date; Non-Extending Purchase Groups | 53 | |
| Section 2.17. | Facility Termination | 55 | 54 |
| Section 2.19. | Swingline Purchases | 55 | 54 |
ARTICLE III | CLOSING PROCEDURES | 56 | |
| Section 3.01. | Purchase and Sale Procedures | 56 | |
| Section 3.02. | Conditions to Closing | 57 | 56 |
| Section 3.02A. | Conditions to Amendment Effectiveness; Post-Effectiveness Covenants | 59 | |
| Section 3.03. | Conditions to Purchases and Letter of Credit Usage | 60 | 59 |
| Section 3.04. | Conditions to Purchase/Acceptance of Assignment of Receivables of Additional Originator; Release and Reconveyance of Certain Receivables | 61 | 60 |
| | | | | | | | | | | | | | | | | |
ARTICLE IV | PROTECTION OF THE OWNERS; ADMINISTRATION AND SERVICING OF RECEIVABLES; COLLECTIONS | 62 | |
| Section 4.01. | Acceptance of Appointment and Other Matters Relating to the Servicer | 62 | |
| Section 4.02. | Maintenance of Information and Marking of Computer Records | 63 | |
| Section 4.03. | Protection of the Interests of the Purchasers and LC Banks | 64 | 63 |
| Section 4.04. | Maintenance of Writings and Records | 64 | |
| Section 4.05. | Information | 65 | 64 |
| Section 4.06. | Audits; Agreed-Upon Procedures | 65 | 64 |
| Section 4.07. | No Impairment | 65 | |
| Section 4.08. | Administration and Collections | 65 | |
| Section 4.09. | Complete Servicing Transfer | 66 | |
| Section 4.10. | Lockboxes; Lockbox Accounts; Depositary Accounts | 68 | 67 |
| Section 4.11. | Reports | 70 | 69 |
| Section 4.11A. | Transition Receivables | 70 | |
| Section 4.13. | Servicer Indemnification of Indemnified Parties | 72 | 71 |
| Section 4.13. | Servicing Fee | 73 | 72 |
ARTICLE V | PARENT UNDERTAKING | 73 | 72 |
| Section 5.01. | Guaranty | 73 | 72 |
| Section 5.02. | Guaranty Absolute | 73 | |
| Section 5.03. | Waiver | 75 | 74 |
| Section 5.04. | Subrogation | 75 | 74 |
ARTICLE VI | REPRESENTATIONS AND WARRANTIES | 76 | 75 |
ARTICLE VII | COVENANTS | 81 | 80 |
| Section 7.01. | Affirmative Covenants of the Ferguson Parties | 81 | 80 |
| Section 7.02. | Negative Covenants of the Ferguson Parties | 88 | 87 |
| Section 7.06. | Separateness Covenants | 91 | 90 |
ARTICLE VIII | TERMINATION | 93 | 92 |
| Section 8.01. | Termination Events | 93 | 92 |
| Section 8.02. | Consequences of a Termination Event | 96 | 95 |
ARTICLE IX | THE ADMINISTRATIVE AGENT AND THE FACILITY AGENTS | 96 | 95 |
| Section 9.01. | Authorization and Action | 96 | 95 |
| Section 9.02. | UCC Filings | 98 | 97 |
| Section 9.03. | Administrative Agent’s and Facility Agents’ Reliance, Etc. | 98 | 97 |
| Section 9.04. | Non-Reliance on the Administrative Agent and the Facility Agents | 99 | 98 |
| Section 9.05. | Administrative Agent, Facility Agents and Affiliates | 100 | |
| Section 9.06. | Indemnification | 101 | 100 |
| Section 9.07. | Successor Administrative Agent | 101 | |
| Section 9.08. | Erroneous Payments | 102 | 101 |
ARTICLE X | INDEMNIFICATION; EXPENSES | 104 | 103 |
| | | | | | | | | | | | | | | | | |
| Section 10.01. | Indemnity by Seller | 104 | 103 |
| Section 10.02. | Indemnity for Taxes | 106 | |
| Section 10.03. | Indemnity by Originators. | 108 | 107 |
| Section 10.04. | Expenses | 108 | |
ARTICLE XI | MISCELLANEOUS | 109 | 108 |
| Section 11.01. | Amendments and Waivers | 109 | 108 |
| Section 11.02. | Successors and Assigns; Assignments; Participations | 110 | 109 |
| Section 11.03. | No Implied Waiver; Cumulative Remedies | 112 | 111 |
| Section 11.04. | No Discharge | 112 | |
| Section 11.05. | [Reserved] | 113 | 112 |
| Section 11.06. | Payments Set Aside | 113 | 112 |
| Section 11.07. | Tax Forms and Status | 113 | 112 |
| Section 11.08. | Replacement of Purchase Groups | 114 | 113 |
| Section 11.09. | No Petition | 114 | |
| Section 11.10. | No Recourse | 115 | 114 |
| Section 11.11. | Holidays | 115 | 114 |
| Section 11.12. | Records | 115 | 114 |
| Section 11.13. | Term of Agreement | 115 | 114 |
| Section 11.14. | Notices | 115 | |
| Section 11.15. | Severability | 116 | 115 |
| Section 11.16. | Prior Understandings | 116 | 115 |
| Section 11.17. | Governing Law; Submission to Jurisdiction | 116 | 115 |
| Section 11.18. | Counterparts; Electronic Signature | 116 | 115 |
| Section 11.19. | Confidentiality | 117 | 116 |
| Section 11.20. | USA Patriot Act | 117 | 116 |
| Section 11.21. | Acquisitions | 118 | 117 |
| Section 11.22. | Waiver of Jury Trial | 118 | 117 |
| Section 11.23. | Designated Excluded Receivables | 118 | 117 |
| Section 11.24. | Acknowledgement and Consent to Bail-In of EEA Financial Institution | 120 | 119 |
EXHIBIT A — Credit and Collection Policy
EXHIBIT B — Form of Monthly Report
EXHIBIT C — Form of Assumption Agreement
EXHIBIT D Form of Addendum/Amendment (Extension of Scheduled Termination Date)
EXHIBIT E — Form of Purchase Notice/Letter of Credit Request
EXHIBIT F — Form of Optional Reduction Notice
EXHIBIT G -- Form of Notice of Designated Excluded Receivables
SCHEDULE I — Schedule of Purchase Groups, Purchase Group Maximum Net Investments, Purpose Group Percentages, Notice Addresses and Funds Transfer Address)
SCHEDULE II — Schedule of Depositary Banks, Lockboxes, and Accounts
SCHEDULE III — Schedule of LC Banks, LC Bank Sublimits, Notice Addresses and Funds Transfer Information
SCHEDULE IV -- Schedule of Designated Excluded Receivables
RECEIVABLES PURCHASE AGREEMENT
Receivables Purchase Agreement, dated as of July 31, 2013 (this “Agreement”), among Ferguson Receivables, LLC, a Delaware limited liability company (the “Seller”), Ferguson Enterprises, LLC, a Virginia limited liability company (“Ferguson”), as servicer (in such capacity, the “Servicer”), Ferguson and the Other Originators (as defined herein) party hereto from time to time (the “Originators”), the conduit Purchasers (as defined herein) party hereto from time to time and listed on Schedule I hereto, the Committed Purchasers (as defined herein) party hereto from time to time and listed on Schedule I hereto, the LC Banks (as defined herein) party hereto from time to time and listed on Schedule III hereto, the Facility Agents (as defined herein) party hereto from time to time and listed on Schedule I hereto, Royal Bank of Canada, as administrative agent for the Conduit Purchasers, the Committed Purchasers, the LC Banks and the Facility Agents (together with its successors and assigns, in such capacity, the “Administrative Agent”) and Ferguson plc, a company incorporated in Jersey under registered number 128484 (the “Parent”).
RECITALS
Whereas, the Seller intends to purchase from the Originators receivables generated by the Originators from time to time, and certain rights and interests related thereto;
Whereas, the Facility Agents, on behalf of their respective Purchase Groups (as defined herein), will from time to time purchase from the Seller undivided percentage ownership interests in such receivables pursuant to and in accordance with the terms hereof;
Whereas, PNC Bank, National Association, in its capacity as Swingline Purchaser, will from time to time purchase, on a same-day basis, from the Seller undivided percentage ownership interests in such receivables pursuant to and in accordance with the terms hereof;
Whereas, the LC Banks, if any, will from time to time issue letters of credit at the request of the Seller, and the Seller will assign an undivided percentage interest in such receivables to secure its reimbursement obligations with respect to such letters of credit pursuant to and in accordance with the terms hereof;
Whereas, the Parent has agreed to provide a performance guaranty with respect to the obligations of the Servicer and the Originators contained herein and in the Purchase and Contribution Agreement (as defined herein); and
Whereas, the Administrative Agent will act in such capacity on behalf of the Facility Agents and the Purchase Groups hereunder.
Now, Therefore, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.01. Certain Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Account” shall mean any Lockbox Account, any Depositary Account, any Blocked Local Account, the Concentration Account or the Collection Account.
“Acquisition Receivable” shall have the meaning specified in Section 11.21 hereof.
“Administrative Agent” shall mean Royal Bank of Canada, and its successors and assigns.
“Administrative Agent Fee Letter” shall mean the agreement between the Seller and the Administrative Agent, setting forth the fees payable by the Seller to the Administrative Agent, as the same may be from time to time amended, restated, supplemented or otherwise modified from time to time.
“Affected Financial Institution” shall mean any (i) EFA Financial Institution or (b) any UK Financial Institution.
“Affected Person” shall have the meaning specified in Section 2.14 hereof.
“Affiliate” shall mean, 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.
“Affiliated Obligor” shall mean any Obligor that is an Affiliate or Subsidiary of another Obligor.
“Aggregate Exposure Amount” shall mean, at any time, the sum of (i) the Aggregate Net Investment, (ii) the undrawn Stated Amount of all Letters of Credit outstanding and (iii) Reimbursement Obligations.
“Aggregate Net Investment” shall mean, at any time, the sum of (i) each Purchase Group’s Net Investment (other than the Net Investment attributable to a Swingline Purchase) at such time and (ii) the Swingline Purchaser’s Net Investment attributable to a Swingline Purchase at such time.
“Aggregate Unpaids” shall mean, at any time, an amount equal to the sum of (i) the aggregate accrued and unpaid Yield on the Aggregate Net Investment and the Reimbursement Obligations at such time, (ii) the Aggregate Net Investment at such time, (iii) the aggregate amount of Reimbursement Obligations at such time; (iv) all fees accrued and unpaid hereunder or under the Transaction Fee Letters at such time and (v) all other amounts owed (whether due or
accrued) hereunder by the Seller to the Purchasers (including the Swingline Purchaser), the Facility Agents, the LC Banks and the Administrative Agent or the Support Providers at such time.
“Agreement” shall mean this Receivables Purchase Agreement, as the same may from time to time be amended, restated, supplemented or otherwise modified from time to time.
“Alternate Base Rate” shall mean, for any Purchase Group, on any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of (i) the prime rate announced from time to time by the related Facility Agent, Swingline Purchaser or LC Bank, as applicable, in effect on such day, (ii) the Federal Funds Rate and (iii) the Term SOFR of a tenor of one month plus the sum of the Benchmark Margin and one percent (1%) per annum.
“Amendment Effective Date” shall mean October 7, 2022.
“Anti-Terrorism Law” shall mean the OFAC Laws and Regulations, the Executive Order, the USA Patriot Act, the BSA and any other applicable requirements of law and governmental guidance for the prevention of terrorism, terrorist financing and drug trafficking or the prevention and detection of money laundering violations, in each case, of the United States or any member state of the European Union.
“Annual Gross Write-off Ratio” shall mean the ratio (expressed as a percentage) calculated for each fiscal year ended July 31 and reported in the Monthly Report delivered to the Facility Agents on the Monthly Report Date immediately following such fiscal year of (i) the gross write-offs of Receivables during such fiscal year to (ii) the aggregate Outstanding Balance of Receivables generated during such fiscal year.
“Approved Data Reporting System” shall mean any of the following: (i) for the Receivables of any branch or location of an Originator or any Acquisition Receivables related to a particular acquisition by an Originator, the Trilogie system; and (ii) for the Transition Receivables of a branch or location of an Originator or any Acquisition Receivables related to a particular acquisition by an Originator, Oracle, at such time as the Servicer can accurately report, to the reasonable satisfaction of the Administrative Agent, all data required to be reported hereunder, for such Transition Receivables or Acquisition Receivables, as the case may be.
“Assumption Agreement” shall mean an agreement in the form of Exhibit C hereto (with such changes as may be appropriate under the specific circumstances) executed and delivered in accordance with Sections 2.16, 2.17, 11.02, and 11.08 hereof.
“Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” shall mean (a) 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 and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Benchmark” shall mean, (i) before the Amendment Effective Date, LIBOR, and (ii) beginning on the Amendment Effective Date, Term SOFR, provided that if a Term SOFR Replacement Event has occurred with respect to Term SOFR, then the “Benchmark” shall mean the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.06.
“Benchmark Margin” shall mean (i) initially, 0.10% per annum and (ii) with respect to a Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Required Facility Agents and the Seller in accordance with Section 2.06.
“Benchmark Replacement” shall mean (i) with respect to the Benchmark Transition Event that is deemed to occur on the Amendment Effective Date, Term SOFR, and (ii) with respect to any Benchmark Transition Event on and after the Amendment Effective Date, a benchmark rate which is:
(a)formally designated, nominated or recommended as the replacement for Term SOFR by:
(i)the administrator of Term SOFR (provided that the market or economic reality that such benchmark rate measures is the same as that measured by Term SOFR); or
(ii)any Relevant Nominating Body,
and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the “Benchmark Replacement” will be the replacement under paragraph (ii) above;
(b)in the opinion of the Required Facility Agents and the Seller, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to Term SOFR; or
(c)in the opinion of the Required Facility Agents and the Seller, an appropriate successor to Term SOFR;
provided that, if such Benchmark Replacement as so determined would be less than 0.00%, such Benchmark Replacement will be deemed to be 0.00% for the purposes of this Agreement and the other Transaction Documents.
“Benchmark Transition Event” shall mean, with respect to (i) LIBOR, the event which is deemed to have occurred on the Amendment Effective Date and (ii) Term SOFR, the occurrence of the Term SOFR Replacement Event.
“Beneficiaries” shall mean the Administrative Agent, for the benefit of itself, the Facility Agents, the Purchasers and the LC Banks.
“Beneficial Ownership Certificate” shall mean a certificate regarding beneficial ownership as required by the Beneficial Ownership Regulation, in substantially the form prescribed in the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.
“Bill and Hold Receivable” shall mean a Receivable originated as a “billed but not shipped” or as a “bill and hold”.
“Blocked Account Agreement” shall mean the “control” agreement related to each Lockbox Account, Depositary Account, Blocked Local Account (other than as specified in the proviso in the definition of “Blocked Local Account”) and the Concentration Account, in form and substance reasonably acceptable to the Administrative Agent, by and among the Seller, the Servicer, the Administrative Agent and the applicable Depositary Bank.
“Blocked Local Account” shall mean, with respect to an Originator, an account established and maintained at a Depositary Bank by the Seller into which Obligor payments with respect to Receivables, as well as payments on cash sales, in each case, generated by such Originator are deposited; provided, however, that during the period from May 19, 2021 to September 1, 2021, Account # 1059629166 established and maintained at PNC by Ferguson shall be deemed a Blocked Local Account for all purposes under this Agreement and the other Transaction Documents.
“BSA” shall mean the United States Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq.
“Business Day” shall mean any day on which (i) banks are not authorized or required to close under the Laws of New York, (ii) a bond market holiday is not recommended by the Securities Industry and Financial Markets Association and (iii) if used in connection with SOFR, such day shall also be a U.S. Government Securities Business Day.
“Calculation Period” shall mean a calendar month.
“Carrying Cost Reserve Amount” shall mean, on any day, the product of (i) the Carrying Cost Reserve Ratio and (ii) the Net Receivables Balance on such day.
“Carrying Cost Reserve Ratio” shall mean, on any day, calculated for the preceding Calculation Period, the product of (i) the Stress Factor, (ii) the Default Rate and (iii) a fraction, the numerator of which is the highest Days Sales Outstanding for the prior 12 Calculation Periods and the denominator of which is 360.
“Change of Control” shall mean (i) with respect to the Seller, Ferguson shall cease to own directly or indirectly 100% of the issued and outstanding Equity Interests therein, (ii) with respect to Ferguson, the Parent shall cease to own directly or indirectly 100% of the issued and outstanding Equity Interests therein, (iii) with respect to any Originator other than Ferguson, Ferguson shall cease to own directly or indirectly 100% of the issued and outstanding Equity Interests therein, or (iv) with respect to the Parent, any Person (whether acting alone or in concert) gains Control (directly or indirectly) of the management and policies of the Parent, whether through the ownership of its Voting Stock, by contract or otherwise.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” shall have the meaning specified in Section 2.01(b) hereof.
“Collection Account” shall mean the account, if any, established and maintained by, and in the name of, the Administrative Agent (for the benefit of the Purchase Groups), in accordance with Section 4.10(e) hereof.
“Collections” shall mean, for any Receivable as of any date, all cash collections and other cash proceeds (whether in the form of cash, wire transfer, or checks) of that Receivable, including, without limitation, all finance charges, if any, and cash proceeds of the related property with respect to such Receivable, any Deemed Collections of such Receivable and any amounts received with respect to a Participation Interest in such Receivable.
“Commercial Paper” shall mean the commercial paper notes which fund the purchase of Receivables by each Conduit Purchaser and which are issued in the commercial paper market by such Conduit Purchaser or an entity sponsored by the same financial institution to provide funding to the related Conduit Purchaser.
“Committed Purchaser” shall mean each entity which is or becomes a party to this Agreement in such capacity by executing this Agreement or an Assumption Agreement and that is identified as such from time to time on Schedule I to this Agreement, and any of its successors and assigns. Unless the context herein requires otherwise, the Swingline Purchaser is a Committed Purchaser.
“Complete Servicing Transfer” shall have the meaning specified in Section 4.09(a) hereof.
“Concentration Account” shall mean the deposit account established and maintained at Bank of America, N.A., account number 4427713552, in the name of the Seller, into which account Collections are received or deposited.
“Concentration Limit” shall mean, on any day, the aggregate Outstanding Balance of all Receivables with respect to the following specified Obligor or type of Obligor may not exceed the applicable concentration limit of the aggregate Outstanding Balance of all Eligible Receivables: (i) in the case of a single Obligor (including a Government Obligor) and such Obligor’s Affiliated Obligors (except in the case of multiple Government Obligors), 2%; (ii) in
the case of all Government Obligors, 4%; and (iii) in the case of all Federal Government Obligors, 1.5%.
“Conduit Purchaser” shall mean each entity that is or becomes a party to this Agreement in such capacity by executing this Agreement or an Assumption Agreement and that is identified as such from time to time on Schedule I to this Agreement, and any of its successors and assigns.
“Conduit Support Document” shall mean any agreement entered into by any Support Provider providing for the issuance of one or more letters of credit for the account of any Conduit Purchaser, the issuance of one or more surety bonds for which any Conduit Purchaser is obligated to reimburse the applicable Support Provider for any drawings thereunder, the sale by any Conduit Purchaser to any Support Provider of its interest in the Receivables (or any portion thereof) and/or the making of loans and/or other extensions of credit to any Conduit Purchaser in connection with such Conduit Purchaser’s securitization program (whether for liquidity or credit enhancement support), together with any letter of credit, surety bond or other instrument issued thereunder.
“Contra Account” shall mean a Receivable that may be offset by a current account payable due from an Originator to the related Obligor
“Contract” shall mean a contract between an Originator and an Obligor, and/or any and all invoices and other writings which, in either case, give rise to a receivable arising from the sale by such Originator of goods or rendering of services in the ordinary course of such Originator’s business.
“Control” shall mean the power, directly or indirectly, to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and “Controlling” and “Controlled” shall have meanings correlative thereto.
“Control Date” shall mean the date on which the Administrative Agent delivers a notice of exclusive control pursuant to Section 4.10(b).
“Control Event” shall mean (i) the occurrence and continuance of a Termination Event or (ii) a Downgrade Event.
“Credit Agreement” shall mean (i) the Multicurrency Revolving Facility Agreement, US$1,100,000,000, dated 10 March 2020 (as amended and restated pursuant to an amendment and restatement agreement dated 7th October 2022), between the Parent and Ferguson UK Holdings Limited, as original borrowers and guarantors, the Mandated Lead Arrangers party thereto, the Financial Institutions party thereto, as original lenders, Barclays Bank PLC, BNP Paribas and ING Bank N.V,, London Branch, as Coordinators, and ING Bank N.V., London Branch, as Agent, as the same may from time to time be amended, restated, supplemented or otherwise modified from time to time, or (ii) any credit agreement between the Parent and/or any Ferguson Party and a group of lenders which replaces the Credit Agreement in preceding clause (i).
“Credit and Collection Policy” shall mean the Servicer’s credit, collection, enforcement and other policies and practices relating to Contracts and Receivables existing on the date hereof and as set forth on Exhibit A hereto, as the same may be modified from time to time in compliance with Section 4.05 hereof.
“Credit Card Agreement” shall mean an agreement entered into by Ferguson with a third party which sets forth the terms of the provision of services relating to the processing of credit card payments from Obligors.
“Days Sales Outstanding” shall mean, on any day for the preceding Calculation Period, an amount equal to the product of (i) a fraction, the numerator of which is the Outstanding Balance of all Receivables on the first day of such Calculation Period and the denominator of which is the aggregate amount of Receivables generated during such Calculation Period and (ii) 30.
“Deemed Collections” shall mean collections deemed received by the Seller in an amount equal to (i) all Dilutions and (ii) the aggregate Outstanding Balance of any Receivables (a) which were included in the Net Receivables Balance and which were not Eligible Receivables, (b) in which the Administrative Agent does not have a first priority perfected ownership or security interest or (c) as to which the other representations and warranties set forth in Sections 6.01(d), (e), (g) and (h) and made by the Seller or the Servicer are no longer true and correct in all material respects (or, if made as of a particular date, which was not true and correct in all material respects as of such date).
“Defaulted Receivable” shall mean the debit balance of a Receivable (i) which remains unpaid for 121 days or more from the original due date (other than the portion of a Receivable subject to retainage that is re-aged in the normal course of business), (ii) the Obligor of which is in a bankruptcy or similar proceeding as debtor, (iii) which has been identified by the Servicer or the applicable Originator as uncollectible or (iv) which, consistent with the Credit and Collection Policy, should be written off as uncollectible.
“Defaulting Purchaser” shall mean any Committed Purchaser that fails to make a Purchase when all conditions to such Purchase have been satisfied.
“Default Rate” shall mean the Alternate Base Rate plus 2.0% per annum.
“Default Ratio” shall mean the ratio (expressed as a percentage) calculated on any day, for the preceding Calculation Period, of (i) the aggregate Outstanding Balance of Receivables that were not Defaulted Receivables at the beginning of such Calculation Period but that became Defaulted Receivables or that were written off the books of the applicable Originator during such Calculation Period (without duplication) to (ii) the aggregate amount payable in respect of Receivables originated five months prior to such Calculation Period.
“Delinquency Ratio” shall mean the ratio (expressed as a percentage), calculated on any day, for the preceding Calculation Period, of (i) the aggregate Outstanding Balance of Delinquent
Receivables as of the last day of such Calculation Period to (ii) the aggregate Outstanding Balance of all Receivables on such last day.
“Delinquent Receivable” shall mean the debit balance of a Receivable which remains unpaid for 91 days or more from the original due date (other than the portion of a Receivable subject to retainage that is re-aged in the normal course of business).
“Depositary Account” shall mean an account maintained at a Depositary Bank into which Collections in the form of wire transfer or electronic funds transfers are made by Obligors.
“Depositary Bank” shall mean, at any time, any financial institution reasonably acceptable to the Administrative Agent which holds a Lockbox Account, a Depositary Account, a Blocked Local Account, the Concentration Account or the Collection Account.
“Designated Account” shall mean the Seller’s bank account as follows:
Bank of America
411 North Akard Street
Dallas, TX 75201
ABA No.: [ ]
Account Name: [ ]
Account No.: [ ]
“Designated Excluded Receivables” shall mean the receivables of the Designated Types listed on Schedule IV hereto from time to time in accordance with the provisions of Section 11.23 hereof.
“Designated Person” shall mean any Person (a) listed in the annex to, or otherwise subject to the provisions of, an Executive Order; (b) listed on any Lists; or (c) owned by or controlled by, or acting for or on behalf of, any person referred to in preceding clause (a) or (b).
“Designated Type” shall mean each (i) Obligor or (ii) Originator log-on location(s), each of which has a customer number or log-on number, as identified on Schedule IV hereto from time to time. For the avoidance of doubt, a group of Obligors taken together can constitute a Designated Type, and a group of Originator log-on locations taken together can constitute a Designated Type.
“Dilution” shall mean the portion of any Receivable which is reduced or canceled as a result of (a) any defective, rejected, returned or repossessed goods or services, any cash or other discount, or any failure by an Originator to deliver any goods or perform any services or otherwise perform under the underlying Contract, (b) any change in or cancellation of any of the terms of such Contract or any other adjustment by an Originator or the Seller which reduces the amount payable by the Obligor on the related Receivable, (c) any rebates, warranties, allowances or charge-backs, or (d) any setoff or credit in respect of any claim by the Obligor thereof (regardless of whether such claim arises out of the same or a related transaction or an unrelated
transaction). The Seller shall be deemed to have received a Collection in an amount equal to the amount of such Dilution of each Receivable on the day such Dilution occurs.
“Dilution Horizon Ratio” shall mean a fraction, calculated on any day for the preceding Calculation Period, (i) the numerator of which equals the aggregate amount of all Receivables generated during such Calculation Period and (ii) the denominator of which equals the Net Receivables Balance at the end of such Calculation Period.
“Dilution Ratio” shall mean the ratio (expressed as a percentage), calculated on any day for the preceding Calculation Period, of (i) the amount of Dilution for such Calculation Period to (ii) the aggregate Outstanding Balance of all Receivables generated during the Calculation Period prior to such Calculation Period.
“Dilution Reserve Amount” shall mean, on any day, the product of (i) the Dilution Reserve Percentage and (ii) the Net Receivables Balance on such day.
“Dilution Reserve Percentage” shall mean, on any day, a percentage equal to the greater of (i) 5.0% (the “Dilution Reserve Floor”) and (ii) the amount expressed as a percentage and calculated in accordance with the following formula:
{(SF x ED) + ((DS – ED) x (DS/ED))} x DHR
Where:
SF = the Stress Factor;
ED = the average of the Dilution Ratios for the twelve most recently ended Calculation Periods;
DS = the highest three month average Dilution Ratio during the twelve most recently ended Calculation Periods; and
DHR = the Dilution Horizon Ratio at such time.
“Distribution Date” shall mean each of (i) before the Termination Date, (a) the second (2nd) Business Day after each Monthly Report Date and (b) the Business Day after each Weekly Report Date and (ii) on and after the Termination Date, each Business Day.
“Dollar” and “$” shall mean lawful currency of the United States of America.
“Downgrade Event” shall mean that the Parent’s senior unsecured debt rating shall be rated below Ba3 from Moody’s or BB- from S&P, as applicable, or suspended or withdrawn.
“EEA Financial Institution” shall mean (a) any credit institution or investment firm established in any EEA Member Country that is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country that is a parent of an institution
described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country that 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” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” shall mean 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.
“Eligible Purchaser” shall mean a financial institution (i) having two of the following short-term debt ratings: A-1 or better by S&P, P-1 or better by Moody’s, and F1 or better by Fitch and (ii) which, if there are LC Banks, is acceptable to such LC Banks (such determination not to be unreasonably withheld or delayed).
“Eligible Receivable” shall mean, at any time for the determination thereof, any Receivable:
(a) which arises from the sale of products or services of an Originator in the ordinary course of business and has been invoiced;
(b) which is an “account” or “payment intangible” as defined in Article 9 of the UCC;
(c) the Obligor of which is not an affiliate of the Seller or any Originator;
(d) which is denominated in U.S. dollars and payable in the U.S.;
(e) the Obligor of which is a U.S. Obligor, except that up to 5.0% of the aggregate Outstanding Balance of all non-Defaulted Receivables may consist of Receivables owing by Foreign Obligors (but no more than 2.0% of such aggregate Outstanding Balance may consist of Receivables owing by Foreign Obligors domiciled in Mexico or any political subdivision thereof);
(f) the sale of or granting of a security interest in which does not contravene any law and the related Contract does not contain any enforceable restriction on assignment of such Receivable that is effective under applicable Law;
(g) which represents a bona fide obligation of the Obligor to pay the stated amount (which stated amount does not include any service charges), and the Receivable, together with the related Contract, is enforceable against the related Obligor in accordance with its terms;
(h) which if, to the knowledge of the Servicer, is subject to any asserted dispute, counterclaim, defense or asserted right of set-off (including any portion of such
Receivable that is attributable to accrued rebate), is the portion thereof not subject to such assertion;
(i) which, together with the related Contract, does not contravene in any material respect applicable law, rule or regulation (including those relating to consumer protection) and no party to such Contract is in violation of any such law, rule or regulation if such contravention or violation, as applicable, would impair the collectability of such Receivable;
(j) which satisfies all applicable requirements of the Credit and Collection Policy in all material respects;
(k) except as provided in clause (r)(ii) of this definition, which is due within 90 days of the original billing date therefor;
(l) in and to which the applicable Originator has validly sold all of its right, title and interest in and to the Seller, and Seller owns good and marketable title to the Receivable, free and clear of any encumbrance, lien or security interest;
(m) the representations and warranties with respect to which in the Purchase and Contribution Agreement and this Agreement are true and correct in all material respects;
(n) which arises under a Contract that contains an obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of services;
(o) unless and until the Seller and the Required Facility Agents have agreed, in their respective reasonable credit judgment, is a Receivable or type of Receivable or has a related Obligor which will no longer be deemed to be an Eligible Receivable;
(p) which is payable by an Obligor who is not the subject of bankruptcy or similar proceedings;
(q) which is not an Ineligible Delinquent/Defaulted Receivable;
(r) which has not been extended, rewritten or otherwise modified from the original terms thereof except (i) in accordance with the Credit and Collection Policy, or (ii) with respect to retainage re-aging completed in the normal course of business, which Receivables subject to retainage re-aging shall not exceed 1% of all Receivables;
(s) which has been fully earned by performance on the part of the applicable Originator and, no further action is required to be performed by such Originator or any other Person with respect thereto other than payment thereon by the applicable Obligor, provided, that a Receivable subject to retainage and a Bill and Hold Receivable shall be considered fully earned for the purposes of this clause (s);
(t) as to which the Obligor is required to make payments (i) directly to a Lockbox or Depositary Account, (ii) by credit card or (iii) directly to the applicable Originator for deposit to a Blocked Local Account;
(u) which was originated by the applicable Originator and (i) was not originated by a business group/division/unit of the applicable Originator created or resulting from the acquisition of a Person or its assets unless the Receivables originated in connection with such acquired Person or assets have been approved by the Facility Agents in accordance with Section 11.21 hereof (solely to the extent such approval is required under Section 11.21), and (ii) which is reported by the applicable Originator on an Approved Data Reporting System (but which is not a Transition Receivable);
(v) the purchase of the obligation constitutes a current transaction within the meaning of the Section 3(a)(3) of the Securities Act of 1933;
(w) which represents the sales price of goods or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940;
(x) on and after a Downgrade Event, which is not a Contra Account; and
(y) on and after a Downgrade Event, which is not a Bill and Hold Receivable.
“Equity Interests” shall mean with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such securities (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Parent or Ferguson, is treated as a single employer under Section 414 of the Code.
“ERISA Event” shall mean (a) any Reportable Event with respect to a Plan ; (b) a withdrawal by the Parent or Ferguson or any of their respective ERISA Affiliates from a Plan subject to Section 4063 of ERISA during a plan year in which the relevant entity is 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 which could reasonably be expected to give rise to any liability with respect to such withdrawal; (c) a complete or partial
withdrawal by the Parent or Ferguson or any of their respective ERISA Affiliates from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings to terminate a Plan or Multiemployer Plan, other than any of the foregoing that is a standard termination; (e) an event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Parent, Ferguson or any of their respective ERISA Affiliates.
“Erroneous Payment” shall have the meaning specified in Section 9.08(a).
“Erroneous Payment Subrogation Rights” shall have the meaning specified in Section 9.08(d).
“EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“EU Securitisation Regulation” shall mean Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation and amending certain other European Union directives and regulations, as amended, and as may be further amended and in effect from time to time.
“EU Securitisation Rules” shall mean the EU Securitisation Regulation, together with all relevant implementing regulations in relation thereto, all regulatory and implementing technical standards in relation thereto or applicable in relation thereto pursuant to any transitional arrangements made pursuant to the EU Securitisation Regulation and, in each case, any relevant guidance and directions published in relation thereto by the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority (or in each case, any other applicable regulatory authority) or by the European Commission, in each case as may be amended and in effect from time to time.
“Excess Concentration Amount” shall mean, on any day, the sum of, without duplication of the amount of each excess concentration, (i) the aggregate amount by which the aggregate Outstanding Balance of Eligible Receivables of an Obligor and its Affiliated Obligor(s) exceeds the applicable Concentration Limit, (ii) the aggregate amount by which the Outstanding Balance of Eligible Receivables of all Government Obligors exceeds the applicable Concentration Limit and (iii) the aggregate amount by which the Outstanding Balance of Eligible Receivables of all Federal Government Obligors exceeds the applicable Concentration Limit.
“Excluded Receivables” shall mean (i) the indebtedness and payment obligations owed by Obligors arising in connection with the sale of merchandise or rendering of services by the divisions of Ferguson known as “Lincoln Products/Ferguson Parts and Packaging” and
“Ferguson International”, (ii) Designated Excluded Receivables, and (iii) Acquisition Receivables and (iv) FFD Receivables.
“Excluded Taxes” shall mean, with respect to an Indemnified Party, any of the following Taxes imposed on or with respect to such Indemnified Party or required to be withheld or deducted from a payment to such Indemnified Party: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, state gross receipts Taxes, and branch profits Taxes imposed as a result of such Indemnified Party being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or that are Other Connection Taxes, (b) in the case of an Indemnified Party, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Indemnified Party with respect to its portion of any Exposure Amount pursuant to a law in effect on the date on which (i) such Indemnified Party acquires or becomes obligated to acquire its portion of any Exposure Amount (other than pursuant to an assignment request by the Seller under Section 11.08) or (ii) such Indemnified Party changes its lending office (unless such change is at the request of the Seller), except in each case to the extent that amounts with respect to such Taxes were payable either to such Indemnified Party’s assignor immediately before such Indemnified Party became a party hereto or to such Indemnified Party immediately before it changed its lending office, (c) any Tax, assignment or other governmental charge attributable to and which would not have been imposed but for such Indemnified Party’s failure to comply with the delivery requirements contained in Section 11.07 with respect to the applicable tax forms (including any successor forms), reports and documentation required to be properly completed and duly executed by such Indemnified Party establishing such Indemnified Party’s exemption from or reduction in U.S. federal withholding tax, and (d) any U.S. Federal withholding Taxes imposed under FATCA.
“Exclusion Date” shall mean, with respect to each Designated Type, the date after which the receivables owing to an Originator of such Designated Type shall be Designated Excluded Receivables.
“Executive Order” shall mean United States Executive Order No. 13224, Fed Reg. 49079, on Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism issued on 23rd September, 2001.
“Exposure Amount” shall mean, for each Purchase Group, the sum of (i) its Net Investment and (ii) the applicable Purchase Group Percentage of (a) the undrawn Stated Amount of all Letters of Credit outstanding and (b) Reimbursement Obligations.
“Facility” shall mean the facility governed by the terms and conditions set forth in this Agreement, pursuant to which (i) the Facility Agents, on behalf of their respective Purchase Groups, purchase from the Seller undivided interests in the Receivables, the Related Security and the Collections, and (ii) the LC Banks make available to the Sellers Letters of Credit in favor of beneficiaries specified by the Seller and permissible under applicable Law.
“Facility Agent” shall mean, with respect to any Conduit Purchaser, Committed Purchaser or LC Bank, the entity acting as agent for such Conduit Purchaser, Committed
Purchaser or LC Bank identified from time to time on Schedule I hereto, which executes this Agreement or an Assumption Agreement, and any successor thereto.
“Facility Termination” shall mean the date on which (i) all Aggregate Unpaids have been fully paid, (ii) the Maximum Net Investment is reduced to zero and (iii) no Letters of Credit remain outstanding.
“FATCA” shall mean the Foreign Account Tax Compliance Act under 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, and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
“Federal Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as amended, and any successor statute thereto.
“Federal Funds Rate” shall mean the percentage rate per annum which is the aggregate of:
(a)the short-term interest rate target set by the US Federal Open Market Committee as published by the Federal Reserve Bank of New York from time to time or, if that target is not a single figure, the arithmetic mean of (i) the upper bound of the short-term interest rate target range set by the US Federal Open Market Committee and published by the Federal Reserve Bank of New York, and (ii) the lower bound of that target range; and
(b)the applicable Federal Funds Rate Adjustment.
“Federal Funds Rate Adjustment” shall mean, in relation to the Federal Funds Rate prevailing at close of business on any US Government Securities Business Day, the 20% trimmed arithmetic mean (calculated by the Administrative Agent) of the Federal Funds Rate Spreads for the five most immediately preceding US Government Securities Business days for which Term SOFR is available.
“Federal Funds Rate Spread” shall mean, in relation to any US Government Securities Business Day, the difference (expressed as a percentage rate per annum) calculated by the Administrative Agent of (i) Term SOFR for that Business Day; and (ii) the Federal Funds Rate prevailing at close of business on that US Government Securities Business Day.
“Federal Government Obligor” shall mean the United States of America, any territory, possession or commonwealth of the United States of America, or any agency, department or instrumentality of any of the foregoing.
“Fee Collateral Amount” shall mean, on any day on and after the Termination Date, the sum of the Used Fees, the Letter of Credit Fronting Bank Fees and other fees to accrue on the
Letters of Credit that are outstanding and undrawn on such day through their stated expiration dates (as such stated expiration dates may be extended in accordance with the proviso in the definition of LC Obligations herein).
“Fee Letter” shall mean the agreement among the Seller and the Facility Agents, setting forth certain fees payable by the Seller in connection with the purchase by the Facility Agents (on behalf of their respective Purchase Groups) of the Receivable Interest, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Ferguson” shall mean Ferguson Enterprises, LLC, a Virginia limited liability company.
“Ferguson Parties” shall mean, collectively, the Seller, each Originator, the Servicer, and the Parent.
“FFD” shall mean Ferguson Fire Design LLC, the company resulting from the spin-off of the businesses of the Spun-Off Locations.
“FFD Assets” shall have the meaning specified in Section 2.01B hereof.
“FFD Effective Time” shall mean 5:00 p.m. New York City time on December 31, 2022.
“FFD Receivables” shall mean the Receivables of the Spun-Off Locations.
“Foreign Obligor” shall mean an Obligor which is domiciled in Canada or Mexico or any political subdivision thereof.
“Foreign Plan” shall mean any employee benefit plan maintained or contributed to by the Parent or any Affiliate which is mandated or governed by any Law of any Governmental Authority outside the United States.
“GAAP” shall mean generally accepted accounting principles in effect in the United States of America from time to time.
“Government Obligor” shall mean (i) any Federal Government Obligor or (ii) any state or local government, including counties, cities and towns, any political subdivision of any of the foregoing, or any agency, department or instrumentality of any the foregoing.
“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Group” shall mean the Parent and its Subsidiaries, and for the purposes of the Parent’s consolidated financial statements, shall include subsidiary undertakings (within the meaning of Section 1162 of the Companies Act of 2006).
“Inclusion Date” shall have the meaning specified in Section 11.21 hereof.
“Incremental Purchase” shall have the meaning specified in Section 2.02 hereof.
“Indemnified Parties” shall have the meaning specified in Section 10.01(a) hereof.
“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Seller under any Transaction Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Ineligible Delinquent/Defaulted Receivables” shall mean, with respect to the Receivables of an Obligor, the net balance of the Receivables of such Obligor which remain unpaid more than 91 days netted against the offsetting credits due such Obligor.
“Interpolated Term SOFR” shall mean, in relation to Term SOFR of the applicable tenor for any Calculation Period, the rate (rounded to the same number of decimal places as Term SOFR) which results from interpolating on a linear basis between:
(a)either:
(i)the most recent applicable Term SOFR for the longest period (for which Term SOFR is available) which is less than such applicable tenor for such Calculation Period (or portion thereof); or
(ii)if no such Term SOFR is available for a period which is less than that such applicable tenor for that Calculation Period, SOFR for a day which is two US Government Securities Business Days before the Quotation Day; and
(b)the most recent applicable Term SOFR for the shortest period (for which Term SOFR is available) which exceeds such applicable tenor for such Calculation Period.
“ISDA Definitions” shall mean the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Issuance” shall mean the initial issuance by an LC Bank of a Letter of Credit in accordance with the provision of Section 2.10 hereof. “Issue” shall mean the doing of such action.
“Law” shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body.
“LC Bank” and “LC Banks” shall mean each financial institution which agrees to issue Letters of Credit at the request of the Seller by being or becoming a party to this Agreement by
executing this Agreement or an Assumption Agreement and which is identified as such from time to time on Schedule III to this Agreement, and any of its successors.
“LC Bank Fee Letter” shall mean, for each LC Bank, the fee letter between such LC Bank and the Seller, setting forth the Letter of Credit Fronting Bank Fee and the other fees payable by the Seller to such LC Bank in connection with the Issuance and/or Modification of a Letter of Credit, as the same may be from time to time amended, restated, supplemented or otherwise modified from time to time.
“LC Bank Sublimit” shall mean, with respect to any LC Bank, the dollar amount indicated from time to time on Schedule III to this Agreement. For the avoidance of doubt, although the aggregate of the LC Bank Sublimits may exceed the LC Sub-Facility, the Stated Amount of the outstanding Letters of Credit may not exceed at any time the LC Sub-Facility.
“LC Cash Collateral Account” shall mean the account designated as the LC Cash Collateral Account to be established and maintained at JPMorgan Chase Bank, N.A., which account shall be in the name of the Administrative Agent, for the benefit of the Purchase Groups, in respect of the Facility.
“LC Effective Date” shall mean the date on which all of the following have occurred: (i) the LC Banks shall have agreed to provide the LC Sub-Facility and all Facility Agents shall have consented thereto; (ii) the LC Banks and their respective LC Bank Sublimits shall have been agreed upon and Schedule III shall have been completed to reflect the same; (iii) the LC Cash Collateral Account shall have been established; (iv) there shall have been delivered to each LC Bank, the LC Bank Fee Letter; (v) forms of Letter of Credit and Letter of Credit Application shall have been delivered by each LC Bank; and (vi) there shall have been delivered to the Facility Agents all certificates and opinions as are reasonably required by the Administrative Agent and the LC Banks.
“LC Obligations” shall mean, at any time, an amount equal to the sum of (a) the aggregate Stated Amount of the then undrawn and outstanding Letters of Credit and (b) the aggregate Reimbursement Obligations described in clause (i) of the definition thereof that have not then been reimbursed pursuant to Section 2.11; provided that any Letter of Credit that has expired by its terms but may still be drawn upon in accordance with Rule 3.14 of the International Standby Practices, shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“LC Sub-Facility” shall mean the maximum aggregate amount of Letters of Credit which the LC Banks agree to Issue and have outstanding at any one time, which amount shall equal 33 1/3% of the Maximum Net Investment.
“Letter of Credit” shall have the meaning set forth in Section 2.10(a) of this Agreement.
“Letter of Credit Application” shall mean, for each LC Bank, such LC Bank’s form of Letter of Credit Application, or such other form agreed to from time to time by the Seller and such LC Bank.
“Letter of Credit Fronting Bank Fee” shall mean the fees payable to an LC Bank which issues a Letter of Credit, as provided in the applicable LC Bank Fee Letter.
“Letter of Credit Request” shall mean the request for the Issuance or Modification of a Letter of Credit in substantially the form of Exhibit E hereto.
“LIBOR” shall mean an interest rate per annum determined on the basis of the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other Person which takes over the administration of that rate) for deposits in United States dollars for a three month period as it appears on the relevant display page on the Bloomberg Professional Service (or any successor or substitute page or service providing quotations of interest rates applicable to United States dollar deposits in the London interbank market comparable to those currently provided on such page.
“Lien,” with respect to any asset, shall mean any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset (including any production payment, proceeds production payment or similar financing arrangement with respect to such asset).
“Limited Liability Company Agreement” shall mean the Limited Liability Company Agreement of the Seller dated July 29, 2013.
“Lists” shall mean the list of Specially Designated Nationals and Blocked Persons maintained by OFAC and/or on any other similar list of any United States or European Union governmental organization.
“Local Account” shall mean a deposit account established and maintained by a financial institution in the name of an Originator into which account Obligor payments with respect to Receivables as well as payments on cash sales generated by such Originator are deposited. Each Local Account shall be identified on Schedule II hereto, as amended from time to time with the consent of the Administrative Agent.
“Lockbox” shall mean a post office box to which Collections are sent and which is administered by a Depositary Bank.
“Lockbox Account” shall mean an account maintained in the name of the Seller at a Depositary Bank into which Collections are deposited.
“Lookback Period” shall mean, with respect to the Exclusion Date for any Designated Type, the 12 calendar month period most recently ended prior to such Exclusion Date.
“Loss Horizon Ratio” shall mean a fraction, calculated on any day, for the preceding Calculation Period, (i) the numerator of which equals the aggregate Outstanding Balance of all Receivables generated during the four most recent Calculation Periods (including such Calculation Period) times the Weighted Average Term Factor and (ii) the denominator of which is equal to the Net Receivables Balance on the last day of such Calculation Period.
“Losses” shall have the meaning specified in Section 10.01(a) hereof.
“Loss Ratio” shall mean, on any day, the highest average of the Default Ratios for any three consecutive Calculation Periods during the twelve Calculation Periods preceding the day on which determined.
“Loss Reserve Amount” shall mean, on any day, the product of (i) the Loss Reserve Percentage and (ii) the Net Receivables Balance on such day.
“Loss Reserve Percentage” shall mean, the percentage, calculated on any day, equal to the greater of (a) 10.00% (the “Loss Reserve Floor”) and (b) the product of (i) the Stress Factor, (ii) the Loss Ratio and (iii) the Loss Horizon Ratio.
“Mandatory Reduction Amount” shall mean the amount necessary to cause the Percentage Interest to be less than or equal to 100%.
“Mandatory Reduction Date” shall mean the date on which a Mandatory Reduction Amount is paid.
“Material Adverse Effect” shall mean a material adverse effect on (i) the financial condition or operations of (a) the Seller, (b) Ferguson and its Subsidiaries, taken as a whole, or (c) the Parent and its Subsidiaries, taken as a whole; (ii) the ability of the Seller, Ferguson or any other Originator, or the Parent to perform its obligations under any Transaction Document; (iii) the legality, validity or enforceability of any material provision of the Transaction Document, or (iv) any Purchaser’s or LC Bank’s interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto.
“Maximum Net Investment” shall mean $1,100,000,000, unless such amount shall be reduced as provided in Section 2.15 or the next sentence or following the termination of a Purchase Group pursuant to Section 11.08 hereof or increased as provided in Section 2.16. On a Non-Pro Rata Extension Date for any Non-Extending Purchase Group, unless such Non-Extending Purchase Group’s Purchase Group Maximum Net Investment has been assigned pursuant to Section 2.17, the Maximum Net Investment shall be reduced by that Non-Extending Purchase Group’s Purchase Group Maximum Net Investment. On any day on and after the occurrence and continuance of a Termination Event or the Scheduled Termination Date, the Maximum Net Investment shall be equal to the Aggregate Exposure Amount. The Swingline Sublimit is a component of, and not in addition to, the Maximum Net Investment.
“Modification” shall mean any renewal, extension (to the extent not automatically renewed subject to the terms of Section 2.10(a)), increase, decrease or other modification of a Letter of Credit, other than a ministerial amendment. “Modify” shall mean the doing of such action.
“Monthly Report” shall have the meaning specified in Section 4.11(a)(i) hereof.
“Monthly Report Date” shall mean the 20th calendar day of each month, or, if such day is not a Business Day, the next Business Day.
“Moody’s” shall mean Moody’s Investors Service, Inc., together with any successor that is a nationally recognized statistical rating association.
“Multiemployer Plan” shall mean a multiemployer plan within the meaning of Section 3(37) of ERISA to which the Parent, Ferguson or any ERISA Affiliate makes or is obligated to make contributions.
“Net Investment” shall mean, (i) for each Purchase Group, at any time, the sum of the amounts of Purchase Price paid by the Purchasers in that Purchase Group to the Seller for each Incremental Purchase, Reimbursement Purchase and to the Swingline Purchaser for each Swingline Reimbursement Purchase less the aggregate amount of Collections and other amounts received and applied by the Servicer or the related Facility Agent to reduce such Net Investment in accordance with the terms hereof, (ii) for the Swingline Purchaser, the amount of the Swingline Purchase(s) made by the Swingline Lender less the aggregate amount of (a) Collections and other amounts paid by the Seller to the Swingline Purchaser and (b) the proceeds of any Swingline Reimbursement Purchases received by the Swingline Purchaser, in each case, to reduce such Net Investment in accordance with the terms hereof; provided, that the Net Investment of each Purchase Group or the Swingline Purchaser, as applicable, shall be increased by the amount of any Collections, other amounts or proceeds so received and applied if at any time the distribution of such Collections is rescinded or must otherwise be returned or restored for any reason.
“Net Receivables Balance” shall mean, at any time, the Outstanding Balances of the Eligible Receivables at such time reduced by the sum of, without duplication of amounts reducing the amount of total Receivables to determine Eligible Receivables, the following: (i) the Excess Concentration Amount, (ii) the aggregate amount of Collections that are unidentified cash, and (iii) the Sales Tax Payable in connection with the Receivables.
“Non-Extending Purchase Group” shall have the meaning specified in Section 2.17(c) hereof.
“Non-Pro Rata Extension Date” shall have the meaning specified in Section 2.17(c) hereof.
“Obligor” shall mean a Person who purchased merchandise or services on credit under a Contract and who is obligated to make payments to an Originator.
“OFAC” shall mean the Office of Foreign Assets Control of the U.S. Department of the Treasury.
“OFAC Laws and Regulations” shall mean the Executive Order or regulation of OFAC codified at 31 C.F.R., Subtitle B, Chapter V.
“Official Body” shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case, whether foreign or domestic.
“Optional Reduction Amount” shall mean the amount of reduction of the Aggregate Net Investment specified by the Seller pursuant to Section 2.15(b) hereof.
“Optional Reduction Date” shall mean the date on which an Optional Reduction Amount is paid.
“Optional Reduction Notice” shall have the meaning specified in Section 2.15(b) hereof.
“Original Closing Date” shall mean July 31, 2013.
“Originator” shall mean each of Ferguson and each other Subsidiary of Ferguson identified as such from time to time on the signature pages or an addendum hereto and which has not been removed as an Originator under Section 3.03 of the Purchase and Contribution Agreement; provided that each Subsidiary of Ferguson which is not a party to this Agreement on May 19, 2021 shall become an Originator hereunder only upon satisfaction of the conditions precedent contained in Section 3.04 hereof.
“Other Companies” shall have the meaning set forth in Section 7.03(a) hereof.
“Other Connection Taxes” shall mean with respect to any Indemnified Party, Taxes imposed as a result of a present or former connection between such Indemnified Party and the jurisdiction imposing such Tax (other than connections arising from such Indemnified Party 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 Transaction Document, or sold or assigned an interest in any portion of its Aggregate Exposure).
“Other Taxes” shall mean 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 Transaction Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 11.08).
“Outstanding Balance” of any Receivable shall mean, at any time, the then outstanding amount thereof.
“Parent” shall mean Ferguson plc, a company incorporated in Jersey under registered number 128484.
“Parent Undertaking” shall mean the unconditional guarantee by the Parent, for the benefit of the Beneficiaries, specified in Section 5.01 hereof.
“Participant” shall have the meaning set forth in Section 11.02(b).
“Participant Registrar” shall have the meaning set forth in Section 11.02(f).
“Participation Interest” shall mean, with respect to any Reassigned Receivable, a 100% undivided beneficial interest in the applicable Originator’s right, title and interest, whether now owned or hereafter arising, in, to and under such Receivable and all Related Security and Collections with respect thereto.
“Payment Recipient” shall have the meaning specified in Section 9.08(a).
“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Percentage Interest” shall mean, at any time of determination, an undivided percentage interest in the Receivables, Related Security and Collections, which percentage is equal to the following:
AEA– LCA + TRA
NRB
Where:
AEA = the Aggregate Exposure Amount at the time of such determination;
LCA = the amount on deposit in the LC Cash Collateral Account (other than the amount deposited therein pursuant to Section 2.12(a) or (c) hereof or allocable to the Fee Collateral Amount) at the time of determination;
TRA = the Total Reserve Amount at the time of such determination; and
NRB = the Net Receivables Balance at the time of such determination.
Following the Scheduled Termination Date or the occurrence and continuance of a Termination Event, for the purpose of allocating Collections pursuant to Section 2.08, the Percentage Interest shall be equal to 100% until the Facility Termination.
“Permitted Liens” shall mean, on any day, any Liens securing the obligations of any Originator in connection with inventory financing not to exceed, in the aggregate for all Originators, 0.25% of the aggregate Outstanding Balance of Receivables on such day.
“Person” shall mean an individual, corporation, limited liability company, partnership (general or limited), trust, business trust, unincorporated association, joint venture, joint-stock company, Official Body or any other entity of whatever nature.
“Plan” shall mean any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan and a Foreign Plan, that is subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Parent or Ferguson or any ERISA Affiliate of either of them contributes or has an obligation to contribute (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to contribute or have an obligation to contribute).
“PNC” shall mean PNC Bank, National Association.
“Potential Termination Event” shall mean any event that, with the giving of notice or the passage of time, or both, would constitute a Termination Event.
“Proceeds” shall mean “proceeds” as defined in Section 9-102(a)(64) of the Uniform Commercial Code as in effect in the State of New York and the jurisdiction whose Law governs the perfection of the Administrative Agent’s ownership or security interests therein.
“Proposed Effective Date” shall have the meaning specified in Section 2.17(a) hereof.
“Purchase” shall mean a purchase, including each Reinvestment Purchase, Incremental Purchase, Reimbursement Purchase and Swingline Reimbursement Purchase, by a Facility Agent (on behalf of its related Purchasers) of the Receivable Interest. Unless the context requires otherwise, the term “Purchase” also includes a Swingline Purchase.
“Purchase and Contribution Agreement” shall mean the Purchase and Contribution Agreement dated as of July 31, 2013, by and between the Seller, as purchaser, Ferguson and the Originators, as sellers, as the same may from time to time be amended, restated, supplemented or otherwise modified from time to time.
“Purchase Group” shall mean each separate group consisting of one or more Conduit Purchasers, if any, one or more Committed Purchasers, one or more LC Banks, if any, one or more Swingline Purchaser(s), if any, and a Facility Agent, identified from time to time on Schedule I to this Agreement.
“Purchase Group Maximum Net Investment” shall mean, with respect to any Purchase Group, the dollar amount indicated from time to time on Schedule I to this Agreement; provided, that if any Purchase Group becomes a Non-Extending Purchase Group, then, effective on its Non-Pro Rata Extension Date, such Non-Extending Purchase Group’s Purchase Group Maximum Net Investment will equal the Net Investment until repaid in accordance with Section 2.17 hereof; and provided further, that if any Purchase Group is terminated without replacement pursuant to Section 11.08, such Purchase Group’s Purchase Group Maximum Net Investment will be reduced to $0. For the avoidance of doubt, the Purchase Group Maximum Net Investment of the Purchase Group including the Swingline Purchaser shall include the Swingline Sublimit.
“Purchase Group Percentage” shall mean, with respect to a Purchase Group, the percentage equivalent of a fraction, (i) unless the Termination Date has occurred, the numerator
of which is the Purchase Group Maximum Net Investment of such Purchase Group and the denominator of which is the Maximum Net Investment and (ii) on each day on and after the Termination Date, the numerator of which is the Exposure Amount of such Purchase Group on such day and the denominator of which is the Aggregate Exposure Amount on such day.
“Purchase Notice” shall mean a notice of an Incremental Purchase, a Swingline Purchase, a Reimbursement Purchase or a Swingline Reimbursement Purchase substantially in the form of Exhibit E hereto.
“Purchase Price” shall mean (i) with respect to any Incremental Purchase (other than a Swingline Purchase), the amount described in Section 2.03(a) paid to the Seller by the Facility Agents, on behalf of the Purchasers, as set forth in the Purchase Notice related to such Incremental Purchase, (ii) with respect to any Swingline Purchase, the amount described in Section 2.19 paid to the Seller by the Swingline Purchaser, as set forth in the Purchase Notice related to such Swingline Purchase, (iii) with respect to any Reimbursement Purchase, the amount drawn under the Letter of Credit as specified in the related Purchase Notice and (iv) with respect to any Swingline Reimbursement Purchase, the amount of the Swingline Purchase to be reimbursed as specified in the related Purchase Notice.
“Purchaser” or “Purchasers” shall mean a Conduit Purchaser or a Committed Purchaser (including the Swingline Purchaser), or one or more Conduit Purchasers or Committed Purchasers, as the context so requires, and shall include a Support Provider and any of their respective successors and assigns that may purchase any portion of the Receivable Interest pursuant hereto or which acquires an undivided interest in any Conduit Purchaser’s Receivable Interest pursuant to a Conduit Support Document.
“Quotation Day” shall mean, in relation to any period for which an interest rate is to be determined, two (2) US Government Securities Business Days before the first day of that period.
“Rating” shall mean, at any time, the rating assigned by each of S&P and Moody’s to the Parent’s senior unsecured debt.
“Rating Agencies” shall mean, collectively, Moody’s, S&P and Fitch Ratings.
“RBC” shall mean Royal Bank of Canada, a Canadian chartered bank.
“Reassigned Receivable” shall have the meaning specified in Section 2.01A hereof.
“Receivable” shall mean all indebtedness and other payment obligations owed to an Originator by an Obligor arising from the sale of merchandise or rendering of services, by the such Originator under a Contract, including all rights to payment of any interest or finance charges and any security related thereto. “Receivables” shall not include Excluded Receivables.
“Receivable Interest” shall mean, at any time, an undivided percentage ownership or security interest in (i) each and every then outstanding Receivable owned by the Seller, (ii) all Related Security with respect to each such Receivable, (iii) all Collections with respect thereto,
and (iv) all cash and non-cash Proceeds of the foregoing, equal to the Percentage Interest at such time, and only at such time (without regard to prior calculations).
“Records” shall mean correspondence, memoranda, computer programs, tapes, discs, reports, papers, books or other documents or transcribed information of any type whether expressed in ordinary or machine readable language; provided, that any intellectual property (such as software) or rights therein that are not permitted by applicable Law or contract to be assigned shall not be included herein.
“Register” shall have the meaning set forth in Section 11.02(e).
“Registrar” shall have the meaning set forth in Section 11.02(e).
“Regulatory Change” shall mean the occurrence after May 19, 2021 (or with respect to any Purchaser or LC Bank, such later date on which such Purchaser or LC Bank, as the case may be, becomes a party to this Agreement) of (i) the adoption of any applicable Law, rule, regulation or treaty (including any applicable law, rule, regulation or treaty regarding capital adequacy or liquidity) or any change therein, (ii) any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, or (iii) the compliance, application or implementation, whether commenced prior to or after May 19, 2021, by any Affected Person with the requirements of the revised BASEL ACCORD prepared by the BASEL Committee on Banking Supervision entitled “A global regulatory framework for more resilient banks and banking systems”, revised June 2011 (“BASEL III”) or any existing or future rules, regulations, guidance, interpretations or directives from U.S., Canadian, or other foreign bank regulatory agencies relating to BASEL III (whether or not having the force of law), regardless of the date any of the foregoing is enacted, adopted or issued.
“Reimbursement Obligation” shall mean the obligation of the Seller to (i) reimburse the LC Bank pursuant to Section 2.11(a) for amounts drawn under Letters of Credit that have not been satisfied by a Reimbursement Purchase in accordance with the terms of Section 2.11(a) and/or (ii) cash collateralize the Stated Amount of undrawn and outstanding Letters of Credit pursuant to Section 2.11(e), as the context requires.
“Reimbursement Purchase” shall have the meaning specified in Section 2.11(a) or (b) hereof.
“Reinvestment Purchase” shall have the meaning specified in Section 2.05 hereof.
“Relevant Governmental Body” shall mean the Board of Governors of the Federal Reserve System and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System and/or the Federal Reserve Bank of New York, or any successor thereto.
“Related Parties” shall mean, with respect to any Person, such Person’s Affiliates and the respective directors, officers, employees and agents of such Person and such Person’s Affiliates.
“Related Security” shall mean with respect to any Receivable:
(a) all Contracts with respect to such Receivable;
(b) all of the Seller’s interest, if any, in the goods (including returned goods) sold by the applicable Originator and which gave rise to such Receivable;
(c) all other security interests or Liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable;
(d) all guarantees, indemnities, letters of credit, insurance or other agreements or arrangements of any kind from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise;
(e) all Records relating to, and all service contracts and any other contracts associated with, such Receivable, the related Contracts or the related Obligors; and
(f) all Proceeds of the foregoing.
“Relevant Nominating Body” shall mean any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board.
“Reportable Event” shall mean a “reportable event” as that term is defined in Section 4043 of ERISA or the regulations issued thereunder (other than an event for which the 30-day notice period is waived).
“Required Facility Agents” shall mean the Administrative Agent and the Facility Agents representing Purchase Groups having Purchase Group Maximum Net Investments equal to more than 50% of the Maximum Net Investment; provided, that if any Facility Agent’s Purchase Group includes a Defaulting Purchaser, its Purchase Group Maximum Net Investment (including as part of the Maximum Net Investment) shall not be included for purposes of this definition.
“Required LC Cash Collateral Amount” shall mean on any day, the sum of (i) if before the Termination Date, the amount, if any, required to be deposited in the LC Cash Collateral Account to cause the Percentage Interest to be less than 100% on such day, (ii) the amount required to be deposited therein pursuant to Section 2.12(a) with respect to a Defaulting Purchaser, and (iii) on and after the Termination Date, the aggregate Stated Amount of outstanding and undrawn Letters of Credit on such day plus the Fee Collateral Amount, which
amount is held in the LC Cash Collateral Account for the benefit of the LC Banks, the Facility Agents and the Purchasers.
“Resolution Authority” shall mean an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Response Date” shall have the meaning specified in Section 2.17(a) hereof.
“Responsible Officer” shall mean, with respect to each Ferguson Party, the chief executive officer, the president, the chief financial officer or treasurer of such Person and any other Person designated as a Responsible Officer by any such officers, as such Ferguson Party may from time to time notify the Administrative Agent.
“Retained Interest” shall have the meaning set forth in Section 7.01(f)(i).
“S&P” shall mean S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, and any successor thereto.
“Sales Tax Payable” shall mean, on and after a Downgrade Event, the sales tax accrual balance maintained in the Servicer’s books and records to reflect the amount of sales tax payable in respect of the Receivables at any time of determination, which as of May 19, 2021 is reflected in GL accounts #2260 through #2270. The Servicer shall notify the Administrative Agent of any change in location in its books and records of the sales tax accrual balance.
“Sanctions” shall mean all sanctions administered and enacted by the United States of America, the United Nations Security Council, the European Union, the United Kingdom or Australia or the respective governmental institutions and agencies of any of the foregoing (including, without limitation, the U.S. Department of the Treasury Office of Foreign Assets Control).
“Scheduled Termination Date” shall mean October 7, 2025, or such later date as the Seller, the Parent, Ferguson and the Facility Agents shall agree in writing in accordance with the provisions of Section 2.17 hereof.
“SEC” shall mean the United States Securities and Exchange Commission or any successor regulatory body.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time and any successor statute thereto.
“Seller” shall have the meaning defined in the preamble hereto.
“Servicer” shall mean, initially, Ferguson, and thereafter, any Person which upon the termination of a Servicer succeeds to the functions performed by such Person as the Servicer of the Receivables pursuant to a Complete Servicing Transfer.
“Servicer Default” shall have the meaning specified in Section 4.12 hereof.
“Servicer Report” shall mean, as applicable, a Monthly Report or a Weekly Report.
“Servicer Report Date” shall mean, as applicable, each Monthly Report Date and each Weekly Report Date.
“Servicing Fee” shall have the meaning specified in Section 4.14.
“Servicing Fee Percentage” shall mean 1.0%.
“Servicing Fee Reserve Amount” shall mean, on any day, the product of (i) the Servicing Fee Reserve Ratio and (ii) the aggregate Outstanding Balance of all Receivables on such day.
“Servicing Fee Reserve Ratio” shall mean, on any day, for the preceding Calculation Period, the product of (i) the Servicing Fee Percentage, (ii) the Stress Factor and (iii) a fraction the numerator of which is the highest Days Sales Outstanding for the preceding twelve Calculation Periods (including such Calculation Period) and the denominator of which is 360.
“Settlement Date” shall mean (i) the third (3rd) Business Day of each calendar month beginning in September, 2013, and (ii) on and after the Termination Date, each Business Day.
“SOFR” shall mean a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” shall mean the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“Spun-Off-Locations” shall mean the two locations (namely, 3539 and 3379) of Ferguson Fire & Fabrication, Inc., the businesses of which are spun off to create FFD.
“Stated Amount” shall have the meaning specified in Section 2.10(g) hereof.
“Stress Factor” shall mean 2.25.
“Sub-Servicer” shall mean each Originator (other than Ferguson) in its capacity as sub-servicer of the Receivables originated by it under Section 4.01.
“Subsidiary” shall mean, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with relevant GAAP as of
such date, as well as any other corporation, limited liability company, partnership, association or other entity of which Voting Stock representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, or held by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
“S&P” shall mean Standard & Poor’s Ratings Services, together with any successor that is a nationally recognized statistical rating organization.
“Support Provider” shall mean and include any Person now or hereafter extending credit, or having a commitment to extend credit to or for the account of, or to make purchases from, any Conduit Purchaser or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with such Conduit Purchaser’s securitization program (excluding any such Person providing any of the foregoing credit or support obligations only with respect to a transaction not related to this Agreement).
“Swingline Purchase” shall mean a Purchase made by the Swingline Purchaser of a Receivable Interest.
“Swingline Purchaser” shall mean PNC, and any of its successors.
“Swingline Reimbursement Purchase” shall have the meaning specified in Section 2.19(b) hereof.
“Swingline Settlement Date” shall mean, with respect to any Swingline Purchase, the earlier of (i) the Tuesday next following the day of such Swingline Purchase, provided, that if any such Tuesday is not a business Day, the next succeeding Business Day. and (ii) the day of an Incremental Purchase next following the day of such Swingline Purchase.
“Swingline Sublimit” shall mean the maximum amount of a Swingline Purchases which the Swingline Purchaser agrees to make and have outstanding at any one time, initially $100,000,000.
“Taxes” shall mean any all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed on an Indemnified Party by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Date” shall mean the earlier of (i) the Scheduled Termination Date and (ii) the date on which, following the occurrence and continuance of a Termination Event, a wind-down period is determined (or deemed to have been determined) to commence pursuant to Section 8.02(a).
“Termination Event” shall have the meaning specified in Section 8.01 hereof.
“Term SOFR” shall mean:
(a) the term SOFR reference rate administered by CME Group Benchmark Administration Limited (or any other person which takes over the administration of that rate) for the relevant periodCalculation Period published (before any correction, recalculation or republication by the administrator) by CME Group Benchmark Administration Limited (or any other person which takes over the publication of that rate) and if such page or service is replaced or ceases to be available, the Administrative Agent may specify another page or service displaying the relevant rate in accordance with Section 2.06;
(b) if the term SOFR reference rate of the applicable tenor is not available for any Calculation Period, Interpolated Term SOFR (rounded to the same number of decimal places as Term SOFR) for that tenor and Calculation Period; or
(c) if:
(i) no term SOFR reference rate of the applicable tenor is available for that Calculation Period; and
(ii) it is not possible to calculate Interpolated Term SOFR of that tenor for that Calculation Period,
the Federal Funds Rate (or if the Federal Funds Rate is not available at 10:00 a.m., New York City time on the Quotation Day, most recent Federal Funds Rate for a day which is no more than five US Government Securities Business Days before the relevant Quotation Day),
as of, in the case of paragraphs (a) and (c) above, 10:00 a.m., New York City time, on the Quotation Day and for the applicable tenor and, if the aggregate of any Benchmark Margin and any such rate is below 0.00%, Term SOFR will be deemed to be 0.00%.
“Term SOFR Replacement Event” shall mean:
(a)the methodology, formula or other means of determining Term SOFR has, in the opinion of the Required Facility Agents and the Seller materially changed;
(b)
(i)
(A)the administrator of Term SOFR or its supervisor publicly announces that such administrator is insolvent; or
(B)information is published in any order, decree, notice, petition or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of Term SOFR is insolvent,
provided that, in each case, at that time, there is no successor administrator to continue to provide Term SOFR;
(ii)the administrator of Term SOFR publicly announces that it has ceased or will cease, to provide Term SOFR permanently or indefinitely and, at that time, there is no successor administrator to continue to provide Term SOFR;
(iii)the supervisor of the administrator of Term SOFR publicly announces that it has been or will be permanently or indefinitely discontinued; or
(iv)the administrator of Term SOFR or its supervisor announces that Term SOFR may no longer be used; or
(c)the administrator of Term SOFR determines that Term SOFR should be calculated in accordance with its reduced submissions or other contingency or fallback policies or arrangements and either:
(i)the circumstance(s) or event(s) leading to such determination are not (in the opinion of the Required Facility Agents and the Seller) temporary; or
(i)Term SOFR is calculated in accordance with any such policy or arrangement for a period no less than the applicable tenor; or
(d)in the opinion of the Required Facility Agents and the Seller, Term SOFR is otherwise no longer appropriate for the purposes of calculating interest under this Agreement.
“Total Reserve Amount” shall mean the sum of (i) the Loss Reserve Amount, (ii) the Dilution Reserve Amount, (iii) the Carrying Cost Reserve Amount and (iv) the Servicing Fee Reserve Amount.
“Transaction Documents” shall mean this Agreement, the Purchase and Contribution Agreement, the Purchase Notices, the Transaction Fee Letters, the Letter of Credit Requests, the Letter of Credit Applications, the Blocked Account Agreements, the Credit Card Agreements, the Limited Liability Company Agreement, and all other material agreements, documents and agreements executed and delivered in connection therewith.
“Transaction Fee Letters” shall mean the Fee Letter, the Administrative Agent Fee Letter and the LC Bank Fee Letters.
“Transition Receivable” shall mean any Receivable in a branch or location that moved from Trilogie data reporting system to Oracle data reporting system before such time as Oracle has become an Approved Data Reporting System with respect to such branch or location.
“UCC” shall mean, with respect to any jurisdiction, the Uniform Commercial Code as in effect from time to time in such jurisdiction.
“UK” shall mean the United Kingdom.
“UK Financial Institution” shall means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” shall mean the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unused Fee” shall have the meaning specified in the Fee Letter.
“Used Fee” shall have the meaning specified in the Fee Letter.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Obligor” shall mean (i) if a natural person, is a resident of the United States or (ii) if a corporation or other business organization, (a) is organized under the laws of the United States or any political subdivision thereof and (b) has its principal place of business in the United States or any political subdivision thereof.
“USA Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, 115 Stat. 272 (2001), of the United States, as amended.
“Voting Stock” shall mean, with respect to any Person, the outstanding shares of Equity Interests voting power for the election of directors of such Person, whether at all times or only so long as no senior class of Equity Interests has such voting power because of default in dividends or such other default.
“Weekly Report” shall have the meaning specified in Section 4.11(a)(ii) hereof.
“Weekly Report Date” shall mean, if a Weekly Report is required to be delivered pursuant to Section 4.11(a)(ii) hereof, the second Business Day of each week.
“Weighted Average Term Factor” shall mean, on any day, the greater of (i) 1.0 and (ii) (A) the weighted average payment terms of the Receivables plus 90 (B) divided by 120.
“Write-Down and Conversion Powers” shall mean, (a) 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, and (b)
with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
“Yield” shall mean, for any Purchase Group, for any Calculation Period (or portion thereof), the sum of, for each day in such Calculation Period (or portion thereof):
(a) to the extent any portion of the Net Investment of such Purchase Group is funded on such day by a Conduit Purchaser through the issuance of Commercial Paper, the product of (i) the portion of the Net Investment of such Purchase Group funded on such day by a Conduit Purchaser through the issuance of Commercial Paper, (ii) a rate of interest equal to the per annum rate (expressed as a percentage and an interest yield equivalent) or, if more than one rate, the weighted average thereof, paid or payable by such Conduit Purchaser from time to time as interest on or otherwise in respect of the Commercial Paper issued by such Conduit Purchaser that is allocated, in whole or in part, by the related Facility Agent to fund such portion of Net Investment on such day and (iii) a fraction the numerator of which is one and the denominator of which is 360;
(b) to the extent Net Investment is funded by a Purchaser other than through the issuance of Commercial Paper, the product of (i) the Net Investment on such day of the Purchaser, (ii) a rate per annum equal to (y) the Term SOFR of a tenor of three months for such day plus the applicable Benchmark Margin, or (z) on and after a Term SOFR Replacement Event, the Benchmark Replacement plus the applicable Benchmark Margin determined in accordance with Section 2.06 for such day, and (iii) a fraction the numerator of which is one and the denominator of which is 365 or 366, as applicable; or
(c) to the extent such Purchase Group includes a related LC Bank which is owed a Reimbursement Obligation described in clause (i) of the definition thereof, the product of (i) the amount of such Reimbursement Obligation owed to such LC Bank on such day, (ii) a rate per annum equal to the Term SOFR of a tenor of three months for such day, or on and after a Benchmark Replacement Date, the Benchmark Replacement for such day, and (iii) a fraction the numerator of which is one and the denominator of which is 365 or 366, as applicable;
provided, that at any time when any Termination Event shall have occurred and be continuing, Yield with respect to each Purchase Group’s Net Investment on each day shall be the product of (i) the Net Investments of all Purchasers (including the Swingline Purchaser, as applicable) in such Purchase Group on such day, (ii) a rate per annum equal to the Default Rate on such day and (iii) a fraction the numerator of which is one and the denominator of which is 365 or 366, as applicable, and provided, further, that that at any time when any Termination Event shall have occurred and be continuing, Yield for each Purchase Group that includes an LC Bank which is owed a Reimbursement Obligation on each day shall be the product of (i) the amount of such Reimbursement Obligation owed to such LC Bank on such day, (ii) a rate per annum equal to the
Default Rate on such day and (iii) a fraction the numerator of which is one and the denominator of which is 365 or 366, as applicable.
Section 1.02. Interpretation and Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, and references to the part include the whole and the words “include”, “including” and “includes” shall be deemed to be followed by “without limitation”. The words “hereof,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.” The section and other headings contained in this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation hereof in any respect. Section, subsection, exhibit and schedule references are to this Agreement unless otherwise specified. As used in this Agreement, the masculine, feminine or neuter gender shall each be deemed to include the others whenever the context so indicates. Terms not otherwise defined herein which are defined in the UCC as in effect in the State of New York from time to time shall have the respective meanings ascribed to such terms therein unless the context otherwise clearly requires.
Section 1.03. [Reserved] .
Section 1.04. Use of Historical Data. When necessary to calculate any ratios or other amounts under this Agreement with reference to periods prior to the date hereof, historical data shall be used.
ARTICLE II
PURCHASES AND SETTLEMENTS
Section 2.01. General Assignment and Conveyance; Intent of the Parties. (a) At the time of each Incremental Purchase (including the initial Incremental Purchase) pursuant and subject to Sections 2.02 and 2.03 hereof, each Reinvestment Purchase pursuant and subject to Section 2.05 hereof, each Reimbursement Purchase pursuant and subject to Section 2.11(a) or (b) hereof and each Swingline Reimbursement Purchase pursuant and subject to Section 2.19 hereof, the Seller hereby sells to the Facility Agents, for the benefit of the applicable Purchasers, and the Facility Agents, on behalf of the applicable Purchasers, purchases from the Seller of, all of the Seller’s right, title and interest in and to the Receivable Interest representing such Purchases. At the time of each Swingline Purchase pursuant and subject to Sections 2.03 and 2.19(a) hereof, the Seller hereby sells to the Facility Agent for the Swingline Purchaser, for the benefit of the Swingline Purchaser, and such Facility Agent, on behalf of the Swingline Purchaser, purchases from the Seller of, all of the Seller’s right, title and interest in and to the Receivable Interest representing such Swingline Purchase. At the time of each Issuance or Modification of a Letter of Credit, as applicable, pursuant and subject to Section 2.10 hereof, and at all times as such Letters of Credit are outstanding, the Seller hereby assigns to the Facility Agents, for the benefit of the applicable Purchasers and LC Banks, and the applicable Facility Agents, on behalf of the applicable Purchasers and LC Banks, accept the assignment from the Seller of, all of the Seller’s right, title
and interest in and to the Receivable Interest securing such Letters of Credit. Any change in the Receivable Interest on any day shall be deemed to be (i) in the event of an increase in the Percentage Interest, a further sale or assignment by the Seller to the Facility Agents, ratably in accordance with their respective Purchase Group Percentages, of an undivided percentage ownership or security interest in each Receivable, together with Related Security and Collections, equal to the amount of such increase or (ii) in the event of a reduction in the Percentage Interest, a reassignment by each Facility Agent, ratably in accordance with its applicable Purchase Group Percentage, to the Seller of an undivided percentage ownership or security interest in each Receivable, together with Related Security and Collections, equal to (in the aggregate for all Facility Agents) the amount of such reduction.
(b) It is the intention of the parties hereto that each Purchase (other than a Swingline Purchase) shall convey to each Facility Agent (for the benefit of its Purchasers), the applicable Purchase Group Percentage of the Receivable Interests, an undivided ownership interest in the Receivables, Related Security, Collections and Proceeds in respect thereof and that such transaction shall not constitute a secured loan. It is the intention of the parties hereto that each Swingline Purchase shall convey to the Facility Agent for the Swingline Purchaser (for the benefit of the Swingline Purchaser), additional Receivable Interests, an undivided ownership interest in the Receivables, Related Security, Collections and Proceeds in respect thereof and that such transaction shall not constitute a secured loan. It is not the intention of the parties that the Incremental Purchases, Reinvestment Purchases, Swingline Purchases, Reimbursement Purchases and Swingline Reimbursement Purchases be deemed a pledge of the Receivable Interests in the Receivables, Related Security, Collections and Proceeds from the Seller to the Facility Agents (on behalf of the Purchasers) to secure a debt or other obligation of the Seller. However, in the event that, notwithstanding the intent of the parties, the Receivable Interests in the Receivables, Related Security, Collections or Proceeds is characterized as collateral for a secured loan or otherwise held to be the property of the Seller, or if for any other reason this Agreement is held or deemed to create a security interest in the Receivable Interests in the Receivables, Related Security, Collections or Proceeds (any of the foregoing being a “Recharacterization”), then it is the intention of the parties hereto that this Agreement shall be a security agreement and the conveyance provided for in Section 2.01(a) shall be deemed to be a grant by the Seller to the Administrative Agent (for the benefit of the Facility Agents and the related Purchasers) of a first priority perfected security interest, securing repayment of the Aggregate Net Investment and all other amounts payable to the Administrative Agent, the Facility Agents and the Purchasers hereunder, in the Collateral. In the case of any Recharacterization, the Seller represents and warrants as to itself that each remittance of Collections to the Administrative Agent, the Facility Agents or the Purchasers hereunder will have been (i) in payment of a debt incurred in the ordinary course of its business or financial affairs and (ii) made in the ordinary course of its business or financial affairs. It is the intention of the parties hereto that each Issuance or Modification of a Letter of Credit shall convey to each Facility Agent (for the benefit of its related LC Bank(s) and Purchasers), the applicable Purchase Group Percentage of the Receivable Interest, a first priority security interest in the Collateral, securing repayment of all Reimbursement Obligations and all other amounts payable to the Administrative Agent, the Facility Agents, the Purchasers and the LC Banks hereunder. “Collateral” shall mean the Seller’s right, title, and interest, whether now owned or hereafter acquired, in and to (a) (i) the Receivables, (ii) the Related Security with respect to such
Receivables, (iii) all Collections, (iv) all Participation Interests, and (v) the Accounts and the LC Cash Collateral Account and (b) all Proceeds of any of the foregoing.
Notwithstanding anything to the contrary in this Agreement and in any Transaction Document, all the parties to this Agreement shall treat this Agreement as indebtedness for U.S. federal income tax purposes secured by the Receivables and shall take no position inconsistent therewith.
Section 2.01A. Certain Reconveyances. If the Servicer determines in its reasonable judgment that (i) the filing of a mechanics lien or the making of a claim on a payment bond is necessary or advisable in order to collect a Receivable that is due from a contractor or (ii) it desires to recover any sales or similar tax paid with respect to a Receivable, the Servicer shall prepare the necessary documentation for filing such lien claim or tax refund for signature by the applicable Originator which originated such Receivable. Immediately prior to the execution of such documentation, and without any further action hereunder, the Administrative Agent (on behalf of the Facility Agents and their respective Purchase Groups) shall be deemed to have sold and assigned to the Seller and released its security interest in each such Receivable (each such Receivable, a “Reassigned Receivable”) and pursuant to the Purchase and Contribution Agreement, the Seller shall be deemed to have simultaneously sold all of its right, title and interest in each such Receivable to the applicable Originator. The purchase price paid by the applicable Originator for each sale of a Reassigned Receivable under the Purchase and Contribution Agreement shall be in the form of the Seller’s retention of a Participation Interest in such Reassigned Receivable, which shall entitle the Seller to receive from such Originator (by deposit into the Concentration Account or other Account subject to a Blocked Account Agreement) all Collections subsequently received with respect to such Reassigned Receivable, but only to the extent actually received. Upon each reconveyance of a Reassigned Receivable pursuant to this Section, the Administrative Agent shall receive a security interest in the Participation Interest relating to such Reassigned Receivable and in any security interest obtained by the Seller in such Reassigned Receivable. Notwithstanding the foregoing, no additional reconveyances of Receivables by the Administrative Agent pursuant to this Section (and sales by the Seller to the applicable Originator pursuant to the Purchase and Contribution Agreement) shall occur (A) without the consent of the Administrative Agents if a Control Event shall have occurred and be continuing or (B) if, during the 12-month period ending on the last day of the month preceding such reconveyance, the sum of the aggregate Outstanding Balance (in each case determined as of the date of reconveyance) of Reassigned Receivables reconveyed hereunder plus the Outstanding Balance of such additional Receivables in which a reconveyance is proposed under this Section would exceed 1% of the aggregate Outstanding Balance of the Receivables generated during such 12-month period.
Section 2.01B. Reconveyance of FFD Receivables.
(a) Effective as of the FFD Effective Time, without recourse and without making any representation or warranty in connection therewith of any type or kind (except with respect to liens as set forth below), each Purchaser, each Facility Agent and the Administrative Agent, respectively, hereby sell and assign, without any further action being required on the part of any person or entity to effect such sale and assignment, to the Seller, and the Seller hereby purchases
and assumes from the Purchasers, the Facility Agents and the Administrative Agent, respectively, all of the right, title and interest of each Purchaser, each Facility Agent and the Administrative Agent, respectively, in and to the FFD Receivables, all Collections with respect thereto and all Related Security with respect thereto (the “FFD Assets”), free and clear of any and all liens in favor of, or any other lien arising by or through, any Purchaser, any Facility Agent or the Administrative Agent; and all security interests granted to any Purchaser, any Facility Agent or the Administrative Agent under any Transaction Document, to the extent they relate to the FFD Assets, shall thereupon be released and terminate. Upon such reconveyance and release, the Facility Agents’ and Purchasers’ undivided percentage ownership interests in each and every remaining Receivables Interest is hereby increased to give effect to such the reconveyance and release.
(b) The Seller, the Purchasers, the Facility Agents and the Administrative Agent acknowledge and agree that on and after the FFD Effective Time, unless and until FFD is added as an “Originator” under the Transaction Documents, the receivables generated by FFD will not be sold to the Seller pursuant to the Purchase and Contribution Agreement and consequently, not sold, transferred or assigned to the Facility Agents, for the benefit of their respective Purchasers, pursuant to this Agreement.
Section 2.02. Incremental Purchases. Subject to the terms and conditions hereof, including Section 3.03 and, as applicable, Section 3.04, (i) the Seller may at any time and from time to time at its option sell to the Facility Agents (as agents for the applicable Purchaser(s)) undivided percentage ownership interests in each and every Receivable, together with the Related Security and Collections with respect thereto (each an “Incremental Purchase”), and (ii) each Facility Agent, on behalf of the applicable Purchaser(s) shall make an Incremental Purchase. The Seller shall provide the Administrative Agent and the Facility Agents with a Purchase Notice by 1:00 p.m. (New York City time) at least one Business Day prior to each Incremental Purchase. Each Purchase Notice shall specify (a) the Purchase Price requested to be paid to the Seller and the allocation among the Purchase Groups (which shall be based on their respective Purchase Group Percentages) and (b) the date of such requested Purchase. Subject to the terms and conditions hereof, for any Purchase Group that includes a Conduit Purchaser, if any Conduit Purchaser in such Purchase Group chooses not to purchase (through its related Facility Agent) an Incremental Purchase, the applicable Committed Purchaser in such Conduit Purchaser’s Purchase Group shall purchase (through the related Facility Agent) such Incremental Purchase. Subject to the terms and conditions hereof, Incremental Purchases shall be allocated among the Facility Agents pro rata in accordance with the respective Purchase Group Percentages. No Facility Agent shall have any obligation to make an Incremental Purchase on any day if the conditions set forth in Section 3.03 and, as applicable, Section 3.04, hereof are not satisfied. No Facility Agent, on behalf of its related Purchaser(s), shall make any such Purchase on or after the Termination Date. Each Incremental Purchase shall be in an aggregate amount of at least $1,000,000 or any higher multiple of $100,000 per each Purchase Group. Each Facility Agent shall purchase its related Purchase Group Percentage of each Incremental Purchase.
Section 2.03. Purchase Price. (a) On the closing date for each Incremental Purchase, each Facility Agent, on behalf of the applicable Purchaser(s), shall pay to the Seller in immediately available funds an amount equal to its Purchase Group Percentage of the Purchase
Price for such Incremental Purchase. The Purchase Price of the initial Incremental Purchase shall equal the initial Aggregate Net Investment; each Facility Agent, on behalf of its Purchase Group, shall pay its Purchase Group Percentage of such initial Purchase Price. The Purchase Price of each subsequent Incremental Purchase shall equal the amount by which the Aggregate Net Investment is increased by such Incremental Purchase and shall be funded by the Facility Agents, pro rata on the basis of their respective Purchase Group Percentages. Each Purchase Notice shall be irrevocable and binding on the Seller.
(b) On the day of each Reimbursement Purchase, the Facility Agents, on behalf of the applicable Purchasers shall pay to the applicable LC Bank in immediately available funds an amount equal to the Purchase Price for such Reimbursement Purchase. The Purchase Price for a Reimbursement Purchase shall be equal to the amount drawn under the applicable Letter of Credit. Each Facility Agent, on behalf of its Purchase Group, shall pay its Purchase Group Percentage of the Purchase Price for each Reimbursement Purchase. The Aggregate Net Investment shall be increased by the amount of each Purchase Price for a Reimbursement Purchase.
(c) On the day of each Swingline Purchase, the Facility Agent for the Swingline Purchaser, on behalf of the Swingline Purchaser, shall pay to the Seller the Purchase Price specified in Section 2.19(a).
(d) On the day of each Swingline Reimbursement Purchase, the Facility Agents (including the Facility Agent for the Purchase Group including the Swingline Purchaser), on behalf of the applicable Purchasers, shall pay to the Swingline Purchaser in immediately available funds an amount equal to the Purchase Price for such Swingline Reimbursement Purchase. The Purchase Price for a Swingline Reimbursement Purchase shall be equal to the Net Investment of the Swingline Purchase due on the Swingline Settlement Date. Each Facility Agent, on behalf of its Purchase Group (other than the Facility Agent for the Swingline Purchase, whose funding, for administrative convenience, shall be deemed made), shall pay its Purchase Group Percentage of the Swingline Reimbursement Purchase.
Section 2.04. Payments to Seller. The Purchase Price for each Purchase and all other amounts paid by any Facility Agent or the Administrative Agent hereunder to the Seller shall be made to the Designated Account.
Section 2.05. Reinvestment Purchases. Subject to Section 3.03 hereof, on each Business Day occurring after the initial Purchase, whichever first occurs hereunder, and prior to the Termination Date, the Seller hereby sells as set forth in Section 2.01 to the Facility Agents, for the benefit of the applicable Purchasers, and each Facility Agent shall, on behalf of the related Purchaser, purchase from the Seller undivided percentage ownership interests in each and every Receivable Interest not previously purchased to the extent that Collections are available for such Purchase in accordance with Section 2.08(a) hereof (each, a “Reinvestment Purchase”), such that after giving effect to such Purchase (and for each Facility Agent that is making such Reinvestment Purchase), (i) the amount of the Aggregate Net Investment of such Facility Agents, for the benefit of their respective Purchasers, at the end of each such day shall be equal to the amount of the Aggregate Net Investment of such Facility Agents, for the benefit of the related
Purchasers, at the end of the day immediately preceding such day, plus the Purchase Price paid with respect to any Incremental Purchase, Reimbursement Purchase or Swingline Reimbursement Purchase made on such day, if any, minus the reduction in Aggregate Net Investment pursuant to Section 2.08, 2.09 or 2.15(b) hereof made on such day, if any, and (ii) such Facility Agent’s (for the benefit of its related Purchaser) Purchase Group Net Investment, at the end of each such day shall be equal to the amount of its Purchase Group Net Investment at the end of the day immediately preceding such day, plus its Purchase Group Percentage of the Purchase Price paid with respect to any Incremental Purchase, Reimbursement Purchase or Swingline Reimbursement Purchase made on such day, if any, minus its pro rata portion of the reduction in the Aggregate Net Investment pursuant to Section 2.08, 2.09 or 2.15(b) hereof made on such day. Subject to the terms and conditions hereof, each such Reinvestment Purchase shall be allocated among the Facility Agents (for the benefit of their related Purchasers) based on their respective Exposure Amounts as a percentage of the Aggregate Exposure Amount on such day.
Section 2.06. Benchmark Replacement. (a) Notwithstanding anything to the contrary herein or in any other Transaction Document, if a Term SOFR Replacement Event has occurred in relation to Term SOFR, the Administrative Agent, acting with the consent of the Required Facility Agents, and the consent of the Seller, may amend or waive a provision of this Agreement and the other Transaction Document which relates to:
(i)providing for the use of a Benchmark Replacement in place of Term SOFR; and
(ii)
(A)aligning any provision of any Transaction Document to the use of that Benchmark Replacement;
(B)enabling that Benchmark Replacement to be used for the calculation of Yield under this Agreement (including, without limitation, any consequential changes required to enable that Benchmark Replacement to be used for the purposes of this Agreement);
(C)implementing market conventions applicable to that Benchmark Replacement;
(D)providing for appropriate fallback (and market disruption) provisions for that Benchmark Replacement; or
(E)adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one party to another as a result of the application of that Benchmark Replacement (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation).
(b) The Administrative Agent will promptly (in one or more notices) notify the Seller and each Facility Agent of (i) any occurrence of a Term SOFR Replacement Event, (ii) the implementation of any Benchmark Replacement, and (iii) the need for aligning any provision of any other Transaction Document to the use of that Benchmark Replacement and shall request consent of the Seller, and subject to paragraph (c) below, the Required Facility Agents with respect to the Benchmark Replacement and the alignment of any provision of any Transaction Document, which changes shall not be effective unless and until such consent is received.
(c) If any Facility Agent fails to respond to a request for an amendment or waiver described in paragraph (a) above within 15 Business Days (or such longer time period in relation to any request which the Seller and the Administrative Agent may agree) of that request being made: (i) its Purchase Group Maximum Net Investment(s) shall not be included for the purpose of calculating the Maximum net Investment when ascertaining whether any relevant percentage of Maximum Net Investment has been obtained to approve that request; and (ii) its status as a Facility Agent and its Purchase Group shall be disregarded for the purpose of ascertaining whether the agreement of any specified Facility Agents has been obtained to approve that request.
(d) Upon the Seller’s receipt of notice of the commencement of a Term SOFR Replacement Event, the Seller may revoke any pending request for a Purchase that accrues Yield based on the Term SOFR Rate or, failing that, will be deemed to have converted such request into a request for a Purchase that accrues Yield at the Alternate Base Rate (other than clauses (ii) or (iii) of that definition).
Section 2.07. Yield, Fees and Costs. (a) The Seller shall pay the Facility Agents (for distribution to the Purchasers and LC Banks, as applicable) Yield due on their Net Investment on each Settlement Date. On the first Business Day of each calendar month, each Facility Agent will provide the Seller and the Servicer with an invoice showing (a) the Yield due on the Net Investment funded by the Purchaser(s) (including the Swingline Purchaser, as applicable) in its Purchase Group and (b) the Yield due on the Reimbursement Obligations owed by the Seller to the LC Banks on the related Settlement Date for the preceding Calculation Period.
(b) The Seller shall pay the Facility Agents (for distribution to the Purchasers and LC Banks, as applicable), and the Administrative Agent, as applicable, the non-refundable fees set forth in the Transaction Fee Letters on each Settlement Date. For each Settlement Date, the Administrative Agent and each Facility Agent will provide the Seller and Servicer with an invoice showing the fees due to it and/or the related Purchasers and LC Banks in its Purchase Group on such Settlement Date.
(c) All payments made by the Seller or the Servicer to any Facility Agent pursuant to this Section 2.07 shall be made to the account designated by such Facility Agent on Schedule I hereto.
(d) The calculations of amounts owing to any Facility Agent (for itself or on behalf of its Purchase Group) or to the Administrative Agent in any invoice or certificate provided in this Section 2.07 shall be conclusive and binding for all purposes, absent manifest error.
Section 2.08. Settlements and Other Payment Procedures. (a) The Servicer shall, on each day before the Termination Date on which Collections of Receivables are received or deemed received by it (including amounts held in the Collection Account):
(i) set aside on its books and Records and hold in trust from the Percentage Interest in such Collections, an amount equal to (A) with respect to each Purchase Group, the aggregate amount of Yield, Used Fee, Unused Fee and other fees, costs, expenses and indemnity amounts accrued through, or payable on, such day for such Purchase Group, (B) with respect to each LC Bank to which Reimbursement Obligations are due and owing, an amount equal to accrued and unpaid Yield on any outstanding Reimbursement Obligations owed to such LC Bank, (C) with respect to each LC Bank that has issued Letters of Credit, all fees, including the Letter of Credit Fronting Bank Fee, accrued and unpaid to such LC Bank, (D) with respect to the Administrative Agent, any accrued and unpaid fees due to the Administrative Agent, and (E) with respect to the Servicer, any accrued and unpaid Servicing Fees;
(ii) deposit to the LC Cash Collateral Account, the amount required to cash collateralize any Defaulting Purchaser’s pro rata share of the aggregate undrawn Stated Amount of Letters of Credit pursuant to 2.12(a) hereof;
(iii) with respect to any LC Bank to which Reimbursement Obligations are owed, set aside the entire amount of such Reimbursement Obligations owed;
(iv) with respect to the Swingline Purchaser, set aside the amount of any Swingline Reimbursement Purchase owed;
(v) with respect to any Non-Extending Purchase Group, on and after the applicable Non-Pro Rata Extension Date (so long as a Termination Event shall not have occurred and be continuing), set aside on its books and Records its ratable share of Collections as described in Section 2.17(c) hereof;
(vi) if the Seller has provided timely notice of an optional reduction of the Aggregate Net Investment or a Mandatory Reduction Amount is due and unpaid, set aside on its books and Records from such Collections the Optional Reduction Amount and Mandatory Reduction Amount, as applicable, but for the avoidance of doubt, without any breakage costs;
(vii) apply all or a portion of the remainder of the Percentage Interest in such Collections, such that the Aggregate Net Investment after such receipt and Reinvestment Purchases is the same as before such receipt and Reinvestment Purchases; and
(viii) release any remaining Collections to the Seller;
and on each Settlement Date, Distribution Date, Mandatory Reduction Date, Optional Reduction Date or other day on which other amounts are due and payable pursuant to the terms of this Agreement, pay the amounts set aside above, together with other amounts paid by the
Seller, the Servicer or the Parent hereunder, to the Administrative Agent, the Facility Agents (on behalf of their Purchase Groups), the Purchasers or the LC Banks, as the case may be. If the Control Date but not the Termination Date shall have occurred, the daily set asides, applications and payments specified in this Section 2.08(a) shall be performed by the Administrative Agent, based on the information provided in the Servicer Reports and pursuant to Section 4.10(f).
(b) On the Termination Date and each Business Day thereafter, all Collections received or deemed received (including amounts in the Collection Account), together with other amounts paid by the Seller, the Servicer or the Parent hereunder, shall be applied in the following order of priority (whether or not such funds are sufficient to pay in full all such amounts and pro rata within each level based on the amounts due at such level):
First, to the Servicer in payment of all accrued and unpaid Servicing Fee and all other out-of-pocket costs and expenses owed to it, if any, in connection with the servicing, administering and collecting the Receivables;
Second, on a pro rata basis (a) to each Facility Agent, the accrued and unpaid Yield due on its Purchase Group’s Net Investment and (b) to any LC Bank, accrued and unpaid Yield on any outstanding Reimbursement Obligations;
Third, on a pro rata basis, (a) to each Facility Agent, the accrued and unpaid Used Fees and Unused Fees due to its related Purchase Group, (b) to each LC Bank, all accrued and unpaid Letter of Credit Fronting Bank Fees due to it and (c) to the Administrative-Agent, all accrued and unpaid fees due to the Administrative Agent;
Fourth, to the LC Cash Collateral Account, the amount necessary to cause the amount therein to equal the Required LC Cash Collateral Amount;
Fifth, to any LC Bank, in payment in full of any outstanding Reimbursement Obligations owed to it;
Sixth, to each Facility Agent, to reduce the related Purchase Group’s Net Investment to zero;
Seventh, to the Administrative Agent and each Facility Agent, any amounts necessary to reimburse the Administrative Agent or such Facility Agent for the costs of collection and enforcement of the Facility;
Eighth, to each Facility Agent and LC Bank, in payment in full of any other amounts owed by the Seller to the Purchasers and LC Banks in their related Purchase Groups pursuant to this Agreement; and
Ninth, to the Administrative Agent, in payment of expenses owed to it by the Seller pursuant to this Agreement.
(c) After the Aggregate Net Investment, Reimbursement Obligations, , Yield, fees and any other Aggregate Unpaids have been paid in full and, if required hereunder, the LC Cash Collateral Account has been funded in an amount equal to the Required LC Cash Collateral Amount, all additional Collections with respect to the Receivable Interest shall be paid to the Seller for its own account.
(d) For the purposes of this Section 2.08:
(i) if, on any day, there arises a Deemed Collection with respect to any Receivable, the Seller shall be deemed to have received on such day a Collection of such Receivable in the amount of such Deemed Collection;
(ii) except as otherwise required by applicable Law or in (i) above or the relevant Contract, all Collections (other than Deemed Collections) received from an Obligor of any Receivable shall be applied to the Receivables of such Obligor in order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables, provided that Deemed Collections shall be applied to the applicable Receivable that gave rise to such Deemed Collection; and
(iii) if and to the extent any Purchaser or LC Bank shall be required for any reason to pay over to an Obligor any amount received on its behalf hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the Seller and, accordingly, such Purchaser or LC Bank, as applicable, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof.
(e) The funds deposited into the LC Cash Collateral Account pursuant to (i) Section 2.08, Section 2.09 or Section 2.12 may be applied as set forth in (A) Section 2.11(b) to satisfy the Seller’s Reimbursement Obligations or (B) Sections 2.12(a) or (c) to satisfy a Defaulting Purchaser’s obligations to fund its portion of Reimbursement Purchases, or (ii) Section 11.08 may be applied to satisfy the Seller’s Reimbursement Obligation and the Required LC Cash Collateral Amount. If on any Monthly Report Date the amount on deposit in LC Cash Collateral Account (other than amounts deposited therein pursuant to Section 11.08 and not then applied pursuant to clause (ii) of the preceding sentence) exceeds the Required LC Cash Collateral Amount, the Administrative Agent shall, on the second Business Day after the next Monthly Report Date, withdraw such excess funds on deposit in the LC Cash Collateral Account, and pay the same to the Seller.
Section 2.09. Mandatory Reduction of Aggregate Exposure Amount If, on any day, the Seller knows or should know that the Percentage Interest exceeds 100%, the Servicer or the Seller shall promptly notify the Administrative Agent and the Facility Agents and shall specify the Mandatory Reduction Amount. By the second Business Day after the date of such notification, the Seller shall pay the Mandatory Reduction Amount to the Administrative Agent. The Administrative Agent shall distribute such funds (i) first, to each LC Bank owed any Reimbursement Obligations(s), its pro rata share (based on such LC Banks’ Reimbursement
Obligation(s) as a percentage of the aggregate amount of Reimbursement Obligations owed to LC Banks) of such Mandatory Reduction Amount (but in no event in excess of the Reimbursement Obligations(s) owed to each such LC Bank), (ii) second, to the Swingline Purchaser, any Swingline Reimbursement Purchase owed to it, (iii) third, to pay to each Facility Agent, its Purchase Group’s Purchase Group Percentage of any remaining Mandatory Reduction Amount to repay all or a portion of the related Purchase Group’s Net Investment, and (iv) fourth, to the LC Cash Collateral Account, any remaining Mandatory Reduction Amount. On any day on which a Mandatory Reduction Amount is due and payable, the Seller shall not be obligated to pay to any Purchaser any breakage costs in connection with the payment of such Mandatory Reduction Amount, even if paid on a date other than a Settlement Date.
Section 2.10. Letters of Credit. (a) On and after the LC Effective Date, subject to the terms and conditions hereof, each LC Bank, in reliance on the agreements of the Facility Agents set forth in Section 2.11, agrees to issue standby and documentary letters of credit (the “Letters of Credit”) for the account of the Seller on any Business Day during the period from the LC Effective Date to the Termination Date (or, in the case of an LC Bank in a Non-Extending Purchase Group, the applicable Non-Pro Rata Extension Date) in such form as may be approved from time to time by such LC Bank; provided that no LC Bank shall have any obligation to Issue any Letter of Credit if, after giving effect to such Issuance, (i) without the consent of the applicable LC Bank, the LC Obligations owed to such LC Bank at such time would exceed such LC Bank’s LC Bank Sublimit, (ii) the Percentage Interest would exceed 100%, (iii) in the event that the Scheduled Termination Date shall have been extended pursuant to Section 2.17 with respect to some but not all of the Purchase Groups, the portion of the LC Obligations attributable to Letters of Credit with expiry dates after the next Non-Pro Rata Extension Date will exceed the portion of the Maximum Net Investment attributable to the Maximum Net Investment of the Purchase Groups that are not Non-Extending Purchase Groups, or (iv) any Committed Purchaser is a Defaulting Purchaser, unless (x) arrangements with respect to such Defaulting Purchaser have been made which are reasonably satisfactory to such LC Bank to mitigate such LC Bank’s risk with respect to such Defaulting Purchaser (as to both existing Letters of Credit and any proposed new Issuance), (y) the Seller has fulfilled the requirements set forth in Section 2.12(a), or (z) such Defaulting Purchaser has assigned all of its rights, interests and obligations hereunder to assignee(s) in accordance with Section 11.08 hereof. Each Letter of Credit shall (A) be denominated in Dollars, (B) have a face amount of at least $5,000,000, (C) expire no later than the earlier of (1) the first anniversary of its date of issuance and (2) the date that is five Business Days prior to the Scheduled Termination Date (or, in the case of an LC Bank in a Non-Extending Purchase Group, the applicable Non-Pro Rata Extension Date), provided that any Letter of Credit with a one-year term may provide for the automatic renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (2) above) and (D) provide for the payment of sight drafts or other written demands for payment no earlier than the next Business Day after being presented for honor thereunder (as long as presented by 2:00 p.m., New York City time, on such Business Day, and, if presented after 2:00 p.m, the second Business Day after being presented) in accordance with the terms thereof and when accompanied by the documents described therein.
(b) The Seller may from time to time request that an LC Bank Issue or Modify a Letter of Credit, as the case may be, by delivering to such LC Bank, at its address for notices specified
on Schedule I hereto (or transmit by electronic communication, if arrangements for doing so have been approved by such LC Bank) and the Administrative Agent a Letter of Credit Application therefor, completed to the satisfaction of such LC Bank, and a Letter of Credit Request. Additionally, the Seller shall furnish to the applicable LC Bank such other certificates, documents and other papers and information as such LC Bank may request. Upon receipt of any Letter of Credit Application, such LC Bank will also provide a copy thereof to the Administrative Agent and, following receipt, the Administrative Agent shall advise the Facility Agents thereof. Such LC Bank will process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures. Unless such LC Bank has knowledge, or has received written notice from any Facility Agent, the Administrative Agent or the Seller at least one Business Day prior to the requested date of the applicable Issuance or Modification, that one or more applicable conditions contained in Section 3.03 shall not then be satisfied, then, subject to the terms and conditions hereof, such LC Bank shall on the requested date of the applicable Issuance or Modification, Issue or Modify the Letter of Credit, as the case may be, requested by such Letter of Credit Application and related documentation (but in no event shall such LC Bank be required to Issue or Modify any Letter of Credit earlier than three Business Days after its receipt of the Letter of Credit Application therefor and all related documentation) by Issuing the original of such Letter of Credit (or requested Modification, if applicable) to the beneficiary thereof or as otherwise may be agreed to by such LC Bank and the Seller. Such LC Bank shall furnish a copy of such Letter of Credit or any amendment thereto to the Seller promptly following the Issuance or Modification thereof. Such LC Bank shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Facility Agents, notice of the Issuance or Modification, as applicable, of each Letter of Credit (including the amount thereof), each increase or decrease in the amount of such Letter of Credit (including the amount thereof) and the termination of such Letter of Credit.
(c) Notwithstanding the foregoing or anything else to the contrary contained herein, no LC Bank shall be under any obligation to Issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such LC Bank from Issuing such Letter of Credit, or any Law applicable to such LC Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such LC Bank (x) shall prohibit, or request that such LC Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular, (y) shall impose upon such LC Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such LC Bank is not otherwise entitled to be compensated hereunder) not in effect on the LC Effective Date, or (z) shall impose upon such LC Bank any unreimbursed loss, cost or expense which was not applicable on the LC Effective Date and which such LC Bank in good faith deems material to it; provided that, in the cases of clauses (y) and (z), such LC Bank shall have provided written notice to the Seller of its refusal to issue any Letter of Credit and the specific reasons therefor and the Seller shall not have compensated such LC Bank for the imposition of such restriction, reserve or capital requirement or reimbursed such LC Bank for such loss, cost or expense, as applicable; (ii) the Issuance of such Letter of Credit would otherwise conflict with, or cause such LC Bank or any Purchase Group to exceed any limits imposed by, any applicable Law; or (iii) the Issuance of such Letter of Credit would violate one or more policies of such LC Bank applicable to letters of credit generally. An LC
Bank shall not be obligated to Modify any Letter of Credit if (A) such LC Bank would have no obligation at such time to Issue the Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of the Letter of Credit does not accept the proposed amendment to the Letter of Credit.
(d) The Seller shall authorize and direct each LC Bank to name the Seller as the “Applicant” or “Account Party” of each Letter of Credit; provided, that any such Letter of Credit may indicate that it is issued “on behalf of Ferguson Enterprises, LLC or an Affiliate of Ferguson Enterprises, LLC” Notwithstanding that a Letter of Credit issued or otherwise outstanding hereunder is in support of any obligations of a Person other than the Seller, the Seller shall be obligated to reimburse the applicable LC Bank hereunder for any and all drawings under such Letter of Credit as provided in this Agreement.
(e) If any draft shall be presented for payment under any Letter of Credit, the relevant LC Bank shall promptly notify the Seller and the Administrative Agent of the date and the amount thereof and whether such LC Bank has made or will make a payment thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Seller of its obligation to reimburse such LC Bank with respect to any drawing under a Letter of Credit in accordance with the terms hereof. Upon receipt of any such notice, the Administrative Agent shall promptly advise the Facility Agents thereof. The responsibility of such LC Bank to the Seller in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.
(f) To the extent that any provision of any Letter of Credit Application related to any Letter of Credit is inconsistent with the provisions of this Section 2.10, the provisions of this Section 2.10 shall apply.
(g) For purposes of determining the “Stated Amount” of a Letter of Credit at any time hereunder, such amount shall be deemed to be the maximum stated amount (including any automatic increases provided by its terms) of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
(h) The Seller shall cause the aggregate Stated Amount of all Letters of Credit outstanding hereunder and all Reimbursement Obligations under clause (i) of that definition to be secured at all times by the Receivable Interest, and shall on every Business Day make such further grant, assignment, transfer and conveyance to the Facility Agents, for the benefit of the related Purchasers and LC Banks, in the Receivables, Related Security and Collections, as is necessary (if any) to cause such Receivable Interest to be so maintained.
(i) All payments made by an LC Bank pursuant to any Letter of Credit shall be made from funds of such LC Bank, and not from the funds of any other Person.
(j) Whenever any LC Bank issues a Letter of Credit, each Facility Agent, on behalf of its related Purchasers, shall, automatically and without further action of any kind upon the
effective date of issuance of such Letter of Credit, have irrevocably (i) agreed to acquire a participation interest therein in an amount equal to its Purchase Group Percentage of the Stated Amount of such Letter of Credit and (ii) committed to make a Reimbursement Purchase hereunder equal to its ratable share of the applicable Reimbursement Obligation in the event that such Letter of Credit is subsequently drawn and such drawn amount shall not have been reimbursed by the Seller upon such draw. In the event that any Letter of Credit expires or is surrendered to the issuing LC Bank without being drawn (in whole or in part) then, in such event, the foregoing commitment to make a Reimbursement Purchase with respect to draws under such Letter of Credit shall expire with respect to such Letter of Credit and the Aggregate Exposure Amount shall automatically reduce by the Stated Amount of the Letter of Credit which is no longer outstanding.
Section 2.11. Letter of Credit Reimbursements; Payments. (a) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the applicable LC Bank will promptly notify the Seller and the Administrative Agent of such request on the date such request is made, and the Administrative Agent shall, in turn, promptly advise the Facility Agents thereof. Upon such drawing, the Seller will have a Reimbursement Obligation to reimburse such LC Bank at or prior to 11:00 a.m., New York time on the date on which such draw is required to be paid, in an amount equal to the amount paid by such LC Bank under such Letter of Credit in respect of such drawing. The Seller shall use its own funds available therefor to satisfy its Reimbursement Obligation; provided, that on and after the Termination Date, the Administrative Agent shall apply funds on deposit in the LC Cash Collateral Account to pay the applicable LC Bank the Reimbursement Obligation owed to it. If the Seller shall not have satisfied its Reimbursement Obligation, the applicable LC Bank shall promptly notify the Administrative Agent, the Seller and the Facility Agents of such non-payment by the Seller of its Reimbursement Obligation and the Seller shall be deemed to have requested that a Purchase (each such Purchase, a “Reimbursement Purchase”) be made on the date of the required drawing in the amount paid by such LC Bank under such Letter of Credit in respect of such drawing on such date and (ii) the Seller will deliver promptly to the Facility Agents a Purchase Notice with respect to such Reimbursement Purchase. Such Purchase Notice will specify the amount of the Reimbursement Purchase and the allocation thereof among the Purchase Groups and remittance instructions provided by the applicable LC Bank. Upon receipt of such Purchase Notice, a Reimbursement Purchase will be made by each Facility Agent (on behalf of its related Purchasers) by delivering its portion of such Reimbursement Purchase (or, in the case of a Defaulting Purchaser, by the Administrative Agent using funds in the LC Cash Collateral Account, if available, to fund such Defaulting Purchaser’s portion of the Reimbursement Purchase) to the Seller by 5:00 p.m. (New York time) on such Business Day; provided, that in no event shall any Facility Agent make a Reimbursement Purchase in the event that, after giving effect to the making of such Reimbursement Purchase, the related Purchase Group’s Exposure Amount would exceed such Purchase Group’s Maximum Net Investment. The requirement to make Reimbursement Purchases hereunder shall continue until the last to occur of any of the following events: (i) each LC Bank ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (ii) no Letter of Credit issued hereunder remains outstanding and uncancelled; and (iii) all Persons (other than the Seller or any Affiliate) have been fully reimbursed for all payments made under or relating to Letters of Credit. To the extent that any Facility Agent (on behalf of its related Purchasers) does not fund such Reimbursement Purchase
hereunder, the aggregate amount of such unfunded Reimbursement Purchases shall be deemed to be a Reimbursement Obligation of the Seller until such time (if at all) that any such Facility Agent(s) (on behalf of their related Defaulting Purchaser(s)) fund their Reimbursement Purchase(s) to such LC Bank. Each Facility Agent’s funding of its ratable portion of a Reimbursement Purchase shall reduce the Seller’s Reimbursement Obligation by the amount of such funding.
(b) If an LC Bank is required at any time to return to the Seller or any other Person, or to a trustee, receiver, liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments made by the Seller to such LC Bank pursuant to this Agreement in payment of a Reimbursement Obligation, each Facility Agent’s obligation (on behalf of its related Purchaser) to make a Reimbursement Purchase in accordance with the terms of Section 2.11(a) shall thereupon arise, and following demand by such LC Bank, each such Facility Agent shall make a Reimbursement Purchase of its ratable amount of any amounts so returned by such LC Bank.
(c) Notwithstanding any other provision of this Agreement, prior to the date on which a drawing occurs on any Letter of Credit (each such date, a “Drawing Date”), no Yield shall accrue or be payable on the Stated Amount of such Letter of Credit, but fees with respect thereto shall be payable in accordance with the Fee Letter and each LC Bank Fee Letter. Following the Drawing Date of any Letter of Credit and funding of a Reimbursement Purchase, applicable Yield shall accrue and be payable on the outstanding unpaid amount of such Reimbursement Purchase for each day from and including the date such Reimbursement Purchase is made. In addition, following the Drawing Date of any Letter of Credit (and until a Reimbursement Purchase or payment in satisfaction of a Reimbursement Obligation in full), applicable Yield shall accrue and be payable on the outstanding amount of such Reimbursement Obligation for each day from and including the date such Reimbursement Obligation arose to but excluding the date the Seller reimburses the Reimbursement Obligation (or such time as the Reimbursement Purchase is made in full to satisfy the Reimbursement Obligation).
(d) The Seller’s obligations under this Section 2.11 and the Facility Agents’ obligations to fund Reimbursement Purchases under this Section 2.11 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Seller or any such Facility Agent may have or have had against any LC Bank, any beneficiary of a Letter of Credit or any other Person. The Seller also agrees with each LC Bank that no LC Bank shall be responsible for, and the Seller’s Reimbursement Obligations shall not be affected by, among other things, (i) any lack of validity or enforceability of any Letter of Credit or any Transaction Document or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by any LC Bank under a Letter of Credit against presentation of a draft or other document that does not strictly comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.11(d), constitute a legal or equitable discharge of, or provide a right of setoff against, the Seller’s obligations hereunder. Neither the Administrative Agent, the Facility Agents, the Purchasers nor the LC Banks, nor any of their Related Parties, shall have any liability
or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of any LC Bank; provided, that the foregoing shall not be construed to excuse the relevant LC Bank from liability to the Seller to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Seller to the extent permitted by applicable Law) suffered by the Seller that are caused by such LC Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of an LC Bank (as finally determined by a court of competent jurisdiction), such LC Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, an LC Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(e) If any Letter of Credit remains outstanding and undrawn (either in full or in part) on the Termination Date, effective as of such date, the Seller shall have a Reimbursement Obligation with respect to all such Letters of Credit in an amount equal to the aggregate Stated Amount of outstanding and undrawn Letters of Credit on such day, together with the associated Fee Collateral Amount, and the Seller agrees to satisfy such Reimbursement Obligation by depositing such amount into the LC Cash Collateral Account.
Section 2.12. Defaulting Purchasers. (a) If any Committed Purchaser becomes a Defaulting Purchaser at any time when there are undrawn Letters of Credit outstanding, then the Servicer shall on each day following such occurrence apply Collections to cash collateralize for the benefit of the LC Banks the portion of the amount of the then outstanding Letters of Credit equal to such Defaulting Purchaser’s ratable share of such undrawn Stated Amount of outstanding Letters of Credit by depositing all Collections available pursuant to Section 2.08 into the LC Cash Collateral Account until the amount therein is equal to such Defaulting Purchaser’s ratable share of undrawn Stated Amount of outstanding Letters of Credit (including increased amounts due to newly-issued Letters of Credit and reductions due to terminations of Letters of Credit). The Administrative Agent shall (1) apply funds deposited into the LC Cash Collateral Account pursuant to this Section 2.12(a) to satisfy a Defaulting Purchaser’s obligation to fund it portion of a Reimbursement Purchase pursuant to Section 2.11(a) or (b) hereof and (2) transfer funds in the LC Cash Collateral Account in excess of the Required LC Cash Collateral Amount to the Seller as provided in Section 2.08(e) hereof. For the avoidance of doubt, the amount required to be deposited and maintained in the LC Cash Collateral Account pursuant to this Section 2.12(a) is only one component of the Required LC Cash Collateral Amount, and other
amounts may be required to be deposited and maintained in the LC Cash Collateral Account pursuant to Section 2.08 or 2.09.
(b) The Seller shall not be required to pay any Defaulting Purchaser the portion of the Used Fee or Unused Fee pursuant to the Fee Letter with respect to the amount of the undrawn Letters of Credit that is cash collateralized pursuant to Section 2.12(a).
(c) Except for the portion of any fees not otherwise payable to such Defaulting Purchaser pursuant to Section 2.12(b), no amount payable by the Seller for the account of a Defaulting Purchaser under this Agreement (whether on account of Net Investment, Yield, indemnity payments or other amounts) shall be paid or distributed to such Defaulting Purchaser (or its Facility Agent), but instead shall be deposited to the LC Cash Collateral Account until the amount therein is equal to the amount of such Defaulting Purchaser’s ratable share of the Stated Amount of the undrawn Letters of Credit that is not cash collateralized in accordance with Section 2.12(a), and to the extent of any remaining amounts, to pay to such Defaulting Purchaser amounts owed to it.
Section 2.13. Payments and Computations, Etc. All per annum fees payable under this Agreement shall be calculated for the actual days elapsed on the basis of a 360-day year. All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be paid or deposited in accordance with the terms hereof in immediately available funds no later than the time specified in the applicable provision of this Agreement, or, if not so specified, by 11:00 a.m. (New York City time) on the day when due. All such amounts shall be paid or deposited to the applicable party or account, as applicable, at the address listed on Schedule I hereto (or in the applicable Assumption Agreement); provided, that, if such amounts are payable to any Purchasers or LC Banks, they shall be paid or deposited in the applicable Facility Agent’s account indicated on Schedule I hereto (or in the applicable Assumption Agreement), until otherwise notified by such party. The Seller shall, to the extent permitted by Law, pay interest on all amounts not paid or deposited when due hereunder at a rate equal to the Default Rate. All computations of Yield hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed other than computations of interest calculated by reference to the Alternate Base Rate which shall be calculated on the basis of a 365- or 366-day year, as applicable.
Section 2.14. Increased Costs. The Seller will indemnify each Purchaser (and any of its Support Providers) and LC Bank if any Regulatory Change (i) subjects such Person (each an “Affected Person”) to any charge on or with respect to such Affected Person’s obligations in connection with the Facility, or on or with respect to the Receivables, or subjects any such Affected Person to Tax on its Exposure Amount or its obligation to fund a portion of the Aggregate Exposure Amount (except for Indemnified Taxes and Excluded Taxes), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or liabilities of any Affected Person, or credit extended by any Affected Person in connection with the Facility (excluding Taxes) or (iii) imposes any other condition the result of which is to increase the cost to any Affected Person of performing its obligations in connection with the Facility, or to reduce the rate of return on any Affected Person’s capital as a consequence of its obligations in connection with the Facility, or to reduce
the amount of any sum received or receivable by any Affected Person in connection with this Facility, or to require any payment calculated by reference to the amount of interests or loans held or interest received by it (excluding Taxes). The Seller will promptly pay to the Facility Agent for the Affected Person such indemnity amount as shall be specified to the Seller in a certificate of the Affected Person (or its Facility Agent, on its behalf) setting forth the calculations of such amount, together with the basis therefor. Any such certificate submitted by or on behalf of the Affected Person shall be conclusive and binding for all purposes, absent manifest error.
Section 2.15. Optional Reduction of Maximum Net Investment; Optional Reduction of Aggregate Net Investment. (a) The Seller may at any time and from time to time reduce in whole or in part the Maximum Net Investment (but not below the Aggregate Exposure Amount) and/or the Swingline Sublimit by giving the Facility Agents and/or the Swingline Purchaser, if applicable, written notice thereof at least five (5) Business Days before such reduction is to take place; provided, however, that any partial reduction of the Maximum Net Investment or the Swingline Sublimit shall be in an amount of $5,000,000 or any higher multiple of $100,000. Any reduction in the Maximum Net Investment shall be allocated ratably among the Purchase Groups. The Seller shall pay each Facility Agent any accrued and unpaid Unused Fee on the date of such reduction with respect to the reduction amount.
(b) The Seller may reduce, in whole or in part, the Aggregate Net Investment (the amount of any such reduction, the “Optional Reduction Amount”) by giving the Administrative Agent and the Facility Agents written notice thereof at least two (2) Business Days before such optional reduction (each, an “Optional Reduction Notice”) substantially in the form of Exhibit F hereto. Each such Optional Reduction Notice shall specify the requested Optional Reduction Amount and the requested optional reduction date. If the Seller has delivered an Optional Reduction Notice with respect to the Aggregate Net Investment, then on the requested Optional Reduction Date, the Servicer shall apply Collections that would have been used for Reinvestment Purchases to pay (i) first, to the Facility Agent for the Swingline Purchaser, any Swingline Purchase Net Investment or Swingline Reimbursement Purchase that is owed, and (ii) second, to the Facility Agents (for the benefit of their respective Purchasers), their ratable shares of the reduction amount, but for the avoidance of doubt, without any breakage costs. Each partial reduction shall be in minimum increments of $5,000,000 or any higher multiple of $100,000.
Section 2.16. Increase in Maximum Net Investment . The Seller may at any time and from time to time as long as no Termination Event or Potential Termination Event exists increase the Maximum Net Investment up to $1,500,000,000 by (a) either (i) adding additional Purchase Groups or (ii) causing an existing Purchase Group or Groups to increase its Purchase Group Maximum Net Investment and (b) executing an amendment to this Agreement. Each new Purchase Group shall become a party hereto by executing and delivering to the Administrative Agent, the Seller and the Servicer an Assumption Agreement (which Assumption Agreement shall be executed by all Purchasers in such new Purchase Group).
Section 2.17. Procedures for Extension of Scheduled Termination Date. (a) No more than 90 days prior to date as of which the proposed extension would become effective (the “Proposed Effective Date”), the Seller may request in writing that each Facility Agent consent to
the extension of the Scheduled Termination Date for an additional period specified in such request, which decision shall be made by each Facility Agent (after consultation with its Purchase Group) in its sole discretion. Each Facility Agent shall notify the Seller of its willingness or its determination not to consent to such extension of the Scheduled Termination Date as soon as practical after receiving such request, and in any event by the thirtieth day following the day such request is received (the “Response Date”). Any Facility Agent which does not expressly notify the Seller of its willingness to extend by the Response Date will be deemed not to have consented to such extension.
(b) If, by the Response Date, all Facility Agents have notified the Seller of their determination to extend the Scheduled Termination Date, then on the Proposed Effective Date, the Scheduled Termination Date will be so extended by the period agreed between the Seller and the Purchase Groups, such extension to be evidenced in an addendum or amendment to this Agreement signed by all parties hereto.
(c) If, by the Response Date, any Facility Agent has notified (or is deemed to have notified) the Seller of its determination not to extend, then such Purchase Group will become a “Non-Extending Purchase Group” on the Proposed Effective Date unless on or before such Proposed Effective Date, the Seller withdraws its request for an extension, in which case, all Purchase Groups shall maintain their existing Purchase Group Maximum Net Investments for the unextended Scheduled Termination Date. If the Seller elects not to withdraw its request, then on the Proposed Effective Date (or such date as is agreed by the parties hereto) (i) for any Facility Agents which have agreed to the extension of the Scheduled Termination Date, the Scheduled Termination Date will be extended for the period requested by the Seller and accepted by such Facility Agents and (ii) the Seller shall either (A) cause each Non-Extending Purchase Group to assign, and each Non-Extending Purchase Group hereby agrees to make such assignment, governed by the terms of Section 11.08, of its interests, rights and obligations (including its obligation to make Swingline Purchases, if applicable) under this Agreement to existing Purchase Groups, an Eligible Purchaser, or other Purchaser acceptable to the Administrative Agent and following the LC Effective Date, the LC Banks, which agree to the extended Scheduled Termination Date, or (B) declare a “Non-Pro Rata Extension Date” as of which date (1) the Maximum Net Investment (and the LC Sub-Facility) will be reduced by the amount of each Non-Extending Purchase Group’s Purchase Group Maximum Net Investment, (2) if such Non-Extending Purchase Group includes the Swingline Purchaser, the Swingline Sublimit will be reduced by the amount of the Swingline Sublimit, and (3) the Servicer shall set aside and hold in trust for each Non-Extending Purchase Group, a ratable percentage of Collections (based on the Exposure Amount of such Non-Extending Purchase Group as a percentage of the Aggregate Exposure Amount). If the amount so set aside on such Non-Pro Rata Extension Date is not adequate to repay each Non-Extending Purchase Group’s Net Investment, together with Yield thereon and other Aggregate Unpaids due to it, then on each Business Day after the Non-Pro Rata Extension Date, unless a Termination Event or Potential Termination Event shall have occurred and be continuing or would occur after giving effect to the payment of such amounts, the Servicer shall allocate to each Non-Extending Purchase Group its ratable portion of Collections (up to such Net Investment, Yield and other amounts) and on each Distribution Date after the Non-Pro Rata Extension Date, shall pay to the Facility Agent for the Non-Extending Purchase Group the Non-Extending Purchase Group’s Net Investment, Yield
thereon and other Aggregate Unpaids due them until such amounts have been paid in full. The Facility Agent for a Non-Extending Purchase Group shall not be obligated to make any Purchases or Issue or Modify Letters of Credit on and after its Non-Pro Rata Extension Date. An extension of the Scheduled Termination Event shall be evidenced by an addendum or amendment to this Agreement executed by all parties hereto (including any new Purchasers and Facility Agents).
Section 2.18. Facility Termination. Subject to other provisions of this Agreement requiring earlier termination, the Facility Agents’ obligations (on behalf of their respective Purchasers) to make Purchases hereunder and LC Banks’ obligations to Issue or Modify (and honor draws under) the Letters of Credit hereunder shall terminate at Facility Termination.
Section 2.19. Swingline Purchases . (a) Subject to the terms and conditions hereof, including Section 3.03 and, as applicable, Section 3.04, from time to time, upon receipt by the Facility Agent for the Swingline Purchaser from the Seller of a Purchase Notice, the Swingline Purchaser hereby agrees to make a Swingline Purchase in an aggregate amount not to exceed at any time the Swingline Sublimit. The Seller shall provide the Facility Agent for the Swingline Purchaser with a Purchase Notice by 1:00 p.m. (New York City time) on the Business Day on which such Swingline Purchase is requested (and if the Facility Agent shall receive such Purchase Notice after 1:00 p.m (New York City time), on a Business Day, such Swingline Purchase shall be deemed to be requested to be made on the next following Business Day). Each Purchase Notice shall specify the Purchase Price of the Swingline Purchase requested to be made. Not later than 4:00 p.m. (New York City time) on the Business Day on which such Purchase Notice is received (or if such Purchase Notice is received after 1:00 p.m., (New York City time) on a Business Day, no later than 1:00 p.m. (New York City time), on the Business Day next following the Business Day on which such Purchase Notice is received), the Swingline Purchaser will make the Swingline Purchase by paying to the Seller in immediately available funds an amount equal to the Purchase Price for such requested Swingline Purchase. The Swingline Purchaser shall have no obligation to make a Swingline Purchase on any day if the conditions set forth in Section 3.03 and, as applicable, Section 3.04, hereof are not satisfied. The Swingline Purchaser shall make no such Swingline Purchase on or after the tenth Business Day before the Scheduled Termination Date or after the Termination Date. Each Swingline Purchase shall be in an aggregate amount of at least $1,000,000 or any higher multiple of $100,000. The Seller will provide the Administrative Agent with a copy of each Purchase Notice for a Swingline Purchase at the same time as such Purchase Notice is provided to the Facility Agent for the Swingline Purchaser, and the Administrative Agent will, in turn, promptly provide such Purchase Notice to the Facility Agents.
(b) On the Swingline Settlement Date related to each Swingline Purchase, such Swingline Purchase shall be repaid by Purchase by the Purchase Groups (each such Purchase, a “Swingline Reimbursement Purchase”). On or prior to 1:00 p.m., New York time on the Business Day before each Swingline Settlement Date, the Swingline Purchaser shall deliver to the Administrative Agent and the Facility Agents a Purchase Notice. Such Purchase Notice will specify the amount of the Swingline Reimbursement Purchase and the allocation thereof among the Purchase Groups (which shall be based on their respective Purchase Group Percentages) and remittance instructions. Upon receipt of such Purchase Notice, a Swingline Reimbursement
Purchase will be made by each Facility Agent (other than the Facility Agent for the Swingline Purchaser whose funding, for administrative convenience, will be deemed made), on behalf of its related Purchasers, by delivering its portion of such Swingline Reimbursement Purchase to the Facility Agent for the Swingline Purchaser by 1:00 p.m. New York time, on the applicable Swingline Settlement Date; provided, that in no event shall any Facility Agent make a Swingline Reimbursement Purchase in the event that, after giving effect to the making of such Swingline Reimbursement Purchase, the related Purchase Group’s Exposure Amount would exceed such Purchase Group’s Maximum Net Investment. The requirement to make Swingline Reimbursement Purchases hereunder shall continue until the last to occur of any of the following events: (i) the Swingline Purchaser ceases to be obligated to make Swingline Purchases hereunder; and (ii) the Net Investment attributable to Swingline Purchases has been repaid.
(c) In the event any Facility Agent fails to make available to the Swingline Purchaser its portion of the Swingline Reimbursement Purchase, such Facility Agent shall continue to owe to the Swingline Purchaser its portion of the Swingline Reimbursement Purchase, together with interest thereon in respect of each day from and including the applicable Swingline Settlement Date to the date such amount is repaid to the Swingline Purchaser in same day funds at the Alternate Base Rate.
(d) In the event that, on a Swingline Settlement Date, a Termination Event occurs and either (i) such Termination Event is of the type described in Section 8.1(f) hereof or (ii) no further Purchases are being made under this Agreement, so long as any such Termination Event is continuing, then, the Seller will be deemed to have sent to each of the Facility Agents (on behalf of their respective Purchas Groups) a Purchase Notice for a Swingline Reimbursement Purchase and the procedures of clause (b) shall apply.
(e) The Facility Agents’ obligations to fund Swingline Reimbursement Purchases under this Section 2.19 shall be absolute and unconditional under any and all circumstances, and irrespective of any setoff, counterclaim or defense to payment that the Seller or any such Facility Agent may have or have had against the Swingline Purchaser or any other Person, and shall apply regardless of whether the conditions precedent thereto set forth in Section 3.03 and, as applicable, Section 3.04 hereof,, are then satisfied and whether or not any Termination Event or Potential Termination Event exists.
ARTICLE III
CLOSING PROCEDURES
Section 3.01. Purchase and Sale Procedures.
(a) General. Each Purchase (other than a Swingline Purchase) hereunder shall constitute a purchase of, and shall transfer ownership to the Facility Agents for the benefit of the Purchasers of, undivided percentage ownership interests in each and every Receivable, together with Related Security and Collections with respect thereto, then existing. Each Swingline
Purchase hereunder shall constitute a purchase of, and shall transfer ownership to the Facility Agent for the benefit of the Swingline Purchaser of, additional undivided percentage ownership interests in each and every Receivable, together with Related Security and Collections with respect thereto, then existing.
(b) Sale Without Recourse. The Receivable Interest sold by the Seller hereunder shall be made without recourse except as specifically provided herein.
(c) Non-Assumption by the Purchase Groups of Obligations. No obligation or liability of the Seller to any Obligor or any third party under any Receivable or Contract which is part of the Receivables in which the Facility Agents, on behalf of their respective Purchase Groups, have acquired the Receivable Interest shall be assumed by any Facility Agent or Purchaser, and any such assumption is hereby expressly disclaimed. Each Purchaser, each LC Bank, each Facility Agent and the Administrative Agent shall be indemnified by the Seller in accordance with Section 10.01 hereof in respect of any Losses arising out of or incurred in connection with any Obligor’s assertion of such obligation or liability against the Purchasers, the LC Banks, the Facility Agents or the Administrative Agent.
Section 3.02. Conditions to Closing. On or prior to the execution of this Agreement on the Original Closing Date, the Seller shall deliver or cause to be delivered to the Administrative Agent the following documents and instruments:
(a) Copies of the resolutions of the board of managers or directors of each Ferguson Party, each certified as of the date hereof by such Person’s secretary or an assistant secretary authorizing the execution, delivery and performance of this Agreement (at a potential Maximum Net Investment of $800,000,000), any other Transaction Document to which such Person is a party, and the other documents to be delivered by such Person hereunder and approving the transactions contemplated hereby and thereby;
(b) The certificate of formation or incorporation of each Ferguson Party certified as of a date reasonably near the date hereof by the Secretary of State or other similar official of such Person’s jurisdiction of organization or incorporation, as applicable;
(c) A good standing certificate for each Ferguson Party issued by the Secretary of State or other similar official of such Person’s jurisdiction of organization or incorporation, each such certificate to be dated a date reasonably near the date hereof;
(d) A certificate of the secretary or, in the case of the Seller, other authorized officer, of each Ferguson Party dated the date hereof and certifying (i) the names and signatures of the officers authorized on such Person’s behalf to execute, and the Responsible Officers authorized to perform, this Agreement, any other Transaction Document to which such Person is a party, and any other documents to be delivered by such Person hereunder (on which certificate the Administrative Agent, the Facility Agents, the Purchasers and the LC Banks may conclusively rely until such time as the Administrative Agent shall receive from such Person a revised certificate meeting the
requirements of this clause (d)(i)) and (ii) a copy of such Person’s By-laws or, in the case of the Seller, the Limited Liability Company Agreement;
(e) Financing statements (Form UCC-l) in proper form for filing naming (i) the Seller as the debtor/seller and RBC, as Administrative Agent (on behalf of the Facility Agents for the benefit of the Purchasers and the LC Banks), as the secured party/purchaser for filing in the State of Delaware, and (ii) each Originator as the debtor/seller, the Seller, as the secured party/purchaser, and RBC, as Administrative Agent (on behalf of the Facility Agents for the benefit of the Purchasers and the LC Banks), as assignee, for filing in the State of Delaware;
(f) Executed copies of proper financing statements (Form UCC-2 or UCC-3), necessary under the laws of all appropriate jurisdictions to release all security interests and other rights of any Person in Receivables previously granted by the Seller or any Originator;
(g) Certified copies of requests for information or copies (Form UCC-11) (or a similar search report certified by parties acceptable to the Administrative Agent) dated a date reasonably near the Original Closing Date listing all effective financing statements which name the Seller or each Originator as debtor and which, in each case, are filed in jurisdictions in which the filings related to each such Person were made pursuant to item (e) above, together with copies of such Liens and financing statements;
(h) Evidence of establishment of the Lockboxes, Lockbox Accounts, Depository Accounts, Blocked Local Accounts and the Concentration Account in the name of the Seller and copies of duly executed Blocked Account Agreements in form and substance reasonably satisfactory to the Administrative Agent;
(i) Copies of the Credit Card Agreements signed by American Express Travel Related Services Company, Inc. and First Data, each of which acknowledges that such credit card processor will make credit card payments on Receivables to the Concentration Account and agreeing to look first to a Ferguson account for payment of fees, expenses, chargebacks and other amounts owing to it under its Credit Card Agreement;
(j) An opinion of Mayer Brown LLP, as counsel to the Ferguson Parties, dated the date hereof, relating to bankruptcy matters, including (i) true sale between each Originator and the Seller, and (ii) no substantive consolidation of any Ferguson Party with the Seller;
(k) A favorable opinion or opinions of Mayer Brown LLP, as special counsel to the Ferguson Parties (other than the Parent, except with respect to enforceability), each dated the date hereof, relating to (i) limited liability company matters with respect to the Seller, (ii) enforceability of the Transaction Documents, (iii) no conflicts with laws or agreements, (iv) no consents, (v) first priority perfected security interest of (A) the Seller’s interest in the Receivables, Related Security and Collections and (B) the Facility
Agents’ interest in the Receivable Interest and (vi) such other matters as the Administrative Agent may reasonably request;
(l) A favorable opinion of Hunton & Williams LLP, as counsel to the Ferguson Parties, dated the date hereof, relating to (i) corporate or limited liability company matters (except with respect to the Seller) and (ii) such other matters as the Administrative Agent may reasonably request;
(m) A favorable opinion or opinions of Carey Olsen Jersey Partnership, as Jersey counsel to the Parent, dated the date hereof, relating to (i) corporate matters and (ii) such other matters as the Administrative Agent may reasonably request;
(n) Certificates of authorized officers of each Ferguson Party as to (i) the truth and correctness in all material respects of the representations and warranties in the Transaction Documents and (ii) the absence of any Potential Termination Event or Termination Event;
(o) Executed copies of the Transaction Fee Letters;
(p) Payment to each Facility Agent, the Administrative Agent and Truist Bank, as co-administrative agent, of all fees payable in accordance with the Transaction Fee Letters, and payment of rating agency fees and fees of Chapman and Cutler LLP, counsel to the Administrative Agent and Facility Agents to the extent invoiced at least two business days before the closing of the Facility;
(q) An executed copy of the Purchase and Contribution Agreement;
(r) A pro forma Monthly Report for the Calculation Period ended June 30, 2013;
(s) Satisfactory completion of a final agreed-upon procedures report by Protiviti Inc.;
(t) Evidence that the Parent has received a Rating of “BBB” or higher,
(u) For each Purchase Group which includes a Conduit Purchaser (if so required by such Purchase Group), rating agency confirmation of the commercial paper rating of such Conduit Purchaser’s Commercial Paper;
(v) Credit approval for the Facility from each Facility Agent; and
(w) Such other documents as the Administrative Agent or any Facility Agent may reasonably request.
Section 3.02A. Conditions to Amendment Effectiveness; Post-Effectiveness Covenants. On or before the effective date of the amendment of this Agreement on OctoberJune 723, 20222023,
the Seller shall cause to be delivered to the Administrative Agent and each Facility Agent the documents and instruments specified in the ThirteenthOmnibus Amendment to Receivables Purchase Agreementand Consent dated as of OctoberJune 723, 20222023, by and among the parties hereto, all of which shall be in a form and substance reasonably acceptable to the Administrative Agent and each Facility Agent:
Section 3.03. Conditions to Purchases and Letter of Credit Usage. In addition to any applicable terms set forth in Section 2.02 and 2.05, each Incremental Purchase, Reinvestment Purchase and Swingline Purchase and each Issuance or Modification of a Letter of Credit shall be subject to the following terms and conditions:
(a) in the case of the initial Issuance, the LC Effective Date shall have occurred;
(b) the Termination Date shall not have occurred;
(c) (i) in the case of an Incremental Purchase, the Administrative Agent and each Facility Agent shall have received a Purchase Notice, and (ii) in the case of an Issuance or Modification of a Letter of Credit, the applicable LC Bank and the Administrative Agent shall have received a Letter of Credit Request and, if applicable, a Letter of Credit Application;
(d) in the case of a Swingline Purchase, the Facility Agent for the Swingline Purchaser and the Administrative Agent shall have received a Purchase Notice;
(e) the representations and warranties made by each of the Ferguson Parties in any Transaction Document are true and correct in all material respects as of such day, except to the extent that such representation or warranty relates to a prior date;
(f) the Ferguson Parties are in compliance with their respective covenants and agreements in the Transaction Documents;
(g) no Termination Event or Potential Termination Event shall have occurred and be continuing or shall occur as a result of such Purchase and/or Issuance/Modification of a Letter of Credit;
(h) both before and after such Purchase and/or Issuance/Modification of a Letter of Credit, (i) the Aggregate Exposure Amount shall not exceed the Maximum Net Investment (and in the case of each Purchase Group, the Exposure Amount shall not exceed the related Purchase Group Maximum Net Investment), and (ii) the aggregate Stated Amount of Letters of Credit shall not exceed the LC Sub-Facility;
(i) in the case of a Swingline Purchase, both before and after such Swingline Purchase, the aggregate of the Net Investments attributable to Swingline Purchase(s) shall not exceed the Swingline Sublimit;
(j) the Facility Agents shall have received all reports and other information required to be delivered by any Ferguson Party; and
(k) both before and after such Purchase and/or Issuance/Modification of a Letter of Credit, the Percentage Interest shall not exceed 100%.
Each Reimbursement Purchase shall be subject to the terms and conditions set forth in Section 2.11(a) or (b) hereof and each Swingline Reimbursement Purchase shall be subject to the terms and conditions set forth in Section 2.19(b) through (d) hereof.
Section 3.04. Conditions to Purchase/Acceptance of Assignment of Receivables of Additional Originator; Release and Reconveyance of Certain Receivables. The initial Purchase or acceptance of an assignment of security interest of Receivables generated by a Subsidiary of Ferguson which is not an Originator party hereto on May 19, 2021 is subject to the conditions precedent that on or prior to the date of such Purchase or acceptance, the Seller shall deliver or cause to be delivered to the Administrative Agent the following documents and instruments, all of which shall be in a form and substance acceptable to the Administrative Agent and each Facility Agent (with copies for the Facility Agents, and with such additional copies thereof as the Administrative Agent may request):
(a) Consent of all Facility Agents to the addition of such Subsidiary as an Originator hereunder to the extent such consent is required pursuant to Section 3.02 of the Purchase and Contribution Agreement;
(b) A signature page or addendum to this Agreement by which such Subsidiary becomes a party to this Agreement;
(c) A signature page or joinder agreement to the Purchase and Contribution Agreement by which such Subsidiary becomes a party to the Purchase and Contribution Agreement;
(d) An acknowledgment by the Parent that the Obligations of such Subsidiary are guaranteed by it pursuant to the provisions of Article V of this Agreement;
(e) For such Subsidiary, each document or certificate specified in Section 3.02(a) through (d) and Section 3.02(n), dated a date reasonably near the addition of such Subsidiary;
(f) A financing statement (Form UCC-l) in proper form for filing naming such Subsidiary as the debtor/seller, the Seller, as the secured party/purchaser, and RBC, as Administrative Agent (on behalf of the Facility Agents for the benefit of the Purchasers and the LC Banks), as assignee, for filing in the state of such Subsidiary’s organization;
(g) Executed copies of proper financing statements (Form UCC-2 or UCC-3), necessary under the laws of all appropriate jurisdictions to release all security interests and other rights of any Person in Receivables previously granted by such Subsidiary;
(h) A certified copy of a request for information (Form UCC-11) (or a similar search report certified by parties acceptable to the Administrative Agent) dated a date reasonably near such addition listing all effective financing statements which name such Subsidiary as debtor and which, in each case, are filed in jurisdictions in which the filings related to each such Subsidiary were made pursuant to item (g) above, together with copies of such Liens and financing statements;
(i) Executed Blocked Account Agreements for any Lockboxes, Lockbox Accounts, Depositary Accounts and Blocked Local Accounts holding Collections of Receivables originated by such Subsidiary;
(j) An opinion of Mayer Brown LLP, dated a date reasonably near such addition, addressing all such matters included in the opinions described in clauses (j) and (k) of Section 3.02 with respect to such Subsidiary;
(k) Such historical portfolio information and data with respect to such Subsidiary hereunder as may be requested by the Administrative Agent;
(l) Evidence satisfactory to the Administrative Agent that such Subsidiary is able to provide information on a monthly basis sufficient for inclusion in the Monthly Report required by Section 4.11(a); and
(m) Such other documents as the Administrative Agent or any Facility Agent may reasonably request.
Contemporaneously with any release and reconveyance of Receivables and Related Security to any Originator in accordance with Section 3.03 of the Purchase and Contribution Agreement, and without any further consideration other than as specified therein, the Administrative Agent (for the benefit of the Facility Agents and the related Purchasers) agrees to reconvey to Seller or its designee, all of its right, title and interest in and to such Receivables and Related Security and to release any security interest it may have in, and all of its right, title and interest in and to such Receivables and Related Security.
ARTICLE IV
PROTECTION OF THE PURCHASERS;
ADMINISTRATION AND SERVICING
OF RECEIVABLES; COLLECTIONS
Section 4.01. Acceptance of Appointment and Other Matters Relating to the Servicer. Ferguson agrees to act, and has been appointed by the Seller, the Administrative Agent and the Facility Agents to act, subject to the terms hereof, as the Servicer under this Agreement, and all
Purchasers and the LC Banks hereby consent to Ferguson acting as Servicer. The Servicer shall collect payments due under the Receivables in accordance with the standards that would be employed by a prudent institution in servicing comparable receivables for its own account and in accordance with the Credit and Collection Policy and shall have full power and authority, acting alone or through any party properly designated by it hereunder, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable.
(a) Without limiting the generality of the foregoing and subject to Sections 2.08 and 4.09 hereof, the Servicer is hereby authorized and empowered (i) to receive and hold in trust for the Facility Agents (for the benefit of their respective Purchasers and the LC Banks) and Seller (to the extent of its interest) Collections received from Receivables as set forth in Article II and elsewhere in this Agreement and (ii) to execute and deliver, on behalf of the Seller and the Facility Agents (for the benefit of the Purchasers and the LC Banks), any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables permitted under and in compliance with applicable Law and regulations. To the extent Collections are transferred to or otherwise received by the Servicer, the Servicer is hereby authorized and empowered to receive and hold in trust such Collections for the Facility Agents (for the benefit of their respective Purchasers and LC Banks) and Seller (to the extent of its interest) to be allocated and distributed as provided in this Agreement.
(b) Subject to the rights retained by the Administrative Agent pursuant to Section 4.09 hereof, each of the Seller, the Purchasers, the LC Banks, the Facility Agents and the Administrative Agent hereby appoint the Servicer to enforce its respective rights and interests in and to the Receivable Interest. If any Person succeeds the initial Servicer as a Servicer, the replaced Servicer shall promptly deliver to such successor Servicer and the replaced Servicer shall hold in trust for the Administrative Agent, the Purchasers, the LC Banks, the Facility Agents and the Seller, in accordance with their respective interests, all documents instruments and records (including computer tapes or disks) that are reasonably necessary to service or collect the Receivables.
(c) Without the prior written consent of the Required Facility Agents, the Servicer shall not be permitted to delegate any of its duties or responsibilities as Servicer to any other Person other than (i) to each Originator (other than itself), acting as Sub-Servicer with respect to the Receivables which it originated, (ii) to PNC Merchant Services Company, PNC or American Express Travel Related Services Company, Inc. with respect to processing Receivables repaid by credit card pursuant to their respective Credit Card Agreements, and (iii) to outside collection agencies in accordance with its customary practices with respect to written-off Receivables. The Servicer shall be responsible for coordinating the servicing of the Receivables by the Sub-Servicers and all other Persons to whom any servicing responsibilities are delegated in accordance with this Section 4.01(c). No delegation of duties by the Servicer permitted hereunder shall relieve the Servicer of its liability and responsibility with respect to such duties.
Section 4.02. Maintenance of Information and Marking of Computer Records. The Servicer will hold in trust and keep safely for the Purchasers and the LC Banks all evidence of the Facility Agents’ (for the benefit of the Purchasers and the LC Banks) right, title and interest
in and to the Receivable Interest. Each of the Servicer and each Originator acting as a Sub-Servicer will place an appropriate code or notation in its computer Records to indicate that the Facility Agents, on behalf of the Purchasers and the LC Banks, have acquired the Receivable Interest.
Section 4.03. Protection of the Interests of the Purchasers and LC Banks. (a) The Servicer will, or will cause the Seller and the Originators to, from time to time and at Seller’s sole expense, take all actions reasonably requested by the Administrative Agent necessary to perfect or protect the Facility Agents’ (for the benefit of their respective Purchasers and LC Banks) right, title and interest in the Receivable Interest, together with Related Security and all Collections with respect thereto, against all Persons whomsoever or to enable the Facility Agents or the Administrative Agent to exercise or enforce any of their respective rights hereunder.
(b) To the fullest extent permitted by applicable Law, the Seller hereby irrevocably grants to the Administrative Agent an irrevocable power of attorney, with full power of substitution, coupled with an interest, to sign and file in the name of the Seller, or in its own name, such financing statements and continuation statements (including “initial financing statements in lieu of continuation statements” under Revised Article 9 of the UCC) and amendments thereto or assignments thereof as the Administrative Agent or any Facility Agent deems necessary to protect or perfect the Receivable Interest; provided, however, that the rights of the Administrative Agent pursuant to such power of attorney shall be exercised only if a Control Event exists.
(c) The Administrative Agent shall have the right to do all such acts and things as they may deem necessary to protect the interests of the Purchasers and the LC Banks, including, without limitation, confirmation and verification of the existence, amount and status of the Receivables; provided, however, that the Administrative Agent shall not contact any Obligor or mark any invoice as “assigned” unless a Termination Event shall have occurred and be continuing; and provided, further, that the Administrative Agent shall not deliver any “shifting control notice” or exercise any other right or remedy set forth as being available upon or during a Control Event or a Termination Event unless a Control Event or a Termination Event, as applicable, shall have occurred and be continuing.
Section 4.04. Maintenance of Writings and Records. The Servicer will, and will cause each Originator to, at all times until completion of a Complete Servicing Transfer keep each writing or Record which evidences, and which is necessary or desirable to establish or protect, including such books of account and other Records as will enable the Administrative Agent and the Facility Agents or their designees to determine at any time the status of, the Receivable Interest of the Facility Agents (for the benefit of their respective Purchasers and LC Banks). The Servicer shall at its own expense prepare and maintain such Records in electronically-readable form in such format as the Servicer customarily maintains its records; provided, however, that upon a Complete Servicing Transfer with respect to the Servicer, the replaced Servicer shall within 10 Business Days of such Complete Servicing Transfer prepare such Records in such format as may be required to permit or facilitate the transfer of such Records to the successor Servicer.
Section 4.05. Information. The Servicer will, or will cause each Originator to, furnish to the Administrative Agent such information with respect to the Receivables (including but not limited to such Originator’s standards and procedures for selling goods or services on credit) as the Administrative Agent may reasonably request, in consultation with the Facility Agents. The Servicer will also furnish to the Administrative Agent and each Facility Agent all material modifications, adjustments or supplements to the Credit and Collection Policy; provided, however, the Servicer shall not, without each Facility Agent’s prior written consent, alter or consent to the alteration of the Credit and Collection Policy as in effect from time to time unless such alteration would not impair the collectability of any Receivables in any material respect or would not otherwise be reasonably likely to have a Material Adverse Effect.
Section 4.06. Audits; Agreed-Upon Procedures. (a) Each of the Seller, the Servicer and each Originator will, from time to time during regular business hours as requested by the Administrative Agent or any Facility Agent upon reasonable notice and subject to any applicable restrictions or limitations on access to any facility or information that is classified or restricted by contract or by law, regulation or governmental guidelines, and at the sole cost of such Person, permit the Administrative Agent, the Facility Agents or their respective agents or representatives (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person’s financial condition or the Receivables and the Related Security or any Person’s performance under any of the Transaction Documents or any Person’s performance under the Contracts and, in each case, with any of the officers or employees of Seller, the Servicer or such Originator having knowledge of such matters; provided, that as long as no Termination Event shall have occurred and be continuing, the Administrative Agent and the Facility Agents hereby agree to conduct only one due diligence visit annually and to coordinate their annual visits.
(b) The Servicer shall cause a firm selected and engaged by the Administrative Agent to furnish an annual report to the Facility Agents pursuant to procedures agreed upon by the Servicer and the Administrative Agent (in consultation with the Facility Agents), provided that if a Potential Termination Event or Termination Event shall have occurred, such audit report shall be furnished at any time and from time to time upon request of the Administrative Agent. The Administrative Agent shall assist the Seller and the Servicer in preparing for each audit and addressing any recommendations made in the audit report.
Section 4.07. No Impairment. Neither the Servicer nor any Originator will not take any action or cause any action to be taken to impair the rights of any Facility Agents (for the benefit of the Purchasers and LC Banks) in the Receivable Interest.
Section 4.08. Administration and Collections.
(a) General. Until a Complete Servicing Transfer shall have occurred, the Servicer will be responsible for the administration, servicing and collection of the Receivables.
(b) Administration. The Servicer shall, to the full extent permitted by Law, have the power and authority, on behalf of the Seller and each Facility Agent, to take such action in respect of any Receivable as the Servicer may deem advisable, including the resale of any repossessed, returned or rejected goods. In addition, the Servicer may adjust or modify (including by extension of time for payment or granting any discounts, allowances or credits) the Outstanding Balance of any Receivable as it determines to be appropriate to maximize Collections thereof.
(c) Enforcement Proceedings. If there is a default under any Receivable, the Servicer shall, at the Seller’s sole expense, to the full extent permitted by Law and as it determines to be appropriate to maximize recoveries on that Receivable, have the power and authority, on behalf of the Seller and each Facility Agent (for the benefit of its related Purchasers and LC Banks), to take or cause to be taken any action in respect of any such Receivable as the Servicer may deem advisable, including, but not limited to, the authority to effectuate the reconveyance of Reassigned Receivables as provided in Section 2.01A hereof. The Servicer will apply or will cause to be applied at all times when a Termination Event does not exist the same standards and follow the same procedures with respect to deciding to commence, and in prosecuting, litigation on such Receivable as is applied and followed with respect to like accounts serviced by it that are not owned by the Facility Agents’ (for the benefit of their respective Purchasers and LC Banks). The Facility Agents hereby authorize the Servicer and each Sub-Servicer, to the extent the Servicer deems it necessary or desirable, to bring suit in the name of the Servicer or the applicable Sub-Servicer, to collect on a Receivable or enforce the terms of its related Contract. In no event shall the Servicer or the Seller, as the case may be, be entitled to make or authorize any Person to make any Facility Agent, Purchaser or LC Bank a party to any litigation without such Facility Agent’s, Purchaser’s or LC Bank’s, as the case may be, express prior written consent.
(d) Facility Agents’ Rights to Enforce Receivables. At any time that a Control Event exists, the Facility Agents may, but shall have no obligation to, take any action or commence any proceeding to realize upon any Receivable, including, but not limited to, delivery to an Obligor of notice of the Facility Agents’ (for the benefit of their respective Purchasers and LC Banks) interest in the Receivables, any such action or commencement of proceeding to be at the sole expense of the Seller. At such time as the Servicer has any obligation to pursue the collection of Receivables and the Administrative Agent, the Facility Agents or any Purchaser or LC Bank possesses any documents necessary therefor, the Administrative Agent or such Facility Agent, Purchaser or LC Bank, as the case may be, agrees to furnish such documents to the Servicer, to the extent and for the period necessary for the Servicer to comply with its obligations hereunder.
Section 4.09. Complete Servicing Transfer.
(a) General. The Administrative Agent may, and at the request of the Required Facility Agents shall, by notice in writing to the Seller, the Servicer and each Originator terminate the Servicer’s capacity as Servicer in respect of the Receivables (such termination referred to herein as a “Complete Servicing Transfer”) if a Termination Event shall have occurred and be continuing or a Downgrade Event shall exist. Upon a Complete Servicing Transfer, the Originators’ duties as Sub-Servicers shall also be terminated. After a Complete Servicing
Transfer, the Administrative Agent (or its designee approved by the Facility Agents) may itself administer, service and collect the Receivables, and in such event, may retain the Servicing Fee for its own account, in any manner it sees fit, including, without limitation, by compromise, extension or settlement of such Receivables. Alternatively, the Facility Agents may engage affiliated or unaffiliated contractors to perform all or any part of the administration, servicing and collection of the Receivables and require the Seller to pay to such contractors all or a portion of the Servicing Fee in consideration thereof.
(b) Transition. The Servicer and each Originator, promptly but in no event later than twenty (20) days after receiving a notice pursuant to Section 4.09(a) hereof, shall, at the Seller’s sole expense, (x) deliver to the Administrative Agent and the Facility Agents or their designated agents (i) a schedule of the Receivables serviced by the Servicer or sub-serviced by such Originator, as the case maybe, in which the Facility Agents (for the benefit of their respective Purchasers and LC Banks) have a Receivable Interest indicating as to each such Receivable information as to the related Obligor, the Outstanding Balance as of such date of such Receivable and the location of the evidences of such Receivable, together with such other information as the Administrative Agent and the Facility Agents may reasonably request and (ii) true copies of such Receivables and such other Records related thereto (including, without limitation, true copies of all evidence of any computer tapes and data in computer memories), (y) permit the Administrative Agent and the Facility Agents reasonable access to the Servicer’s or such Originator’s premises, equipment and files and other Records relating to the Receivables and (z) to the extent not prohibited by contract or applicable Law, take all actions as are necessary to transfer or cause to be transferred to the Administrative Agent or its designated agent any software that relates to, and is necessary for the servicing of, such Receivables, in each case as the Administrative Agent and the Facility Agents may reasonably deem necessary to enable them to protect and enforce their rights and the rights of the Purchasers and LC Banks in the Receivable Interest. Following the termination of the Facility, the Administrative Agent and the Facility Agents or any of their applicable designated agents hereby agree to return to the Servicer any materials previously delivered pursuant to this Section 4.09(b) and still in their possession.
(c) Collections. If at any time there shall be a Complete Servicing Transfer, the terminated Servicer or each Originator will cause to be transmitted and delivered directly to the successor Servicer, promptly upon receipt and in the exact form received, all Collections (properly endorsed, where required, so that such items may be collected on behalf of the Facility Agents (for the benefit of their respective Purchasers and LC Banks)) to be distributed to the Facility Agents as provided herein. All such Collections consisting of cash shall not be commingled with other items or monies of the terminated Servicer or an Originator for a period longer than two Business Days after the Servicer’s knowledge of its receipt thereof. If the successor Servicer receives items or monies that are not payments on account of the Receivables, such items or monies shall be delivered promptly to the terminated Servicer after being so identified by or to such successor Servicer. After a Complete Servicing Transfer, each of the Seller, the terminated Servicer and each Originator hereby irrevocably grants the Administrative Agent or each of its designated agents, if any, an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the Seller or the terminated Servicer, as the case may be, all steps with respect to any Receivable which the Administrative Agent, after consultation with the Facility Agents, may deem reasonably necessary or advisable
to negotiate or otherwise realize on any right of any kind held or owned by the Seller or the terminated Servicer, as the case may be, or transmitted to or received by any Facility Agent or its designated agent (whether or not from the Seller or any Obligor) in connection with the Facility Agents’ (for the benefit their respective Purchasers and LC Banks) Receivable Interest, which power of attorney shall automatically terminate upon the termination of the Facility.
(d) Collection and Administration at Expense of the Seller. The Seller agrees that in the event of a Complete Servicing Transfer it will reimburse the Administrative Agent, each Facility Agent, each Purchaser and LC Bank for all reasonable out-of-pocket expenses (including, without limitation, attorneys’ and accountants’ and other third parties’ fees and expenses, expenses incurred by the Administrative Agent, such Facility Agent, such Purchaser or such LC Bank, as the case may be, expenses of litigation or preparation therefor, and expenses of audits and visits to the offices of the Seller or any Originator) incurred by the Administrative Agent, such Facility Agent, such Purchaser or such LC Bank in connection with the transfer of functions following a Complete Servicing Transfer whenever such expenses are incurred.
(e) Payments by Obligors. At any time, and from time to time, following a Complete Servicing Transfer, the Seller, the terminated Servicer and each Originator shall permit such Persons as the Administrative Agent, with the consent of the Facility Agents, may designate to open and inspect all mail received by the Seller or the terminated Servicer and reasonably believed to relate to the Receivables, and to remove from such mail any and all Collections.
Section 4.10. Collections; Lockboxes; Accounts. (a) Each of the Servicer and each Originator, acting in its capacity as Sub-Servicer, shall instruct all Obligors to make all payments in respect of the Receivables to a Lockbox Account or a Depositary Account (either by check mailed to the relevant Depositary Bank or directly by wire transfer or electronic funds transfer to a Depositary Account), except to the extent that the Servicer or such Originator, in the normal course of its business and consistent with past and ongoing practices has accepted payments by credit card from Obligors or has permitted Obligors to remit payments directly to such Originator at its business locations for deposit to a Local Account or Blocked Local Account. Each of the Servicer and each Originator, acting in its capacity as Sub-Servicer, also shall have established separate collection systems that are intended to keep payments in respect of Excluded Receivables separate from payments in respect of the Receivables.
(b) The Seller and the Servicer shall have established the Lockboxes and related Lockbox Accounts and the Depositary Accounts specified on Schedule II hereto. The Seller and Servicer hereby agree as follows: (i) each Lockbox Account and Depositary Account shall be established in the name of the Seller as a segregated account and, except as provided in Section 7.02(l), the funds deposited therein from time to time shall not be commingled with any other funds of the Seller or any Affiliate thereof; (ii) each Lockbox Account and Depositary Account shall be maintained with a Depositary Bank pursuant to the terms of the related Blocked Account Agreement; (iii) except as provided in Section 7.02(l), not to direct any funds other than Collections to be mailed to Lockboxes or deposited into related Lockbox Accounts or Depositary Accounts; (iv) not to change any Depositary Bank, any Blocked Account Agreement or the location of any Lockbox, Lockbox Account or Depositary Account without the consent of the Administrative Agent; and (v) if a Control Event exists, the Administrative Agent may, or shall
at the direction of the Required Facility Agents, deliver a “shifting control notice” to the Depositary Banks, upon receipt of which notice, the Depositary Banks will, upon direction of the Administrative Agent, transfer funds in their respective Lockbox Accounts and Depositary Accounts to the Collection Account within two (2) Business Days of deposit into those Lockbox Accounts or Depositary Accounts, as applicable.
(c) The Seller and the Servicer shall have established the Blocked Local Accounts specified on Schedule II hereto and the Concentration Account. The Seller and Servicer hereby agree as follows: (i) each Blocked Local Account and the Concentration Account shall be established in the name of the Seller; (ii) each Blocked Local Account and the Concentration Account shall be maintained with a Depositary Bank pursuant to the terms of the related Blocked Account Agreement; (iii) not to change any Depositary Bank, any Blocked Account Agreement or the location of any Blocked Local Account or the Concentration Account without the consent of the Administrative Agent; and (iv) if a Control Event exists, the Administrative Agent may, or shall at the direction of the Required Facility Agents, deliver a “shifting control notice” to the Depositary Banks, upon receipt of which notice, the Depositary Banks will, upon direction of the Administrative Agent, be required to transfer funds in their respective Blocked Local Accounts and the Concentration Account to the Collection Account within two (2) Business Days of deposit into those Blocked Local Accounts or the Concentration Account, as applicable. Notwithstanding the foregoing, with respect to the Account specified in the proviso in the definition of “Blocked Local Account” and for the period specified therein, the Seller and the Servicer will not be required to comply with the account requirements of this Section 4.10(c).
(d) As of MayJune 1923, 20212023, Ferguson shall have established and maintain the applicable Local Account specified on Schedule II hereto. Ferguson hereby agrees as follows: (i) to transfer, within two (2) Business Days of deposit therein, funds therein to the Concentration Account; (ii) not to change the location of the Local Account without the consent of the Administrative Agent; and (iii) if a Downgrade Event has occurred, within 30 days of the request of the Administrative Agent, to transfer the Local Account to the Seller’s name and enter into Blocked Account Agreement with a Depositary Bank with respect to the Local Account which is subject to the same terms as the Blocked Local Accounts as described in preceding clause (c).
(e) The Administrative Agent shall have the right at any time to establish the Collection Account. On or after the Control Date, the Administrative Agent shall direct the Depositary Banks to transfer funds in their respective Accounts to the Collection Account within two (2) Business Days of deposit into the respective Accounts. The Administrative Agent shall set aside and hold in trust for the Seller such portion of funds in the Collection Account as are not allocated to the Purchase Groups.
(f) On each Business Day, the Servicer shall have the ability to identify which of the collected funds received in the Blocked Local Accounts, the Local Accounts and the Concentration Account, or if the Administrative Agent has directed that funds be transferred to the Collection Account, funds received in the Collection Account, on the second preceding Business Day do not constitute Collections on account of Receivables, and shall, upon request,
provide such information to the Administrative Agent on such Business Day; provided that, on each Business Day following a Control Event the Servicer shall provide such information to the Administrative Agent on a daily basis. The parties hereto agree and acknowledge that due to the Servicer’s systems limitations, the data reported in the Monthly Report (and, if applicable, the Weekly Report) with respect to sales generated by Originators and Collections will include cash sales. For the avoidance of doubt, proceeds of cash sales remain the property of the applicable Originators, and do not constitute Collections.
(g) If the Seller or the Servicer determines that it is advisable to add or close any Account, the Servicer shall provide written notice of such determination to the Administrative Agent at least 30 days prior to the date on which such addition or closure is proposed to take effect. If any such addition or closure necessitates changes to any Blocked Account Agreement, the Seller, the Servicer and the Administrative Agent shall work together with the Depositary Bank to make such changes. Schedule II hereof shall be deemed amended (and a replacement Schedule prepared and distributed to the Facility Agents) to reflect any addition or closure of an Account proposed by the Seller or Servicer and consented to by the Administrative Agent.
Section 4.11. Reports. (a) (i) On or prior to the Monthly Report Date in each month, the Servicer shall deliver to each Facility Agent a monthly report, substantially in the form of Exhibit B (a “Monthly Report”), as of the close of business on the last day of the immediately preceding Calculation Period.
(ii) In addition to delivery of Monthly Reports in accordance with clause (a) above, whenever a Downgrade Event exists, the Servicer shall, on each Weekly Report Date, deliver to each Facility Agent a report in form and substance to be agreed upon by the Servicer and the Required Facility Agents (each a “Weekly Report”).
(b) The Seller shall, or shall cause the Servicer and each Originator to, furnish to the Administrative Agent (who shall promptly deliver the same to each Facility Agent) at any time and from time to time such other or further information in respect of the Receivables, the Seller and the Obligors as the Administrative Agent or any Facility Agent may reasonably request.
(c) [Reserved].
(d) The Administrative Agent shall assist the Seller and the Servicer (i) in preparing the Monthly Reports and Weekly Reports, (ii) if a Weekly Report is required to be delivered, in developing the form of that Weekly Report, and (iii) in updating the form of the Monthly Report from time to time as is necessary and desirable to improve the presentation of information about the Receivables and the Facility, address changed circumstances or respond to recommendations made in the agreed-upon procedures reports provided pursuant to Section 4.06(b).
Section 4.11A. Transition Receivables. (a) No later than five (5) Business Days before an Originator plans to convert the reporting of a branch or location from the Trilogie data reporting system to the Oracle data reporting system, such Originator, or the Servicer on its
behalf, shall so notify the Administrative Agent and each Facility Agent and shall specify in such notice, the branch or location to be so converted, together with the conversion date and the aggregate Outstanding Balance of the Receivables in such branch or location as of the notice date. The parties hereto agree that on the conversion date the Receivables in such branch or location shall become Transition Receivables.
(b) When the Servicer determines it can accurately report all data required by this Agreement with respect to Transition Receivables of any branch or location, it shall so notify Administrative Agent and the Facility Agents. The Administrative Agent will promptly determine, after receipt from the applicable Originator or the Servicer of appropriate data and conducting of any necessary due diligence, whether the applicable Transition Receivables can be so reported and if so determined, such Receivables shall no longer be Transition Receivables.
(c) Transition Receivables shall not be included in the amount of Outstanding Balance of Receivables or in any calculations, tests and reports hereunder, but the aggregate Outstanding Balance of Transition Receivables shall be reported separately by the Servicer in each Monthly Report.
Section 4.12. Servicer Default. The occurrence of each of the following events shall constitute a “Servicer Default”:
(a) Failure of Servicer to perform or observe any covenant or agreement under the Transaction Documents, and such failure shall continue for five (5) Business Days after the Servicer receives written notice or has actual knowledge of such failure;
(b) Failure of the Servicer to make when due any payment or deposit required to be made by it under any Transaction Document, and such failure shall continue for two (2) Business Days;
(c) Any representation or warranty made or deemed made by the Servicer under or in connection with any Transaction Document or any certificate, report or other statement delivered by the Servicer pursuant to the terms set forth in the Transaction Documents shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered (unless such representation or warranty in Section 6.01(d) or Section 6.01(g) herein relates solely to one or more specific Receivables and immediately following the removal of the related Receivables from the Net Receivables Balance, the Percentage Interest does not exceed 100%;
(d) The Servicer or any Originator shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of all or a substantial part of its property, (ii) become unable, admit in writing its inability or fail to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary case under the Federal Bankruptcy Code or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding,
or action shall be taken by it for the purpose of effecting any of the foregoing, or (vi) if without the application, approval or consent of the Servicer or any Originator, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of the Servicer or any Originator an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of the Servicer or such Originator or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and (A) is not challenged by appropriate means by the Servicer or such Originator within thirty (30) days and (B) the same shall continue undismissed or unstayed for any period of 60 consecutive days after commencement of such case; or
(e) the Servicer shall fail to deliver any Monthly Report or Weekly Report when required under the Transaction Documents, and such failure shall continue for three (3) consecutive Business Days (one (1) Business Day on or after a Downgrade Event); or
(f) there shall occur any change in the business, financial or other condition of the Servicer which could reasonably be expected to have a Material Adverse Effect on the collectability of the Receivables.
Section 4.13. Servicer Indemnification of Indemnified Parties. (a) The Servicer agrees to indemnify and hold harmless the Indemnified Parties from and against any Losses (other than any Losses to the extent resulting from the gross negligence or willful misconduct of the Indemnified Party, the Indemnified Party’s breach of contract under any Transaction Document or any document delivered pursuant to any Transaction Document, Taxes (except as provided in this Agreement), or recourse (except as provided in this Agreement) for uncollectible Receivables) arising out of or resulting from (i) false or incorrect representations warranties or certifications of the Servicer, acting in that capacity, in any Transaction Document or any document delivered pursuant to any Transaction Document or (ii) any breach (whether by action or omission) by the Servicer, acting in that capacity, of any of its obligations or covenants under any Transaction Document.
(b) Promptly upon receipt by any Indemnified Party under this Section 4.13 of notice of the commencement of any suit, action, claim, proceeding or governmental investigation against such Indemnified Party, such Indemnified Party shall, if a claim in respect thereof is to be made against the Servicer hereunder, notify the Servicer in writing of the commencement thereof. The Servicer may participate in and assume the defense of any such suit, action, claim, proceeding or investigation at its expense, and no settlement thereof shall be made without the approval of the Servicer and the Indemnified Party. The approval of the Servicer and the Indemnified Party will not be unreasonably withheld or delayed. After notice from the Servicer to the Indemnified Party of its intention to assume the defense thereof with counsel reasonably satisfactory to the Administrative Agent and the Indemnified Party, and so long as the Servicer so assumes the defense thereof in a manner reasonably satisfactory to the Administrative Agent and the Indemnified Party, the Servicer shall not be liable for any legal expenses of counsel unless there
shall be a conflict between the interests of the Servicer and the Indemnified Party, in which case the Indemnified Party(ies) shall have the right to employ counsel to represent it (them).
(c) The Servicer will promptly pay to the Facility Agent for the Indemnified Party such indemnity amount as shall be specified to the Servicer in a certificate of the Indemnified Party (or its Facility Agent, on its behalf) setting forth the calculations of such amount, together with the basis therefor. Any such certificate submitted by or on behalf of the Indemnified Party shall be conclusive and binding for all purposes, absent manifest error. The provisions of this Section 4.13 shall survive the termination of this Agreement.
Section 4.14. Servicing Fee. The monthly fee due to the Servicer for performing its obligations hereunder shall be equal to (A) the product of (1) the Servicing Fee Percentage, expressed as a decimal, and (2) the average daily Outstanding Balances of Receivables during the preceding Calculation Period, divided by (B) twelve (the “Servicing Fee”). Such monthly Servicing Fee shall be paid to the Servicer in arrears on the second (2nd) Business Day after each Monthly Report Date.
ARTICLE V
PARENT UNDERTAKING
Section 5.01. Guaranty. The Parent hereby unconditionally guarantees the punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of all obligations of (a) Ferguson and its successor legal entities, in its capacities as Originator, Servicer and the party requesting Letters of Credit, and (b) the other Originators and their successor legal entities, in their respective capacities as Originators and sub-servicers and parties on behalf of which the Seller will request Letters of Credit hereunder, now or hereafter existing under the Transaction Documents, whether for Collections, repurchase, indemnification payments, fees, expenses or otherwise (such obligations being the “Obligations”), and agrees to pay any and all reasonable and properly documented out-of-pocket expenses (including counsel fees and expenses) incurred by any Beneficiary in enforcing any rights under this Parent Undertaking, together with interest on such amounts from the time when the Parent was notified that such amounts were due, based on a 365-day year, at a rate per annum for each day equal to 2.00% over the Alternate Base Rate on such day. Without limiting the generality of the foregoing, the Parent’s liability shall extend to all amounts which constitute part of the Obligations and would be owed by Ferguson or any Originator to the Seller or any Beneficiary under any Transaction Document but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving Ferguson or such Originator as debtor. For the avoidance of doubt, the obligations of the Parent under this Parent Undertaking do not include losses in respect to Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor.
Section 5.02. Guaranty Absolute. The Parent guarantees that the Obligations will be performed or paid strictly in accordance with the terms of the applicable Transaction Documents, regardless of the rights of the Administrative Agent or any Beneficiary with respect thereto. The obligations of the Parent under this Parent Undertaking are independent of the Obligations, and a
separate action or actions may be brought and prosecuted against the Parent to enforce this Parent Undertaking, irrespective of whether any action is brought against Ferguson or any Originator, as the case may be, or whether Ferguson or such Originator is joined in any such action or actions. The liability of the Parent under this Parent Undertaking shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any Transaction Document, or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any Transaction Document, including, without limitation, any increase in the Obligations resulting from additional Purchases or Issuances/ Modifications of Letters of Credit or otherwise;
(c) any failure or omission to enforce any right, power or remedy with respect to the Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Obligations or any part thereof;
(d) any waiver of any right, power or remedy or of any default with respect to the Obligations or any part thereof or any agreement relating thereto;
(e) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations;
(f) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of Ferguson, any Originator or any of their respective Subsidiaries;
(g) the existence of any claim, setoff or other rights which the Parent may have at any time against Ferguson or any Originator in connection herewith or any unrelated transaction;
(h) any assignment or transfer of the Obligations or any part thereof permitted under the Purchase and Contribution Agreement, this Agreement or any other Transaction Document;
(i) any change, restructuring or termination of the corporate structure or existence of Ferguson, any Originator or any of their respective Subsidiaries; or
(j) any other circumstance which might otherwise constitute a defense available to, or a discharge of Ferguson or any Originator.
Section 5.03. Waiver. (a) The Parent hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Parent Undertaking and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against Ferguson, any Originator or any other Person or entity or any collateral.
(b) The Parent irrevocably and unconditionally abandons and waives any rights which it may have at any time under the existing or future laws of Jersey: (i) whether by virtue of the droit de discussion or otherwise to require that recourse be had by the beneficiaries of this Parent Undertaking to the assets of any other person before any claim is enforced against it in respect of the obligations assumed by it under this Parent Undertaking; and (ii) whether by virtue of the droit de division or otherwise to require that any liability under any guarantee or indemnity contained in this Parent Undertaking be divided or apportioned with any other person or reduced in any manner whatsoever.
(c) The Parent hereby waives any right to revoke this Parent Undertaking, and acknowledges that this Parent Undertaking is continuing in nature and applies to all Obligations, whether existing now or in the future.
(d) The Parent acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Transaction Documents and that the waivers set forth in this Section 5.03 are knowingly made in contemplation of such benefits.
Section 5.04. Subrogation. The Parent will not exercise any rights which it may acquire by way of subrogation under this Parent Undertaking, by any payment made hereunder or otherwise, until all the Obligations and other amounts payable under this Parent Undertaking shall have been paid in full and the Facility Termination shall have occurred. If any amount shall be paid to the Parent on account of such subrogation rights at any time prior to the later of (x) the payment in full of the Obligations and all other amounts payable under this Parent Undertaking and (y) the date after the Termination Date that all Aggregate Unpaids are paid in full, such amount shall be held in trust for the benefit of the Beneficiaries and shall forthwith be paid to the Administrative Agent to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms of the applicable Transaction Document or to be held by the Administrative Agent as collateral security for any Obligations thereafter existing. If (i) the Parent shall make payment to the Beneficiaries of all or any part of the Obligations, (ii) all the Obligations and all other amounts payable under this Parent Undertaking shall be paid in full and (iii) the date after the Termination Date that all Aggregate Unpaids are paid in full shall have occurred, the Administrative Agent and the Facility Agents on behalf of their respective Beneficiaries will, at the Parent’s request, execute and deliver to the Parent appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Parent of an interest in the Obligations resulting from such payment by the Parent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. General Representations and Warranties of the Ferguson Parties. Except as otherwise set forth below, each of the Ferguson Parties, as to itself (and, if so specified, its Subsidiaries), hereby represents and warrants to each Purchaser, each LC Bank, each Facility Agent and the Administrative Agent on and as of the date hereof and on and as of the date of each Purchase and each Issuance or Modification that:
(a) Corporate Existence, Power and Authority, Etc. It is duly organized, validly existing and in good standing in its jurisdiction of organization; it is duly qualified to do business in each jurisdiction where the conduct of its business so requires and except where failure to be so qualified would not be reasonably expected to have a Material Adverse Effect; it has power and authority to execute and deliver the Transaction Documents and to carry out the transactions contemplated thereby; each of the Transaction Documents to which it is a party has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (subject to usual and customary bankruptcy and equitable principles exceptions); it has all necessary authorizations and approvals to execute, deliver and perform its obligations under all of the Transaction Documents to which it is a party, except where failure to obtain any such authorization or approval would not reasonably be expected to result in a Material Adverse Effect; no notices to, or filings with, any Governmental Authority are required for the due execution, delivery or performance by it of any of the Transaction Documents to which it is a party, except for the filing of financing statements referred to therein and except where the failure to provide any such notice or make any such filing would not reasonably be expected to result in a Material Adverse Effect;
(b) No Conflicts. The execution and delivery by such Ferguson Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder, in each case, do not contravene or violate its certificate or articles of incorporation or formation, or its by-laws or limited liability company agreement, as applicable, (ii) any Law applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any adverse claim on assets of such Ferguson Party or its Subsidiaries (except that created in favor of the Administrative Agent (for the benefit of the Purchasers and the LC Banks) except, in the case of Ferguson Parties other than the Seller, where any such contraventions or violations would not reasonably be expected to result in a Material Adverse Effect; and no transaction contemplated under any Transaction Document requires compliance with any bulk sales act or similar law;
(c) No Termination Event. No Termination Event or Potential Termination Event has occurred and is continuing, or will, after giving effect to the Purchase and/or Issuance or Modification to occur on such day, occur;
(d) Eligible Receivables. All Receivables represented as being Eligible Receivables are Eligible Receivables at such time;
(e) Accuracy of Information. The written reports, financial statements, certificates and other written information furnished by it or on its behalf in connection with the negotiation of the Transaction Documents or delivered in connection therewith (as modified or supplemented by other written information when so furnished), when taken as a whole, did not contain as of the date such written reports, financial statements or other written information were so furnished, any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(f) Servicer Reports. The information furnished by it or on its behalf in each Monthly Report or Weekly Report is true and complete as of the date of such report;
(g) Good Title. In the case of each Originator, each Receivable sold under the Purchase and Contribution Agreement is owned by such Originator free and clear of any lien or adverse claim (except that created in favor of the Administrative Agent (for the benefit of the Purchasers and the LC Banks) and Permitted Liens). In the case of the Seller, the Administrative Agent (on behalf of the Purchasers and LC Banks) has acquired from the Seller a valid and perfected first priority security interest in each Receivable sold and/or assigned under this Agreement free and clear of any Lien or adverse claim (except for liens created pursuant to any of the Transaction Documents);
(h) Ownership/Security Interest. It has taken or caused to be taken all actions, including necessary filings, to evidence the Administrative Agent’s (on behalf of the Purchasers and the LC Banks) first priority undivided percentage ownership or security interest in all Receivables (whether existing or thereafter arising) and in the Related Security and Collections with respect thereto;
(i) Credit and Collection Policy. It has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract. It has not made any change in its underwriting policies or the Credit and Collection Policy that would (i) impair the collectability of any Receivables in any material respect or (ii) be reasonably likely to have a material adverse effect on the Servicer’s performance of its obligations under the Transaction Documents;
(j) Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Ferguson Party, asserted against it, which would be reasonably likely to have a Material Adverse Effect as specified in clauses (ii) through (iv) of that definition;
(k) Collections. Except as described in Section 4.10(a), all Obligors have been directed to remit their Collections to Lockboxes, Lockbox Accounts or Depositary Accounts, as applicable, listed on Schedule II to this Agreement;
(l) Payments to the Originators. The Seller has given reasonably equivalent value to the applicable Originator under the Purchase and Contribution Agreement in connection with each sale of Receivables thereunder, and no such sale was made for or on account of an antecedent debt owed by such Originator to the Seller or is or may be voidable as a fraudulent transfer under Section 547 of the Federal Bankruptcy Code or a voidable preference under Section 548 of the Federal Bankruptcy Code;
(m) Change of Control. No Change of Control has occurred with respect to any Ferguson Party (other than, in the case of the Parent, a “Permitted Change of Control”, as defined in the Credit Agreement);
(n) Subsidiaries, Business. The Seller has no subsidiaries and is engaged in no other business activities other than the business activities contemplated by the Transaction Documents;
(o) Solvency. After giving effect to any Purchase, Issuance, or Modification on such date and the application of the proceeds therefrom, the Seller is (i) not “insolvent” (as such term is defined in the Federal Bankruptcy Code), (ii) able to pay its debts as they become due, (iii) does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it reasonably expects to engage, and (iv) has tangible net worth equal to at least 6% of the aggregate Outstanding Balance of Receivables (for the avoidance of doubt, for the purposes of this subsection (o), the calculation of tangible net worth shall take into account any intercompany debt issued by the Seller to Ferguson or any other Originator);
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(p) Tax. The Seller or other Ferguson Party has paid when due all material sales, use or property taxes payable in connection with the origination or ownership of the Receivables, exclusive of any taxes the validity of which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. Each of the Seller or other Ferguson Party has filed or caused to be filed all material federal, state and local income tax returns and all other material tax returns on or before the applicable due date (as such due date may have been timely extended), and has paid or caused to be paid all taxes due pursuant to such returns or pursuant to any assessment received by it (other than those which are currently being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with relevant GAAP shall have been set aside on its books).
(q) ERISA. Such Ferguson Party and each of its ERISA Affiliates have fulfilled their respective obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan, except as any noncompliance could not reasonably be expected to result in a Material Adverse Effect. No Reportable Event has occurred with respect to any Plan nor has any prohibited transaction under Section 406 of ERISA occurred with respect to any “Employee Benefit Plan” (as that term is defined in Section 3(3) of ERISA), of such Ferguson Party or any of its ERISA Affiliates which, in either case, could reasonably be expected to result in a Material Adverse Effect. No prohibited transaction under Section 406 of ERISA which could be expected to result in a Material Adverse Effect has occurred with respect to such Ferguson Party or any of its ERISA Affiliates or will occur upon the closing of any Purchase or any Issuance or Modification or the execution of any Transaction Document. Neither the Parent nor any of its Subsidiaries has (i) engaged in any transaction prohibited by any Law applicable to any Foreign Plan; (ii) failed to make full payment when due of all amounts due as contributions to any Foreign Plan; or (iii) otherwise failed to comply with the requirements of ay Law applicable to any Foreign Plan, where singly or cumulatively, the above could reasonably be expected to result in a Material Adverse Effect. No ERISA Event has occurred or is reasonably likely to occur which is reasonably likely to result in a Material Adverse Effect;
(r) Material Adverse Effect. Since the date of its formation, the Seller is not aware of the occurrence of any event or circumstance which has had or will have a Material Adverse Effect. There has been no change in the business or financial condition of the Ferguson Parties, taken as a whole, since the delivery of the combined financial statements of the Group for its financial year ended July 31, 2019, which could reasonably be expected to have a Material Adverse Effect as specified in clauses (ii) and (iii) of that definition;
(s) Investment Company Act. It is not and is not required to be registered as an “investment company” or a company “controlled” by an “investment company,” each as defined in the Investment Company Act of 1940, as amended;
(t) Required Credit Enhancement. After giving effect to the Purchase and/or Issuance or Modification on such date, the Percentage Interest shall not exceed 100%;
(u) [Reserved];
(v) Use of Proceeds. It has not taken and will not take any action which would cause the use of the proceeds of the Purchases to violate the provisions of Regulation U of the Board of Governors of the Federal Reserve System;
(w) Accuracy of Financial Statements. (i) The audited combined financial statements of the Group as of the most recent fiscal year-end fairly present in all material respects, in conformity with GAAP, the combined financial position of the Group as of such date and their combined results of operations and cash flows for such fiscal year; and (ii) the audited financial statements of Ferguson and its Subsidiaries and the operating companies under its Control as of the most recent fiscal year-end fairly present in all material respects, in conformity with GAAP, the financial position of Ferguson and
its Subsidiaries and the operating companies under its Control as of such date and their results of operations and cash flows for such fiscal year;
(x) Accounting. On its consolidated financial statements, each of the Parent and Ferguson consolidates the transactions contemplated by the Purchase and Contribution Agreement, but includes appropriate notations to indicate that the Seller is a separate entity from each Ferguson Party and that the assets of the Seller are not available to satisfy the debts and obligations of any Ferguson Party;
(y) Purpose. The Seller has determined that, from a business viewpoint, the purchase of the Receivables and the Related Security with respect thereto form the Originators under the Purchase and Contribution Agreement, and the sale of the Receivables to the Administrative Agent, for the benefit of the Purchasers and the LC Banks, and the other transactions contemplated herein, are in the best interests of the Seller;
(z) Parent Undertaking. The Parent’s guaranty in the Parent Undertaking is a direct and unsecured obligation of the Parent ranking pari passu as against all other present and future unsecured indebtedness of the Parent which is not expressed to be subordinate or junior in rank to any other indebtedness of the Parent, except for obligations mandatorily preferred by Law applying to companies generally; and
(aa) Foreign Assets Control, Sanctions, Etc.
(i) It has in place policies and procedures designed to promote and achieve compliance with applicable Sanctions.
(ii) It is not and, to the best of its knowledge, none of its directors, employees, officers or Affiliates (when acting in their capacity as such) is an individual or entity currently the target of any Sanctions.
(bb) Not a Covered Fund. The Seller is not a “covered fund” under Section 13 of the Bank Holding Company Act of 1956, as amended (together with the implementing regulations thereunder, commonly referred to as the “Volcker Rule”). In determining that the Seller is not a “covered fund,” the Seller is entitled to rely on the exception to the definition of “investment company” set forth in Section 3(c)(5) of the Investment Company Act of 1940, as amended; and
(cc) Beneficial Ownership Certificate. The information included in the Beneficial Ownership Certificate is true and correct in all respects.
(dd) EU Securitisation Rules. With respect to the Facility, Ferguson (i) is an originator established in a “third country” for the purposes of the EU Securitisation Rules (that is, a country not established in the European Union), (ii ) it was not established for the sole purpose of securitizing the Receivables, (iii) originated its respective Receivables on the basis of sound and well-defined criteria for credit-granting and clearly established processes for approving, originating, and financing such
Receivables and (iv) it has effective systems in place to apply those criteria and processes in order to ensure that credit-granting is based on a thorough assessment of each Obligor's creditworthiness.
ARTICLE VII
COVENANTS
Section 7.01. Affirmative Covenants of the Ferguson Parties. In addition to its other covenants contained herein or made pursuant hereto, until the Facility Termination, each of the Ferguson Parties (as applicable) covenants to each Purchaser, each Facility Agent and the Administrative Agent as follows:
(a) General:
(i) Compliance with Laws, Etc. It will comply, and will cause each of its Subsidiaries to comply, with all applicable Laws and preserve and maintain its corporate or organizational existence, rights, franchises, qualifications, and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications, and privileges would not reasonably be expected to have a Material Adverse Effect;
(ii) Offices, Records, and Books of Account. It will keep its jurisdiction of organization and the office where it keeps its records concerning the Receivables at the address set forth under its name on the signature pages to this Agreement or upon 30 days’ prior written notice to the Administrative Agent, at any other locations in jurisdictions where all actions reasonably requested by the Administrative Agent to protect and perfect the interest in the Receivables have been taken and completed. In the case of each of the Servicer and each Originator, it also will maintain and implement administrative and operating procedures (including, without limitation, the ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of Receivables (including, without limitation, records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). Each Originator will mark its data processing records and other books and records to indicate which Receivables have been sold or contributed to the Seller under the Purchase and Contribution Agreement and the Seller will mark its data processing records and other books and records to indicate that the Receivables have been sold or assigned to the Administrative Agent;
(iii) Taxes. It will file all material tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing, except when failure to pay would not reasonably be expected to have a Material Adverse Effect or such as are being contested in good faith by appropriate proceedings and for which appropriate reserves in accordance with relevant GAAP (in the case of the Seller, in accordance with GAAP) shall have been set aside on its books. It or other Ferguson Party will pay when due any sales, use or property taxes payable in connection with the origination or ownership of the Receivables, exclusive of any taxes the validity of which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with relevant GAAP (in the case of the Seller, in accordance with GAAP) shall have been set aside on its books;
(iv) Performance and Compliance with Credit and Collection Policy. It will, as applicable and at its own expense, timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contracts;
(v) Payments to the Originators. With respect to any Receivable purchased or accepted as a capital contribution from any Originator, such sale or acceptance shall be effected under, and in strict compliance with the terms of, the Purchase and Contribution Agreement, including the terms relating to the amount and timing of payments to be made to such Originator in respect of the purchase price for such Receivable;
(vi) Transfers from Local Accounts. It will direct the Depositary Banks holding the Local Accounts to transfer, within two (2) Business Days of deposit therein, Collections received in such Local Accounts to the Concentration Account;
(vii) Other Information. It will cause to be provided to the Administrative Agent and each Facility Agent such other information in respect of the Receivables or its condition or operations, financial or otherwise, as the Administrative Agent or such Facility Agent may from time to time reasonably request, including, but not limited to, all notices delivered to it under the Purchase and Contribution Agreement; and
(viii) Payments to Credit Card Processors. To the fullest extent practicable, Ferguson will use its own funds (rather than funds in the Concentration Account) to pay the entities processing the credit card payments pursuant to Credit Card Agreements with respect to its receivables (including the Receivables) the fees, assessments, chargebacks and other amounts owed to those processors.
(b) Reporting:
(i) The Parent will cause to be provided to the Administrative Agent (who shall promptly distribute the same to the Facility Agents) as soon as available and in any event within 120 days after the close of each of its fiscal years, its audited consolidated financial statements, certified by independent public accountants as having been prepared in accordance with the relevant GAAP;
(ii) [Reserved];
(iii) The Seller will cause to be provided to the Administrative Agent (who shall promptly distribute the same to the Facility Agents) as soon as available and in any event within 180 days after the close of each of its fiscal years, financial statements of the Seller, (which may be unaudited), prepared in accordance with the relevant GAAP;
(iv) The Parent will cause to be provided to the Administrative Agent (who shall promptly distribute the same to the Facility Agents) as soon as available and in any event within 90 days after the end of the first half of each of its fiscal years, its condensed consolidated financial statements prepared in accordance with the relevant GAAP;
(v) Each of the Parent and Ferguson will cause to be provided to the Administrative Agent (who shall promptly distribute the same to the Facility Agents) at the time of the delivery of the financial statements provided for above, a certificate of , in regards to the Parent, a director, and in regards to Ferguson, a Responsible Officer, to the effect that such financial statements fairly represent its financial condition as of the date as at which such financial statements were prepared;
(vi) Each of the Parent and Ferguson will cause to be provided to the Administrative Agent (who shall promptly distribute the same to the Facility Agents) within 10 days after the delivery of the financial statements provided for above, a certificate of, in regards to the Parent, a director, and in regards to Ferguson, a Responsible Officer, to the effect that to the best of such officer’s knowledge, no Termination Event or Potential Termination Event has occurred and is continuing or, if any Termination Event or Potential Termination Event has occurred and is continuing, specifying the nature and extent thereof;
(vii) Each of the Parent and Ferguson will cause the financial statements provided for above to be prepared using accounting practices and financial reference periods consistent with those applied in preparation of the financial statements provided on or before the Amendment Effective Date, unless it notifies the Administrative Agent (who shall promptly notify the Facility Agents) that there has been a change in the relevant GAAP, the relevant accounting practices
or the relevant reference periods, together with a description of any change necessary for those financial statements to reflect the relevant GAAP, relevant accounting practices and relevant reference periods upon which such financial statements were prepared prior to such change; and
(viii) Each of the Parent and Ferguson shall provide to the Administrative Agent (who shall promptly distribute the same to the Facility Agents) such additional information regarding its and its Subsidiaries’ operations, business affairs and financial condition, or compliance with the terms of this Agreement or any other Transaction Document, as may be reasonably requested by the Administrative Agent.
(c) Notices:
(i) Termination. It will provide or cause to be provided to the Administrative Agent (and the Administrative Agent shall promptly distribute the same to the Facility Agents) promptly and in any event within five Business Days after obtaining knowledge of the occurrence of a Termination Event or Potential Termination Event, with a statement of its financial officer setting forth details of such Termination Event or Potential Termination Event;
(ii) Credit Agreement. It will provide to the Administrative Agent (and the Administrative Agent shall promptly distribute the same to the Facility Agents) notice of the occurrence of an “Event of Default” under the Credit Agreement, together with a copy of the same, as soon as practicable after, but in no event later than 15 days following such occurrence;
(iii) ERISA Event. It will cause to be provided to the Administrative Agent (and the Administrative Agent shall promptly distribute the same to the Facility Agents) promptly and in any event within five Business Days after obtaining knowledge thereof, notice of the occurrence or existence of any ERISA Event which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;
(iv) Tax Lien. It will cause to be provided to the Administrative Agent (and the Administrative Agent shall promptly distribute the same to the Facility Agents) promptly and in any event within five Business Days after obtaining knowledge of the arising or existence of any tax Lien which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;
(v) Material Event. It will provide or cause to be provided to the Administrative Agent (and the Administrative Agent shall promptly distribute the same to the Facility Agents) promptly after the occurrence thereof, notice of any event or condition of which it has knowledge that has had or could reasonably be expected to have a Material Adverse Effect; and
(vi) Changes with respect to Beneficial Ownership Certificate; etc. The Seller shall, promptly upon a responsible officer of the Seller becoming aware thereof, notify the Administrative Agent and each Facility Agent of any change in the information provided in the Beneficial Ownership Certificate that would result in a change to the list of beneficial owners or control party identified in such certification. Without limiting the generality of the preceding sentence, promptly following any request therefor, the Seller shall provide such information and documentation reasonably requested by the Administrative Agent or any Facility Agent for purposes of compliance with the Beneficial Ownership Regulation.
(d) Anti-Terrorism Laws and Anti-Money Laundering Laws.
(i) It shall immediately notify the Administrative Agent (and the Administrative Agent shall promptly distribute the same to the Facility Agents) if it obtains knowledge that any of the representations contained in Section 6.01(aa) is incorrect as of any date;
(ii) It shall not, and it will procure that none of its Subsidiaries shall knowingly, in contravention of any Anti-Terrorism Law: (A) conduct any business with or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Designated Person; or (B) deal in, or otherwise engage in any transaction relating to, any property or interest in property blocked pursuant to any Anti-Terrorism Law.
(iii) No Designated Person shall have a controlling interest of any nature whatsoever in such Ferguson Party with the result that an investment in such Ferguson Party (whether direct or indirect) or the obligation to fund Purchases hereunder would be in violation of any Anti-Terrorism Law.
(iv) At all times throughout the term of this Agreement, to the knowledge of such Ferguson Party, based upon its reasonable inquiry, none of the funds that are used to repay any portion of the Aggregate Exposure Amount shall be derived from any unlawful activity, with the result that (A) such repayment or any transaction contemplated by the Transaction Documents (whether directly or indirectly) is prohibited by law or (B) the Purchases or obligation to fund Purchases would be in violation of law.
(v) It shall not, and shall not permit any of its Subsidiaries to:
(A) violate any Anti-Terrorism Law;
(B) require any Purchaser or Facility Agent to take any action that would cause it to violate any Anti-Terrorism Law, it being understood that each Purchaser or Agent can refuse to honor any such request otherwise validly made by such Ferguson Person under this Agreement;
(C) conduct any transaction for the benefit of any Designated Person in violation of any Anti-Terrorism Law;
(D) engage in any transaction relating to any property blocked pursuant to any Anti-Terrorism Law, in violation of any Anti- Terrorism Law;
(E) repay any Aggregate Exposure Amount with any funds derived from any unlawful activity with the result that the making of Purchases hereunder would be in violation of law; or
(F) cause or permit the proceeds of any Purchase to be used, directly or indirectly, to make a loan or other advance to, invest or contribute or otherwise support the activities or business of any person, entity, country or Governmental Authority that is subject to sanctions administered under any Anti-Terrorism Law; or
(G) engage in or conspire to engage in any transaction that evades or violates, or is intended to evade or violate, or attempts to evade or violate any Anti-Terrorism Law.
(vi) It shall deliver to any Facility Agent any certificates or other evidence requested from time to time by such in its reasonable discretion, to confirm such Ferguson Party’s compliance with this Section 7.01(d) to the extent the same is requested so as to enable such Facility Agent to comply with an applicable law or regulation or request made of it by a regulatory body or an advisor which such Facility Agent is customarily in the habit of complying with in respect of such matters.
(vii) No part of any Purchase Price or Letter of Credit draw 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 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, assuming in all cases that such Act applies to any of the Ferguson Parties.
(e) Sanctions, It shall, and shall not permit any of its Subsidiaries to:
(i) knowingly (having taken the requisite due diligence), directly or indirectly, use the proceeds of the Facility or lend, contribute or otherwise make available such proceeds to any Subsidiaries, joint venture partner or other person or entity (each a “Relevant Transaction”) to fund any activities or business of or with any person or entity or in any country or territory where, at the time of such funding, such Relevant Transaction would be in breach of applicable Sanctions;
(ii) knowingly (after due and careful enquiry) engage in, or conspire to engage in, any transaction that breaches, or is intended to breach, any Sanctions; or
(iii) otherwise breach any Sanctions that it is aware (after due and careful enquiry) are binding on it.
(f) Risk Retention and Due Diligence under EU Securitization Rules. Ferguson, as the originator which is managing the Facility for the purposes of Article 6 of the EU Securitization Regulation, undertakes, for so long as there is Net Investment
outstanding to any Purchaser subject to the EU Securitization Regulation, for the benefit of each Purchaser that is required to comply with the EU Securitization Rules:
(i)to hold and maintain a net economic interest in the Receivables (such net economic interest, the “Retained Interest”) in an amount (determined in accordance with Article 6 of the EU Securitisation Regulation) as in effect as at the Amendment Effective Date at least equal to 5% of the aggregate Outstanding Balance of the Receivables;
(ii)to maintain the Retained Interest in the form of a first loss tranche as referenced in paragraph (d) of Article 6(3) of the EU Securitization Regulation as in effect as at the Amendment Effective Date by holding, directly or indirectly, all of the equity interests of the Seller;
(iii)that it will not (and will not permit any of its Affiliates to) subject the Retained Interest to any credit risk mitigation or hedging, or sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the Retained Interest, except to the extent permitted under the EU Securitization Rules;
(iv)to include in each Monthly Report confirmation of its continuing compliance with clauses (i) through (iii) of this Section 7.01(f);
(v)that it will (A) promptly, and in event within five (5) Business Days, notify, or cause to be notified, the Administrative Agent in the event that it ceases to hold the Retained Interest in accordance with clauses (i) and (ii) or otherwise fails to comply with clauses (i) through (iii) of this Section 7.01(f) in any way; and
(vi)it will, promptly following a reasonable request in writing by any Facility Agent from time to time, provide such further information as that Facility Agent may reasonably require in order to enable the Purchasers in its Purchase Group to perform their due diligence and monitoring obligations (if any) under the EU Securitisation Rules (excluding, however, Article 5(1)(e) and Article 7 of the Securitisation Regulation and any other EU Securitisation Rules adopted pursuant to, implementing or otherwise to the extent relating to those provisions), to the extent such information is reasonably available to Ferguson (or other Originators or the Seller) and Ferguson (or the other Originators or the Seller) can provide it without breaching confidentiality obligations; provided, that if the provision of any such information specifically required under this Section 7.01(f) would result in Ferguson incurring any material third-party costs in addition to those that it would otherwise incur in connection with its compliance with any provision of this Agreement, the relevant Purchaser shall reimburse Ferguson in respect of any reasonable and document expenses incurred in connection with the provision of such information;
provided, however, that each such Purchaser, by accepting the benefits of this Section 7.01(f), acknowledges that (A) each Purchaser must independently assess and determine whether the agreement by Ferguson to retain the Retained Interest as described above and the information to be provided to the Purchasers in the Monthly Reports and otherwise pursuant to, or in connection with, this Agreement are sufficient for the purposes of complying with the EU Securitisation Rules and any corresponding national measures which may be relevant and (B) none of the Originators, Ferguson, the Seller, the Servicer, or any of their Affiliates makes any representation or provides any assurance to the effect that the terms of this Agreement and such information are sufficient for any such purpose or that compliance with such terms and provisions of such information would render the transactions described herein compliant with any EU Securitisation Rules.
Section 7.02. Negative Covenants of the Ferguson Parties. Except as otherwise specified below and in addition to its other covenants contained herein or made pursuant hereto, until the Facility Termination, each of the Ferguson Parties (as applicable) covenants and agrees as follows:
(a) Sales, Liens, Etc. Such Ferguson Party (other than the Seller) will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any adverse claim (except for the interest in favor of the Seller created pursuant to the Purchase and Contribution Agreement, the interest in favor of the Administrative Agent (for the benefit of the Purchasers and the LC Banks and Permitted Liens) created pursuant to this Agreement) upon or with respect to, any Receivable, Related Security, related Contract or Collections, or upon or with respect to any Account, or assign any right to receive income in respect thereof;
(b) Change in Payment Instructions to Obligors. It will not add or terminate any bank as a Depositary Bank from those listed on Schedule II hereto provided to the Facility Agents, or make any change in its instructions to Obligors regarding payments to be made in respect of the Receivables or payments to be made to any Depositary Bank, unless the Administrative Agent will have received notice of such addition, termination or change (including an updated Schedule II) and a fully executed Blocked Account Agreement in form and substance satisfactory to the Administrative Agent with respect to each new Lockbox Account or Depositary Account;
(c) Change in Name or Jurisdiction of Origination, Etc. It will not change its name, identity or organizational structure unless the Administrative Agent shall have received at least thirty (30) days’ advance written notice of such change and all action by such Ferguson Party, necessary or appropriate to perfect or maintain the perfection of the Administrative Agent’s (for the benefit of the Purchasers and the LC Banks) ownership or security interest in the Receivables, the Related Security and the Collections (including, without limitation, the filing of all financing statements and the taking of such other action as the Administrative Agent may request in connection with such change or relocation) will have been duly taken;
(d) Treatment as Sales. It will not account for or treat (whether in financial statements or otherwise) the transactions contemplated by the Purchase and Contribution Agreement and this Agreement in any manner other than as the sale and/or absolute conveyance of Receivables, except that the transactions under this Agreement will be treated (i) under relevant GAAP as a liability in the Parent’s consolidated financial statements and in Ferguson’s consolidated financial statements and (ii) for U.S. federal income tax purposes, as a financing;
(e) Transaction Documents. The Seller will not terminate, amend, waive or modify, or consent to any termination, amendment, waiver or
modification of, any provision of any Transaction Document or grant any other consent or other indulgence under any Transaction Document, in each case without the prior written consent of the Required Facility Agents (provided that any release and reconveyance pursuant to Section 3.03 of the Purchase and Contribution Agreement shall not be prohibited hereunder). The Seller will perform all of its obligations under the Purchase and Contribution Agreement and enforce the Purchase and Contribution Agreement in accordance with its terms;
(f) Nature of Business. The Seller will not engage in any business activities other than those contemplated by the Transaction Documents and will not create or form any subsidiary;
(g) Mergers, Etc. The Seller will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise 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 acquire all or substantially all of the assets or capital stock or other ownership interest of, or enter into any joint venture or partnership agreement with, any Person, other than as contemplated by the Transaction Documents. No other Ferguson Party will (a) consolidate or merge with or into any other person or (b) sell, lease or otherwise transfer (in one transaction or in a series of transactions) all or substantially all of its assets to any other person; provided, that (i) any Person may consolidate or merge with or into the Parent in a transaction in which the Parent is the surviving Person, (ii) any Person may consolidate or merge with or into any Originator in a transaction in which such Originator is the surviving Person, (iii) any Originator may consolidate or merge with or into any other Originator in a transaction in which one or the other such Originator is the surviving Person, and (iv) if at the time thereof and immediately after giving effect thereto no Default (as defined in the Credit Agreement) or Event of Default (as defined in the Credit Agreement) under the Credit Agreement shall have occurred and be continuing, any Person may consolidate or merge with or into the Parent, and the Parent may consolidate or merge with or into any Person, as long as the surviving entity, if other than the Parent, has unsecured debt ratings at least equal to those of the Parent (prior to consolidation or merger) and the surviving entity assumes the obligations of the Parent under this Agreement pursuant to an agreement executed and delivered to the Facility Agents in a form reasonably satisfactory to the Required Facility Agents;
(h) Distributions, Etc. The Seller will not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any membership interests or other equity interests of the Seller, or return any capital to its members or other equity holders as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any membership interests or other equity of the Seller or any warrants, rights or options to acquire any membership interests or other equity of the Seller, now or hereafter outstanding; provided, however, that
the Seller may declare and pay cash dividends to its member out of Collections available for such purpose pursuant to the Transaction Documents so long as (i) no Termination Event or Potential Termination Event shall then exist or would occur as a result thereof, (ii) such dividends are in compliance with all applicable law including the Delaware Limited Liability Company Act, and (iii) such dividends have been approved by all necessary and appropriate limited liability company action of the Seller and its board of directors;
(i) Debt. The Seller will not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than the incurrence of obligations pursuant to, and, as contemplated in, the Transaction Documents and the incurrence of operating expenses in the ordinary course of business or other liabilities;
(j) Sales, Liens. The Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any adverse claim upon (including the filing of any financing statement) or with respect to, any Receivable, Related Security or Collection, or upon or with respect to any Contract under which any Receivable arises, or any Lockbox or Account or any amounts from time to time on deposit therein or credited thereto, or assign any right to receive income with respect thereto (other than, in each case the creation of the interests therein in favor of the Administrative Agent or the sale or assignment of a Reassigned Receivable pursuant to Section 2.01A hereof), and the Seller will defend the right, title and interest of the Administrative Agent in, to and under any of the foregoing property, against all claims of third parties claiming through or under the Seller or an Originator;
(k) ERISA. (i) Neither it nor any of its ERISA Affiliates shall (A) adopt or institute any Plan; (B) take any action which will result in the partial or complete withdrawal, within the meanings of Sections 4203 and 4205 of ERISA, from a Multiemployer Plan; (C) engage or permit any Ferguson Party, or any Subsidiary or Affiliate thereof to engage in any transaction prohibited by Section 406 of ERISA or Section 4975 of the Code involving any Plan which would subject such Ferguson Party or any ERISA Affiliate thereof to any tax, penalty or other liability including a liability to indemnify; (D) incur or allow to exist any failure by any Plan to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA); (E) fail to make full payment when due (including any permissible extensions) of all amounts due as contributions to any Plan or Multiemployer Plan; or (F) fail to comply with the requirements of Section 4980B of the Code or Part 6 of Title I(B) of ERISA, where singly or cumulatively, the above could reasonably be expected to have a Material Adverse Effect; and
(ii) Neither it nor any Subsidiary thereof shall (A) engage in any transaction prohibited by any Governmental Authority applicable to any
Foreign Plan; (B) fail to make full payment when due of all amounts due as contributions to any Foreign Plan; or (C) otherwise fail to comply with the requirements of any Governmental Authority applicable to any Foreign Plan, where singly or cumulatively, the above could have a Material Adverse Effect; and
(l) Commingling. It will not direct any funds to be deposited into any Lockbox Account or Depositary Account other than Collections of Receivables; provided, however, that it may direct or allow (i) collections of FFD Receivables and (ii) Collections of Acquisition Receivables being prepared for reporting on an Approved Data Reporting System in accordance with Section 11.21 hereof until the applicable Inclusion Date for such Acquisition Receivables (after which Inclusion Date, the following limit will no longer apply) to be so deposited in an aggregate amount not in excess of $15,000,000 (as determined on the last day of each Calculation Period and reported in the related Monthly Report).
Section 7.03. Separateness Covenants. Until the Facility Termination, except as set forth below, each of the Ferguson Parties (as applicable) covenants and agrees as follows:
(a) The Seller will at all times maintain at least one independent director or manager who (i) is not currently and has not been during the five years preceding the date of this Agreement an officer, director or employee of any of the Parent, Ferguson, any other Originator, the Servicer, or any of their respective Affiliates or Subsidiaries (except the Seller) (collectively, the “Other Companies”), (ii) is not a current or former officer or employee of the Seller, (iii) is not a stockholder of any of the Other Companies or any of their respective Affiliates, and (iv) who (A) has prior experience as an independent director for a corporation or manager for a limited liability company whose charter documents required the unanimous consent of all independent directors thereof before such corporation or limited liability company could consent to the institution of bankruptcy or insolvency proceedings against it or could file a petition seeking relief under any applicable federal or state law relating to bankruptcy and (B) has at least three years of employment experience with one or more entities that provide, in the ordinary course of their respective businesses, advisory, management or placement services to issuers of securitization or structured finance instruments, agreements or securities. The Seller will provide not less than 30 business days’ prior written notice to the Administrative Agent and the Facility Agents in the event of the replacement of the Seller’s independent director or manager;
(b) The Seller will conduct its business in its own name and from an office separate from that of the Other Companies (but which may be located in the same facility as one or more of the Other Companies). The Seller will have stationery and other business forms separate from that of the Other Companies;
(c) The Seller will at all times be adequately capitalized in light of its contemplated business;
(d) The Seller will at all times provide for its own operating expenses and liabilities from its own funds except that common overhead expenses may be shared by the Seller one or more of the Other Companies on a basis reasonably related to use;
(e) The Seller will maintain its assets and transactions separately from those of the Other Companies and reflect such assets and transactions in financial statements separate and distinct from those of the Other Companies and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Companies. The Seller will hold itself out to the public under the Seller’s own name as a legal entity separate and distinct from the Other Companies. The Seller will not hold itself out as having agreed to pay, or as being liable, primarily or secondarily, for, any obligations of the Other Companies;
(f) The Seller will hold at least one annual duly noticed meeting of its board of directors, make and retain minutes of such meetings and otherwise observe all limited liability company formalities as a distinct entity;
(g) The Seller will prepare its financial statements separately from those of any of the Other Companies and will insure that any consolidated financial statements of any Other Company that are filed with the SEC or any other Official Body or are furnished to any creditors of any Other Company will include notes clearly stating that the Seller is a separate corporate entity and that its assets are available first and foremost to satisfy the claims of the creditors of the Seller;
(h) The Seller will not direct or participate in the management of any of the Other Companies’ operations;
(i) The Seller will not maintain any joint account with any Other Company or become liable as a guarantor or otherwise with respect to, or grant a security interest in any of its assets to secure, any debt or contractual obligation of any Other Company;
(j) The Seller will not engage in any transaction with, or make loans, advances or otherwise extend credit to, any of the Other Companies except as expressly contemplated by the Transaction Documents;
(k) The Seller will maintain its Limited Liability Company Agreement in conformity with this Agreement such that it does not amend, restate, supplement or otherwise modify its Limited Liability Company Agreement in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents;
(l) Such Ferguson Party (other than the Seller) will take all actions necessary to maintain the Seller as a separate, limited purpose subsidiary of Ferguson pursuant to, and in accordance with the terms of, the Seller’s Limited Liability Company Agreement; and
(m) Such Ferguson Party (other than the Seller) will take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinions issued by Mayer Brown LLP, as counsel for Seller, in connection with the Facility on the Original Closing Date and MayJune 1923, 20212023 and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times.
ARTICLE VIII
TERMINATION
Section 8.01. Termination Events. The occurrence of each of the following events shall constitute a “Termination Event”:
(a) Failure of any Ferguson Party (other than Ferguson when acting in its capacity as Servicer) to perform or observe any covenant or agreement under the Transaction Documents, and such failure shall continue for five (5) Business Days after such applicable party receives written notice or has actual knowledge of such failure;
(b) Failure of any Ferguson Party (other than Ferguson when acting in its capacity as Servicer) to make when due any payment or deposit required to be made by it under any Transaction Document, and such failure shall continue for one (1) Business Day with respect to payments of principal and three (3) Business Days with respect to all other payments under any Transaction Document;
(c) Any representation or warranty made or deemed made by any Ferguson Party (other than Ferguson when acting in its capacity as Servicer) under or in connection with any Transaction Document or any certificate, report or other statement delivered by such Ferguson Party pursuant to the terms set forth in the Transaction Documents shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered (unless such representation or warranty in Section 6.01(d) or Section 6.01(g) herein relates solely to one or more specific Receivables and immediately following the removal of the related Receivables from the Net Receivables Balance, the Percentage Interest does not exceed 100%;
(d) the occurrence of (i) an event of default as defined in any mortgage, indenture, agreement or instrument under which there may be issued or evidenced, any indebtedness of the Seller in excess of $50,000; or (ii) an event of default as defined in any mortgage, indenture, agreement or instrument under which there may be issued or evidenced, any indebtedness of any other Ferguson Party (A) relating to the payment of principal of, or interest on, such indebtedness, but only if such indebtedness is in an aggregate amount exceeding $75,000,000 or (B) of any other type which shall result in such indebtedness being accelerated, but only if such indebtedness is in an aggregate amount exceeding $75,000,000;
(e) (i) One or more judgments or decrees involving a liability in excess of $50,000 shall be entered against the Seller; (ii) one or more judgments or decrees shall be entered against any Ferguson Party (other than the Seller) or any of their respective Subsidiaries or any combination thereof involving in the aggregate a liability (not paid or fully covered by insurance) of $25,000,000 and, in the case of either clause (i) or clause (ii), such judgments or decrees shall not have been vacated, dismissed, discharged or stayed within 60 days from the entry thereof;
(f) Any Ferguson Party shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of all or a substantial part of its property, (ii) become unable, admit in writing its inability or fail to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary case under the Federal Bankruptcy Code or any applicable bankruptcy or insolvency Law of Jersey or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or action shall be taken by it for the purpose of effecting any of the foregoing, or (vi) if without the application, approval or consent of any Ferguson Party, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of such Ferguson Party an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of such Ferguson Party or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and (A) is not challenged by appropriate means by such Ferguson Party within thirty (30) days and (B) the same shall continue undismissed or unstayed for any period of 60 consecutive days after commencement of such case;
(g) The Administrative Agent (for the benefit of the Purchasers and the LC Banks) shall cease to have, for any reason, a valid and perfected first priority ownership or security interest in the Receivables, the Related Security and the Collections;
(h) [Reserved];
(i) Any Transaction Document shall terminate in whole or in part (except in accordance with its terms or with the consent of the parties thereto) or shall cease to be effective or to be legally valid, binding and enforceable obligation of any one of the Ferguson Parties, or any one of the Ferguson Parties shall directly or indirectly contest such effectiveness, validity, binding nature or enforceability of any such Transaction Document;
(j) 3-month rolling average Dilution Ratio exceeds 9.2510.50%;
(k) 3-month rolling average Delinquency Ratio exceeds (i) for eachany Calculation Period occurring duringin the period beginning on January 1, 2023 and ending on June 30, 2023months of April through November, 8.00% and (ii) for eachany Calculation Period thereafteroccurring in the months of December through March, 6.509.00%;
(l) 3-month rolling average Default Ratio exceeds 2.50%;
(m) the Annual Gross Write-off Ratio exceeds 1.00%;
(n) 3-month rolling average of Days Sales Outstanding exceeds 46 days;
(o) the Percentage Interest exceeds (i) 100%, and such circumstance continues for two (2) consecutive Business Days (one (1) Business Day on or after a Downgrade Event) the Seller knows or should know of such circumstance;
(p) a Servicer Default shall occur;
(q) a Change of Control of Ferguson, any Originator, the Seller or the Parent (other than, in the case of the Parent, a “Permitted Change of Control” as defined in the Credit Agreement) shall occur; or
(r) there shall have been filed against any Ferguson Party (i) notice of a material federal tax Lien from the Internal Revenue Service, which either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and five (5) days shall have elapsed without such notice having been effectively withdrawn or such Lien having been released or discharged, (ii) notice of a material Lien from the PBGC under Section 430(k) of the Code or Section 303(k) of ERISA for a failure to make a required installment or other payment to plan to which either of such sections applies and five (5) days shall have elapsed without such notice having been effectively withdrawn or such Lien having been released or discharged, or (iii) a notice of any other Lien the existence of which could reasonably be expected to have a Material Adverse Effect with respect to such Person and thirty (30) days shall have elapsed without such notice having been effectively withdrawn or such Lien having been released or discharged.
Section 8.02. Consequences of a Termination Event. (a) Upon the occurrence and continuance of any Termination Event, the Administrative Agent may, or at the direction of the Required Facility Agents shall, by written notice to the Ferguson Parties, determine to commence the wind-down period during or after which no Reinvestment Purchases shall be made; provided, that, upon the occurrence of the Termination Event specified in Section 8.01(f) above, the wind-down period shall be deemed to commence automatically. In addition, (i) upon the occurrence and continuance of any Termination Event, (A) the Percentage Interest shall be increased to 100% and all Collections will be applied to repay the Facility, (B) pricing on the Facility will be at the Default Rate, (C) the Administrative Agent may, or at the direction of the Required Facility Agents shall, deliver the notices of exclusive control to the Depositary Banks under the
Blocked Account Agreements, and (D) the Administrative Agent may, or at the direction of the Required Facility Agent shall, replace the Servicer and (ii) upon the occurrence of the Termination Date, (X) the Maximum Net Investment shall be reduced as of each calendar date thereafter equal to the Aggregate Exposure Amount as of such date (and each Purchase Group’s Exposure Amount will be reduced ratably) and (Y) the Seller shall deposit into the LC Cash Collateral Account the amount necessary to cause the amount therein to be equal to the Required LC Cash Collateral Amount.
(b) Upon the occurrence and continuance of any Termination Event, the Purchasers, the LC Banks, the Facility Agents and the Administrative Agent shall have, in addition to all rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and under other applicable Laws, which rights shall be cumulative.
(c) The parties hereto acknowledge that this Agreement is, and is intended to be, a contract to extend financial accommodations to the Seller within the meaning of Section 365(e)(2)(B) of the Bankruptcy Code (11 U.S.C. § 365(e)(2)(B)) (or any amended or successor provision thereof or any amended or successor code).
ARTICLE IX
THE ADMINISTRATIVE AGENT AND THE FACILITY AGENTS
Section 9.01. Authorization and Action. (a) Each Facility Agent, each Purchaser and each LC Bank hereby appoints RBC as Administrative Agent hereunder and authorizes the Administrative to take such action as agent on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. When requested to do so by a Facility Agent, the Required Facility Agents or the Facility Agents (as the context herein requires or allows), the Administrative Agent shall take such action or refrain from taking such action consistent with its duties hereunder and under the other Transaction Documents as a Facility Agent, the Required Facility Agents or the Facility Agents, as the case may be, direct under or in connection with or on any matter relating to any Ferguson Party, this Agreement and all other Transaction Documents. In the event of a conflict between a determination or calculation made by the Administrative Agent and a determination or calculation made by any Purchaser, LC Bank or any Facility Agent, the determination or calculation of the Purchaser, the LC Bank or the Facility Agent shall control absent manifest error.
(b) Each Purchaser and LC Bank (if any) in a Purchase Group hereby accepts the appointment of the applicable Facility Agent hereunder, and authorizes such Facility Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to such Facility Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Each other Purchaser or LC Bank within any other Purchase Group hereby accepts the appointment of the related Facility Agent for such Purchase Group and authorizes and empowers such Facility Agent as provided in the preceding sentence.
(c) Except for actions which the Administrative Agent or any Facility Agent is expressly required to take pursuant to this Agreement or any Conduit Support Document, neither the Administrative Agent nor any Facility Agent shall be required to take any action which exposes the Administrative Agent or such Facility Agent to personal liability or which is contrary to applicable Law unless the Administrative Agent or such Facility Agent shall receive further assurances to its satisfaction from the Purchasers and LC Banks of the indemnification obligations under Section 9.06 hereof against any and all liability and expense which may be incurred in taking or continuing to take such action. The Administrative Agent agrees to give to each Facility Agent, each Purchaser and each LC Bank prompt notice of each notice and determination given to it by any Ferguson Party or any Depositary Bank or by it to any Ferguson Party or any Depositary Bank, pursuant to the terms of this Agreement. Each Facility Agent agrees to give the Administrative Agent and such Facility Agent’s respective Purchasers and LC Banks prompt notice of each notice and determination given to it by any Ferguson Party, any Depositary Bank or by it to any Ferguson Party or any Depositary Bank, pursuant to the terms of this Agreement. Notwithstanding the foregoing, neither the Administrative Agent nor any Facility Agent shall be deemed to have knowledge or notice of the occurrence and continuance of any Termination Event unless the Administrative Agent or such Facility Agent has received written notice from a Conduit Purchaser, a Committed Purchaser, any LC Bank, any other Facility Agent, the Seller or the Servicer referring to this Agreement, describing such Termination Event and stating that such notice is a “notice of a Termination Event.” Subject to Section 9.07 hereof, the appointment and authority of the Administrative Agent and each Facility Agent hereunder shall terminate on the date of Facility Termination.
(d) For the avoidance of doubt, notwithstanding any other provision hereof, (i) no Facility Agent in its capacity as such shall have any purchase, reinvestment or funding commitment or obligation hereunder, nor be obligated to remit funds to the Seller hereunder, unless such funds are received from the applicable Conduit Purchaser or Committed Purchaser, and (ii) no Facility Agent shall have any personal liability for any default by its Conduit Purchaser or Committed Purchaser hereunder.
Section 9.02. UCC Filings. The Administrative Agent, the Purchasers, the LC Banks, the Facility Agents, the Seller, Originators, the Servicer and the Parent expressly recognize and agree that the Administrative Agent may be listed as the assignee or secured party of record on, and the Administrative Agent, the Facility Agents, the Purchasers, the LC Banks, expressly authorize the Administrative Agent to execute on their behalf as their agent, the various UCC filings required to be made hereunder and under the Transaction Documents in order to perfect the sale and assignment of the Receivable Interest from the Seller to the Facility Agents, for the benefit of the Purchasers and the LC Banks, that such listing and/or execution shall be for administrative convenience only in creating a record or nominee owner to take certain actions hereunder on behalf of the Facility Agents, the Purchasers and the LC Banks or to execute UCC filings on behalf of the Facility Agents, the Purchasers and the LC Banks and that such listing and/or execution will not affect in any way the status of the Administrative Agent, the Facility Agents, and the Purchasers and the LC Banks as the beneficial owners of, and secured parties with respect to, the Receivable Interest. In addition, such listing or execution shall impose no duties on the Administrative Agent other than those expressly and specifically undertaken in accordance with this Article IX. In furtherance of the foregoing, the Administrative Agent, each
Facility Agent, Purchaser and LC Bank shall be entitled to enforce their respective rights created under this Agreement without the need to conduct such enforcement through the Administrative Agent except as provided herein.
Section 9.03. Administrative Agent’s and Facility Agents’ Reliance, Etc. (a) Neither the Administrative Agent nor any Facility Agent nor any of their respective directors, officers, agents or employees shall be liable to the Purchasers, the Administrative Agent or the Facility Agents for any action taken or omitted to be taken by it or them as Administrative Agent or Facility Agent under or in connection with this Agreement (including, without limitation, the Administrative Agent’s servicing, administering or collecting Receivables as Servicer pursuant to Section 4.01(c) hereof), except for its or their own gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final non-appealable order. Without limiting the foregoing, the Administrative Agent and each Facility Agent: (i) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Purchaser or LC Bank and shall not be responsible to any Purchaser or LC Bank for any statements, warranties or representations made by any Ferguson Party in connection with this Agreement or any Transaction Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any Transaction Agreement on the part of any Ferguson Party or to inspect the property (including the books and records) of any Ferguson Party; (iv) shall not be responsible to any Purchaser for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telex or electronic means) believed by it in good faith to be genuine and signed or sent by the proper party or parties.
(b) Each Facility Agent shall determine with its related Purchasers and LC Banks, the number of such (each, a “Voting Block”) which shall be required to request or direct such Facility Agent to take action, or refrain from taking action, under this Agreement and the other Transaction Documents on behalf of such Purchasers and LC Banks. Such Facility Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of its appropriate Voting Block, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of such Facility Agent’s Purchasers and LC Banks.
(c) Unless otherwise advised in writing by a Facility Agent or by any Purchaser or LC Bank on whose behalf such Facility Agent is purportedly acting, each party to this Agreement may assume that (i) such Facility Agent is acting for the benefit of each of its respective Purchasers and LC Banks, as well as for the benefit of each assignee or other transferee from any such Purchaser or LC Bank, and (ii) such action taken by such Facility Agent has been duly authorized and approved by all necessary action on the part of the Purchasers and LC Banks on whose behalf it is purportedly acting. Each Conduit Purchaser (or, with the consent of all other members of the respective Purchase Group then existing, any other Purchaser or LC Bank) shall
have the right to designate a Facility Agent (which may be itself) to act on its behalf and on behalf of its assignees and transferees for purposes of this Agreement by giving to the Administrative Agent written notice thereof signed by such Purchaser(s) and/or LC Bank(s) and the newly designated Facility Agent; provided, however, if such new Facility Agent is not an Affiliate of a Facility Agent that is party hereto, any such designation of a new Facility Agent shall require the consent of the Seller, which consent shall not be unreasonably withheld. Such notice shall be effective when receipt thereof is acknowledged by the Administrative Agent, which acknowledgement the Administrative Agent shall not unreasonably delay giving, and thereafter the party named as such therein shall be Facility Agent for such Purchasers and LC Banks under this Agreement. Each Facility Agent and its respective Purchasers and LC Banks shall agree among themselves as to the circumstances and procedures for removal and resignation of such Facility Agent.
Section 9.04. Non-Reliance on the Administrative Agents and the Facility Agents. Without limiting the generality of any other provision of this Agreement: (a) each of the Conduit Purchasers, the Committed Purchasers, the LC Banks and the Facility Agents expressly acknowledges that neither the Administrative Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of any Ferguson Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any such Person. Each of the Conduit Purchasers, the Committed Purchasers, the LC Banks and the Facility Agents represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Conduit Purchaser, Committed Purchaser, LC Bank or Facility Agent 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 any Ferguson Party and made its own decision to enter into this Agreement. Each of the Conduit Purchasers, the Committed Purchasers, the LC Banks and the Facility Agents also represents that it will, independently and without reliance upon the Administrative Agent or any other Conduit Purchaser, Committed Purchaser, LC Bank or Facility Agent, 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 Transaction 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 any Ferguson Party. Except for notices, reports and other documents expressly required to be furnished to the Facility Agents, the other Purchasers and LC Banks by the Administrative Agent hereunder, the Administrative Agent shall have no duty or responsibility to provide any Conduit Purchaser, any Committed Purchaser, any LC Bank or any Facility Agent with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Ferguson Party which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
Each of the Committed Purchasers and LC Banks expressly acknowledges that neither its Facility Agent (or any other Facility Agent) nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by
its Facility Agent (or any other Facility Agent) hereinafter taken, including any review of the affairs of any Ferguson Party shall be deemed to constitute any representation or warranty by any Facility Agent to any such Person. Each of the Committed Purchasers and LC Banks represents to the Facility Agents that it has, independently and without reliance upon its Facility Agent or any other Committed Purchaser, LC Bank or Facility Agent 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 each Ferguson Party made its own decision to enter into this Agreement. Each of the Committed Purchasers and LC Banks also represents that it will, independently and without reliance upon its Facility Agent, any other Committed Purchaser, LC Bank or Facility Agent, 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 Transaction 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 each Ferguson Party. Except for notices, reports and other documents expressly required to be furnished to any Purchaser or LC Bank by its Facility Agent hereunder, no Facility Agent shall have any duty or responsibility to provide any Purchaser or LC Bank with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Ferguson Party which may come into the possession of such Facility Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
Section 9.05. Administrative Agent, Facility Agents and Affiliates. RBC, each Facility Agent and their respective Affiliates may generally engage in any kind of business with any Ferguson Party or any Obligor, any of their respective Affiliates and any Person who may do business with or own securities of any Ferguson Party or any Obligor or any of their respective Affiliates, all as if such parties did not have the agency agreements contemplated by this Agreement and without any duty to account therefor to the Purchasers or the LC Banks.
Section 9.06. Indemnification. (a) The Committed Purchasers and LC Banks in each Purchase Groups (proportionately, among the Purchase Groups, in accordance with their respective Purchase Group Percentages) severally agrees to indemnify the Administrative Agent (to the extent not reimbursed by the Seller or the Servicer), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement; provided, that (i) no Committed Purchaser or LC Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting or arising from the Administrative Agent’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final non-appealable order and (ii) no Committed Purchaser or LC Bank shall be liable for any amount in respect of any compromise or settlement or any of the foregoing unless such compromise or settlement is approved by the Facility Agents. Without limitation of the generality of the foregoing, the Committed Purchasers and LC Banks in each Purchase Groups (proportionately, among the Purchase Groups, in accordance with their respective Purchase Group Percentages) agree to reimburse the Administrative Agent (to the extent not reimbursed by the Seller or the Servicer),
promptly upon demand, for any reasonable out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the 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; provided, that no Purchaser or LC Bank shall be responsible for the costs and expenses of the Administrative Agent in defending itself against any claim alleging the gross negligence or willful misconduct of the Administrative Agent to the extent such gross negligence or willful misconduct is determined by a court of competent jurisdiction in a final and non-appealable decision.
(b) Each Purchaser and LC Bank also agrees to indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Purchaser or LC Bank (but only to the extent that the Seller has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Seller to do so), (ii) any Taxes attributable to such Purchaser’s or LC Bank’s failure to comply with the provisions of Section 11.02 relating to the maintenance of a participant register and (iii) any Excluded Taxes attributable to such Purchaser or LC Bank, in each case that are payable or paid by the Administrative Agent in connection with any Transaction Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.
Section 9.07. Successor Administrative Agent. The Administrative Agent may resign at any time by giving at least sixty days’ written notice thereof to the Purchasers, the LC Banks, the Facility Agents, the Seller, Originators, the Servicer and the Parent. Upon the resignation of the Administrative Agent, the Seller shall have the right to appoint a successor Administrative Agent approved by the Facility Agents (which approval will not be unreasonably withheld or delayed). If no successor Administrative Agent shall have been so appointed by the Seller, and shall have accepted such appointment, within thirty days after the retiring Administrative Agent’s delivery of notice of resignation, then the retiring Administrative Agent may appoint a successor Administrative Agent which, if such successor Administrative Agent is not an Affiliate of any of the Facility Agents, is approved by the Seller (which approval will not be unreasonably withheld or delayed), and which successor Administrative Agent shall be (a) a commercial bank having a combined capital and surplus of at least $250,000,000 and (b) experienced in the types of transactions contemplated by this Agreement. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent’s resignation or removal hereunder, the provisions of this Article IX 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.
Section 9.08. Erroneous Payments. (a) If the Administrative Agent notifies a Purchaser (any such Purchaser, a “Payment Recipient”) that the Administrative Agent has determined in its reasonable sole discretion (whether or not after receipt of any notice under immediately succeeding clause (b)) that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise
erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Payment Recipient) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof) (provided that, without limiting any of its other rights or remedies (whether at law or in equity), the Administrative Agent may not make any such demand under this clause (a) with respect to an Erroneous Payment unless such demand is made within 10 Business Days of the date of receipt of such Erroneous Payment by the applicable Payment Recipient), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Administrative Agent, and such Payment Recipient shall promptly, but in no event later than two Business Days thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient 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 from time to time in effect. A notice of the Administrative Agent to any Payment Recipient under this clause (a) shall be conclusive, absent demonstrable error.
(b) Without limiting immediately preceding clause (a), each Payment Recipient hereby further agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates), or (z) that such Payment Recipient, otherwise becomes aware was transmitted to it, or received by it, in error or by mistake (in whole or in part), then:
(i) (A) in the case of immediately preceding clauses (x) or (y), an error shall be presumed to have been made (absent written confirmation from the Administrative Agent to the contrary) or (B) an error has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and
(ii) such Payment Recipient shall (and shall cause any of its Affiliates that receives all or a portion of such payment, prepayment or repayment on its respective behalf to) promptly (and, in all events, within one Business Day of its knowledge of such error) notify the Administrative Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Administrative Agent pursuant to this Section 9.08(b).
(c) Each Payment Recipient hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Payment Recipient under any
Transaction Document, or otherwise payable or distributable by the Administrative Agent to such Payment Recipient from any source, against any amount due to the Administrative Agent under the immediately preceding clause (a) or under the indemnification provisions of this Agreement. In addition, each party hereto agrees that, irrespective of whether the Administrative Agent may be equitably subrogated, the Administrative Agent shall be contractually subrogated to all the rights and interests of the applicable Payment Recipient under the Transaction Documents with respect to each Erroneous Payment (or portion thereof that is not returned to the Administrative Agent as provided herein) (the “Erroneous Payment Subrogation Rights”).
(d) The parties hereto agree that an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any obligations owed by the Seller, any Originator, the Servicer, the Parent or any Facility Agent to the Administrative Agent; provided that this Section 9.08 shall not be interpreted to increase (or accelerate the due date for), or have the effect of increasing (or accelerating the due date for), the obligations of the Seller, any Originator the Servicer or the Parent relative to the amount (and/or timing for payment) of the Aggregate Capital and other obligations that would have been payable had such Erroneous Payment not been made by the Administrative Agent; provided, further, that for the avoidance of doubt, this clause (d) shall not apply to the extent any such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Seller, any Originator, the Servicer or the Parent for the purpose of making such Erroneous Payment.
(e) To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.
(f) Each party’s obligations, agreements and waivers under this Section 9.08 shall survive the resignation or replacement of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Purchaser, the termination of the Purchase Group Maximum Net Investments and/or the repayment, satisfaction or discharge of all obligations of the Seller (or any portion thereof) under any Transaction Document.
ARTICLE X
INDEMNIFICATION; EXPENSES
Section 10.01. Indemnity by Seller. (a) The Seller shall indemnify the Administrative Agent, the Facility Agents, the Purchasers, the Support Providers and the LC Banks and their respective assigns, officers, directors and employees (each, an “Indemnified Party”) against all liabilities, claims, damages, costs, expenses, or losses (“Losses”) associated with the Facility, excluding, however, (i) Losses to the extent resulting from the gross negligence or willful misconduct of the Indemnified Party or the Indemnified Party’s breach of contract under any Transaction Document or any document delivered pursuant to any of the Transaction
Documents, (ii) recourse (except as provided in this Agreement) for uncollectable Receivables or (iii) Losses that are due to or relate to Taxes (which are addressed in Section 10.02).
Without limiting the foregoing, the Seller shall indemnify the Indemnified Parties for all Losses resulting from:
(i) False or incorrect representations, warranties or certifications of any Ferguson Party in any Transaction Document or any document delivered pursuant to any of the Transaction Documents;
(ii) Failure by any Ferguson Party to comply with applicable law, rules or regulations related to the Receivables;
(iii) Failure to vest in the Administrative Agent (for the benefit of the Purchasers and the LC Banks) a first priority perfected ownership or security interest in the Receivables, the Related Security and the Collections, free and clear of any Liens;
(iv) Failure to file, or delay in filing, any financing statements or similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to the Receivables, the Related Security or the Collections;
(v) Any dispute, claim or defense of an Obligor (other than discharge in bankruptcy) to the payment of any Receivable including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid or binding obligation of such Obligor, or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with respect to such Receivable or any Contract related thereto, or any adjustment, cash discount, warranty, rebate, return of product or cancellation with respect to such Receivable;
(vi) Failure by any Ferguson Party to perform any of their respective duties or other obligations or comply with any of their respective covenants under the Transaction Documents;
(vii) Any products liability, personal injury or damage suit, environmental or other claim by an Obligor or other third party arising out of the goods or services which are the subject of any Receivable;
(viii) Any third party investigation, litigation or proceeding (actual or threatened) related to this Agreement or any other Transaction Document or the transactions contemplated hereby or thereby, or the use of proceeds of Purchases under this Agreement or the draw under any Letter of Credit, or in respect of any Receivable;
(ix) Commingling of Collections with any other funds of any Ferguson Party or any set-off against Collections by any credit card servicers;
(x) Third party claims arising from the Seller’s, any Originator’s or the Servicer’s administration of the Receivables;
(xi) The sale of any Receivable in violation of applicable Law;
(xii) Any setoff by any Obligor;
(xiii) Any Letter of Credit issued pursuant to this Agreement or the use of the proceeds thereof by the applicable beneficiary or any affiliate, agent, employee or assignee thereof;
(xiv) The failure of the Seller or any Originator to pay when due any sales, excise, business and occupation, property or other similar taxes payable in connection with the Receivables;
(xv) Any action or omission by any Ferguson Party which reduces or impairs the rights of the Administrative Agent, the Facility Agents, the Purchasers or the LC Banks with respect to any Receivable and the Related Security and Collections with respect thereto or the value of any such Receivable and the Related Security and Collections with respect thereto;
(xvi) Any dispute, suit or claim arising out of any provision in any Contract restricting or prohibiting sale and assignment of the related Receivables;
(xvii) Overstatement of the balance of any Receivable due to provisions of the related Contract relating to retainage, data assumptions, cash on delivery sales, or bill and hold sales, or other similar provisions of comparable effect; and
(xviii) Any dispute, suit or claim arising out of the efforts to collect on a Reassigned Receivable.
Except as set forth in Section 10.01(a)(xiv) above, all obligations of the Seller with respect to Taxes are addressed in Section 10.02.
(b) Promptly upon receipt by any Indemnified Party under this Section 10.01 of notice of the commencement of any suit, action, claim, proceeding or governmental investigation against such Indemnified Party, such Indemnified Party shall, if a claim in respect thereof is to be made against the Seller hereunder, notify the Seller in writing of the commencement thereof. Any notice claiming compensation under this Section shall set forth in reasonable detail the amount or amounts to be paid to it hereunder and shall be conclusive in the absence of manifest error. The Seller may participate in and assume the defense and settlement of any such suit, action, claim, proceeding or investigation at its expense, and no settlement thereof shall be made without the approval of the Seller and such Indemnified Party. The approval of the Seller and such Indemnified Party will not be unreasonably withheld or delayed. After notice from the Seller to the Indemnified Party of its intention to assume the defense thereof with counsel reasonably satisfactory to the Administrative Agent and the Facility Agents, and so long as the
Seller so assumes the defense thereof in a manner reasonably satisfactory to the Administrative Agent and the Facility Agents, the Seller shall not be liable for any legal expenses of counsel unless there shall be a conflict between the interests of the Seller and the Indemnified Party, in which case the Indemnified Party(ies) shall have the right to employ one counsel to so represent it (them).
(c) The Seller will promptly pay to the Facility Agent for the Indemnified Party such indemnity amount as shall be specified to the Seller in a certificate of the Indemnified Party (or its Facility Agent, on its behalf) setting forth the calculations of such amount, together with the basis therefor. Any such certificate submitted by or on behalf of the Indemnified Party shall be conclusive and binding for all purposes, absent manifest error.
(d) Each Indemnified Party, on behalf of itself, its assigns, officers, directors, officers and employees, shall use its good faith efforts to mitigate, reduce or eliminate any losses, expenses or claims for indemnification.
Section 10.02. Indemnity for Taxes. (a) Any and all payments by or on account of any obligation of the Seller under any Transaction Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of the Seller) requires the deduction or withholding of any Tax from any such payment by the Seller, then the Seller shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Seller shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 10.02) the applicable Indemnified Party receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) The Seller shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the written request of the applicable Indemnified Party timely reimburse it for the payment of, any Other Taxes.
(c) The Seller shall indemnify each Indemnified Party, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 10.02) payable or paid by such Indemnified Party or required to be withheld or deducted from a payment to such Indemnified Party 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. The Administrative Agent and each Facility Agent will promptly notify the Seller of any event of which it has knowledge, which will entitle it or any Person in its Purchase Group to compensation pursuant to this Section 10.02; provided, however, that failure of any Indemnified Party to demand indemnification for any Taxes shall not constitute a waiver of such right to indemnification, except that the Seller shall not be required to indemnify an Indemnified Party for Taxes under this Section 10.02 unless such Indemnified Party notifies the Seller of such claim no later than 180 days after such Indemnified Party has knowledge of such Taxes being
imposed or arising. Any notice claiming compensation under this Section 10.02 shall set forth in reasonable detail the additional amount or amounts to be paid to it hereunder and shall be conclusive in the absence of manifest error. Absent manifest error, the Seller shall be obligated to any claim for Indemnified Taxes promptly upon receipt of such notice.
(d) Each Indemnified Party agrees that it will use reasonable efforts to reduce or eliminate any claim for indemnity pursuant to this Section 10.02 including, subject to applicable Law, a change in the funding office of such Indemnified Party; provided, however, that nothing contained herein shall obligate any Indemnified Party to take any action that imposes on such Indemnified Party any additional costs (without reimbursement) or imposes legal or regulatory burdens which such Indemnified Party reasonably considers material, nor which, in such Indemnified Party’s reasonable opinion, would have an adverse effect on its business, operations or financial condition.
(e) If any party 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 pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this subsection (e) plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection (e), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection (e) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection (e) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
Section 10.03. Indemnity by Originators. (a) Each Originator shall indemnify the Indemnified Parties for all Losses (other than recourse for uncollectible Receivables) resulting from:
(i) False or incorrect representations, warranties or certifications of such Originator in this Agreement or any document delivered pursuant to this Agreement; and
(ii) Failure by such Originator to perform any of its duties or other obligations or comply with any of its covenants under this Agreement.
(b) Promptly upon receipt by any Indemnified Party under this Section 10.03 of notice of the commencement of any suit, action, claim, proceeding or governmental investigation against such Indemnified Party, such Indemnified Party shall, if a claim in respect thereof is to be made against any Originator hereunder, notify such Originator in writing of the commencement thereof. Any notice claiming compensation under this Section 10.03 shall set forth in reasonable detail the amount or amounts to be paid to it hereunder and shall be conclusive in the absence of manifest error. Any affected Originator may participate in and assume the defense and settlement of any such suit, action, claim, proceeding or investigation at its expense, and no settlement thereof shall be made without the approval of such Originator and the Indemnified Party. The approval of such affected Originator will not be unreasonably withheld or delayed. After notice from an affected Originator to the Indemnified Party of its intention to assume the defense thereof with counsel reasonably satisfactory to the Administrative Agent and the Facility Agents, and so long as such Originator so assumes the defense thereof in a manner reasonably satisfactory to the Administrative Agent and the Facility Agents, such Originator shall not be liable for any legal expenses of counsel unless there shall be a conflict between the interests of such Originator and the Indemnified Party, in which case the Indemnified Party(ies) shall have the right to employ one counsel to so represent it (them).
(c) Each affected Originator will promptly pay to the Facility Agent for the Indemnified Party such indemnity amount as shall be specified to such Originator in a certificate of the Indemnified Party (or its Facility Agent, on its behalf) setting forth the calculations of such amount, together with the basis therefor. Any such certificate submitted by or on behalf of the Indemnified Party shall be conclusive and binding for all purposes, absent manifest error.
(d) Each Indemnified Party, on behalf of itself, its assigns, officers, directors, officers and employees, shall use its good faith efforts to mitigate, reduce or eliminate any losses, expenses or claims for indemnification.
Section 10.04. Expenses. The Seller agrees, promptly following receipt of a written invoice, to pay or cause to be paid, and to save each Purchaser, each LC Bank, each Facility Agent and the Administrative Agent harmless against liability for the payment of, (a) all reasonable out-of-pocket expenses (excluding salaries and overhead costs) incurred by or on behalf of any Purchaser, any LC Bank, any Facility Agent and the Administrative Agent in connection with the negotiation, execution, delivery and preparation of this Agreement and the other Transaction Documents and the transactions contemplated by or undertaken pursuant to or in connection herewith or therewith (including, without limitation, rating agency fees, the reasonable fees of Protiviti Inc. in conducting the agreed-upon procedures, and the reasonable fees and expenses of counsel of one law firm representing the Administrative Agent and the Facility Agents) and (b) all reasonable out-of-pocket expenses (including, without limitation, the reasonable fees and expenses of counsel from one law firm representing the Administrative Agent and the Facility Agents), including all reasonable costs and expenses actually incurred by or on behalf of any Purchaser, any LC Bank, any Facility Agent and the Administrative Agent from time to time (i) relating to any requested amendments, waivers or consents under the Transaction Documents, (ii) arising in connection with the Purchasers’, the LC Banks’, the Facility Agents’ or the Administrative Agent’s enforcement or preservation of their respective rights (including, without limitation, the perfection and protection of the Receivable Interest)
under the Transaction Documents, (iii) relating to audit and due diligence fees (limited as provided in Section 4.06 hereof) or (iv) relating to the maintenance of the transactions contemplated by or undertaken pursuant to or in connection with this Agreement or the other Transaction Documents.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendments and Waivers. The Required Facility Agents may, in writing, from time to time, (a) enter into agreements with the Seller, the Originators, the Servicer and the Parent amending, modifying or supplementing this Agreement, and (b) in their sole discretion, grant waivers of the provisions of this Agreement or consents to a departure from the due performance of the obligations of the Seller, the Originators, the Servicer or the Parent under this Agreement; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all Facility Agents and LC Banks:
(i) change the definitions of “Aggregate Exposure Amount”, “Concentration Limit”, “Downgrade Event”, “Eligible Receivable”, “Net Receivables Balance”, “Percentage Interest” or “Total Reserve Amount”, or any components of any of the foregoing, contained in this Agreement;
(ii) [Reserved];
(iii) reduce the amount of Aggregate Net Investment or Yield thereon or delay any scheduled date for payment thereof;
(iv) reduce fees payable by the Seller to the Facility Agents or the Purchasers, or delay the dates on which such fees are payable;
(v) extend the Scheduled Termination Date (except as extended in accordance with the terms of this Agreement);
(vi) change any of the provisions of this Section 11.01 or the definition of “Required Facility Agents”; or
(vii) change the first sentence of Section 11.02;
and provided, further, that no amendment, waiver or consent shall (a) increase the Purchase Group Maximum Net Investment of a Purchase Group or reduce the amount of Net Investment of, or Yield or fees payable to, any Purchase Group unless in writing and signed by the Facility Agent for such Purchase Group and its related Purchasers, (b) affect the rights of the Swingline Purchaser, including by the increase of the Swingline Sublimit, the reduction of the amount of the Swingline Reimbursement Purchase or Yield on the Swingline Purchase unless in writing signed by the Swingline Purchaser or (c) affect the rights of any LC Banks, including by the reduction of the amount of the Reimbursement Obligation or Yield thereon or any fees payable
with respect to the Letters of Credit issued by it, unless in writing signed by such LC Bank. Any waiver of any provision hereof, and any consent to a departure by the Seller, an Originator, the Servicer or the Parent from any of the terms of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given.
Notwithstanding anything in this Section 11.01 to the contrary, any amendments or waivers of any provisions in this Agreement relating to a Term SOFR Replacement Event or Benchmark Replacement shall be governed by the provisions of Section 2.06.
To the extent that any Facility Agent for any Purchase Group determines that it (or the Conduit Purchaser(s) in such Purchase Group) is obligated by S&P or Moody’s to do so, such Facility Agent will provide S&P and/or Moody’s, as applicable, with a copy of each amendment to this Agreement prior to the effectiveness thereof.
Section 11.02. Successors and Assigns; Assignments; Participations. (a) This Agreement shall be binding on the parties hereto and their respective successors and assigns; provided, however, that except as provided in Section 4.01(c), no Ferguson Party may assign any of its rights or delegate any of its duties hereunder without the prior written consent of the Facility Agents. Each of the Purchasers may assign, (a) without any prior written consent, in whole or in part, its interest in the Receivables and obligations hereunder to any other then-existing Purchaser, any Support Provider or to any other Conduit Purchaser administered by its Facility Agent and (b) to any other Person, with the consent of the Seller and the Administrative Agent (and the LC Banks following the LC Effective Date), which consent shall not be unreasonably withheld or delayed; provided, that if a Termination Event exists, the Seller’s consent shall not be required. To effectuate an assignment hereunder, both the assignee and the assignor (including, as appropriate, its Facility Agent) will be required to execute and deliver to the Seller, the Servicer and the Administrative Agent an Assumption Agreement (or other writing acceptable to the remaining parties hereunder), which will require such assignee to, among other things, deliver the tax forms required by Section 11.07, agree to the confidentiality provisions of Section 11.19 and such assignment must be recorded in book entries. Following any assignment in accordance with the foregoing criteria, the Purchase Group Percentage and Purchase Group Maximum Net Investment of each Purchase Group hereunder (after giving effect to the assignment), and if applicable, the Swingline Sublimit, will be adjusted to such extent as may be necessary to reflect such assignment (and Schedule I hereto shall be deemed to be amended accordingly). The Seller, each Originator and the Parent hereby agree and consent to the complete assignment by the applicable Conduit Purchasers of all of their respective rights under, interest in, title to and obligations under the Transaction Documents to the respective collateral agent or trustee under the applicable Conduit Purchaser’s Commercial Paper programs.
(b) Any Committed Purchaser (including the Swingline Purchaser, in such capacity) may sell participating interests (each acquirer of a participating interest, a “Participant”) in its rights and obligations pursuant to this Agreement; provided, however, that the selling Committed Purchaser shall retain all rights and obligations under this Agreement and all parties to this Agreement shall continue to deal solely with such selling Committed Purchaser. Each agreement between a Committed Purchaser and a Participant shall provide that (i) such Committed Purchaser shall retain the sole right to enforce the Transaction Documents and to approve any
amendment, modification or waiver of any provision of this Agreement (other than any amendment, modification or waiver of a provision described in clause (ii) in Section 11.01 that affects such Participant), (ii) such Participant shall be entitled to receive no greater indemnity amounts than its related Committed Purchaser would have been entitled to receive (unless the Seller consents to such Participant’s receipt of such greater amounts), and (iii) such Participant provide its related Committed Purchaser with the applicable tax forms that it would have had to provide under Section 11.07, if it were a Purchaser.
(c) Any Purchaser may at any time pledge or grant a security interest in all or any portion of its rights (including, without limitation, any interests in the Receivable Interest and any rights to payment of Net investment and Yield) under this Agreement to secure obligations of such Purchaser to a Federal Reserve Bank, without notice to or consent of any Ferguson Party; provided, that no such pledge or grant of a security interest shall release a Purchaser from any of its obligations hereunder, or substitute any such pledgee or grantee for such Purchaser as a party hereto.
(d) An LC Bank may assign its interests, rights and obligations as an LC Bank under this Agreement only with the consent of the Seller.
(e) The Administrative Agent, acting solely for this purpose as an agent of the Seller (in such role, “Registrar”), shall maintain a register (a “Register”) for the Purchases, on which it will record the name and address of each applicable Purchase Group and the Purchaser(s) therein (including any assignees), the related Purchase Group Maximum Net Investment, the Net Investment owing to each Purchase Group under this Agreement and any other information necessary to ensure that the Purchases are maintained “in registered form” within the meaning of Treasury regulations section 5f.103-1(c). The entries in each Register will be conclusive absent manifest error, and the Seller, the Servicer, the Administrative Agent and the applicable Facility Agent and Purchasers will treat each Person whose name is recorded in a Register pursuant to the terms hereof as the Purchasers hereunder for all purposes of this Agreement. The Registrar shall update the applicable Register promptly upon receiving written notice from any Purchaser (or its Facility Agent) of an assignment of such Purchaser’s interests and obligations hereunder, and no such assignment shall be effective until reflected in the related Register. The Register shall be available for inspection by the Seller, the Servicer and each other Purchaser and Facility Agent at any reasonable time and from time to time upon reasonable prior notice. In the event that the Purchase Group Percentage for any Purchase Group is adjusted in accordance with any assignment in accordance with Section 11.02(a), the Registrar shall update the applicable Register to reflect the updated Purchase Group Percentage for each such Purchase Group.
(f) In the event that any Committed Purchaser sells a participation of its rights and obligations hereunder, such Committed Purchaser shall maintain a register (the “Participant Register”) on which it will record the name and address of each participant, the portion of the Purchase Group Net Investment (if any) of such Participant, and the principal amounts (and stated interest) of each participant’s interest in such rights and obligations, and any other information necessary to ensure that the Purchases are maintained “in registered form” within the meaning of Treasury regulations section 5f.103-1(c). The entries in the Participant Register will be conclusive absent manifest error, and such Committed Purchaser will treat each Person whose
name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement. Such Committed Purchaser shall update the Participant Register promptly upon a sale of a participation of such Committed Purchaser’s rights and obligations hereunder, and no such sale of a participation shall be effective until reflected in the Participant Register. Such Committed Purchaser will not have any obligation to disclose all or any portion of the Participant Register to any Person except to the extent that such disclosure is necessary to establish that the Advances are maintained “in registered form” within the meaning of Treasury regulations section 5f.103-1(c). The Registrar and the Administrative Agent shall not have any responsibility to monitor, track or record any such participation of a Committed Purchaser’s participation.
Section 11.03. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of any Purchaser, any LC Bank, any Facility Agent or the Administrative Agent in exercising any right, power or privilege under the Transaction Documents shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent, the Facility Agents, Purchasers and the LC Banks under the Transaction Documents are cumulative and not exclusive of any rights or remedies which the Administrative Agent, any Facility Agent, any Purchaser or any LC Bank would otherwise have.
Section 11.04. No Discharge. The respective obligations of the Seller, the Originators, the Servicer and the Parent under the Transaction Documents shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by (a) any exercise or nonexercise of any right, remedy, power or privilege under or in respect of the Transaction Documents or applicable Law, including, without limitation, any failure to set-off or release in whole or in part by the Administrative Agent, any Facility Agent, any Purchaser or any LC Bank of any balance of any deposit account or credit on its books in favor of any Ferguson Party, as the case may be, or any waiver, consent, extension, indulgence or other action or inaction in respect of any thereof, or (b) any other act or thing or omission or delay to do any other act or thing which could operate as a discharge of any Ferguson Party as a matter of Law.
Section 11.05. [Reserved] .
Section 11.06. Payments Set Aside. To the extent that any Ferguson Party or any Obligor makes a payment to a Purchaser or an LC Bank, or a Purchaser or LC Bank exercises its rights of set-off, and such payment or set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by, or is required to be refunded, rescinded, returned, repaid or otherwise restored to such Ferguson Party, such Obligor, a trustee, a receiver or any other Person under any Law, including, without limitation, any bankruptcy law, any state or federal law, common law or equitable cause, the obligation or part thereof originally intended to be satisfied shall, to the extent of any such restoration, be reinstated, revived and continued in full force and effect as if such payment had not been made
or such set-off had not occurred. The provisions of this Section 11.06 shall survive the termination of this Agreement.
Section 11.07. Tax Forms and Status. (a) Each Purchaser and each LC Bank agrees to provide the Seller, the Servicer, the Administrative Agent and the Facility Agent for such Purchaser and LC Bank with (A) (x) two appropriately executed copies of Internal Revenue Service Form W-9, or any successor form, on the date hereof (or, if later, on the date on which it becomes a Purchaser or LC Bank under this Agreement) certifying that such Purchaser or LC Bank is exempt from U.S. backup withholding or (y) two appropriate executed copies of Internal Revenue Service Form W-8ECI (or alternatively, Internal Revenue Service Form W-8BEN), or any successor forms, (i) on the date hereof (or, if later, the date on which it becomes an Purchaser or LC Bank under this Agreement), and (ii) upon the occurrence of any event that would require the amendment or resubmission of any such Form previously provided hereunder and (B) any other forms, certificates or information in connection therewith requested by the Seller, the Servicer, the Administrative Agent or the Facility Agent for such Purchaser or LC Bank.
(b) If a payment made to a Purchaser under this Agreement would be subject to U.S. Federal withholding Tax imposed by FATCA if such Purchaser 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 Purchaser shall deliver to the Seller, the Servicer and the Administrative Agent at the time or times prescribed by Law and at such time or times reasonably requested by the Seller or Servicer 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 Seller, the Servicer or the Administrative Agent as may be necessary for the Seller, the Servicer and the Administrative Agent to comply with their obligations under FATCA and to determine that such Purchaser has complied with such Purchaser’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for the purposes of this clause (b), FATCA shall include any amendments made to FATCA after the date of this Agreement.
Each Purchaser and each LC Bank 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 Seller, the Servicer, and the Administrative Agent in writing of its legal inability to do so.
Section 11.08. Replacement of Purchase Groups. If (i) any Conduit Purchaser’s Commercial Paper ceases to have a short-term debt rating of “A-1” or better by S&P, “P-1” or better by Moody’s or “F-1” or better from Fitch Ratings (but only if such Conduit Purchaser’s Commercial Paper is then rated by such Rating Agency, (ii) any Purchase Group includes a Defaulting Purchaser, or (iii) any Purchase Group makes an claim for indemnity pursuant to Section 2.14 (but not all Purchase Groups make such a claim)], as long as no Potential Termination Event or Termination Event then exists (or would occur after giving effect to any termination of a Purchase Group), upon notice to the related Facility Agent and the Administrative Agent, the Seller shall have the right to terminate the interests, rights and obligations of such Purchaser and its Purchase Group or require each Purchaser in such Facility
Agent’s Purchase Group to assign and delegate, without recourse, all of its respective interests, rights and obligations under this Agreement to an Eligible Purchaser, or other Purchaser acceptable to the Administrative Agent, that shall execute an Assumption Agreement and, if applicable, shall not have the same cause to make a claim for indemnity pursuant to Section 2.14 or Section 10.02; provided, that each member of such terminated or assigning Purchase Group shall have received payment of an amount equal to all outstanding Net Investment, Yield in respect thereof, accrued and unpaid fees and all other Aggregate Unpaids payable to it hereunder, from the Seller or the assignee, as the case may be; and provided further, that if such terminated or assigning Purchase Group includes an LC Bank whose Letters of Credit will remain outstanding after such termination or assignment, as applicable, (i) the Seller makes a deposit to the LC Cash Collateral Account in an amount equal to the aggregate Stated Amount of such outstanding and undrawn Letters of Credit and (ii) such LC Bank (a) will remain a party hereto and shall continue to have the rights and obligations of an LC Bank under this Agreement with respect to Letters of Credit issued by it prior to such termination or assignment, other than the right to receive the Used Fee or the Unused Fee, and (b) will have no LC Bank Sublimit and no obligation to issue additional Letters of Credit. The Seller agrees to use commercially reasonable efforts to cause the Letters of Credit issued by a LC Bank which is a member of a terminated or assigning Purchase Group to be terminated and replaced. The Administrative Agent shall (1) apply funds deposited to the LC Cash Collateral Account pursuant to this Section 11.08 to satisfy, as necessary, the Seller’s Reimbursement Obligations or the Required LC Cash Collateral Amount, and (2) transfer funds deposited in the LC Cash Collateral Account pursuant to this Section 11.08 to the Seller to the extent they exceed the sum of the aggregate Stated Amount of the outstanding and undrawn Letters of Credit of the LC Banks in the terminated or assigning Purchase Group and the amounts drawn on such Letters of Credit which have been reimbursed to such LC Banks.
Section 11.09. No Petition. Each party hereto agrees, for the benefit of the holders of the privately or publicly placed indebtedness of borrowed money of any Conduit Purchaser not, prior to the date which is one (1) year and one (1) day after the payment in full of all such indebtedness, to acquiesce, petition or otherwise, directly or indirectly, invoke, or cause such Conduit Purchaser to invoke, the process of any Official Body for the purpose of (a) commencing or sustaining a case against such Conduit Purchaser under any federal or state bankruptcy insolvency or similar law (including the Federal Bankruptcy Code), (b) appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for such Conduit Purchaser or any substantial part of the property of such Person, or (c) ordering the winding up or liquidation of the affairs of such Conduit Purchaser.
Section 11.10. No Recourse. The obligations of each Conduit Purchaser, under this Agreement shall be payable solely out of the funds of such Conduit Purchaser available for such purpose and shall be solely the corporate or limited liability company obligations of such Conduit Purchaser. No recourse shall be had for the payment of any amount owing by a Conduit Purchaser in respect of this Agreement or for the payment of any fee hereunder or for any other obligation or claim arising out of or based upon this Agreement against any Affected Party, any Facility Agent, the Administrative Agent, any Affiliate of any of the foregoing, or any stockholder, employee, officer, director, incorporator or beneficial owner of any of the foregoing.
Section 11.11 Holidays. Except as may be otherwise provided in this Agreement, if any payment due hereunder shall be due on a day which is not a Business Day, such payment shall instead be due on the next Business Day.
Section 11.12. Records. Except as may be otherwise provided in this Agreement to the contrary, all amounts calculated or due hereunder shall be determined from the records of the Administrative Agent or Facility Agent, which determinations shall be conclusive absent manifest error.
Section 11.13. Term of Agreement. This Agreement shall terminate on the date of Facility Termination; provided, however, that (i) the indemnification and payment provisions set forth in Sections 2.14, 4.13 and 11.06 and Article X hereof and (ii) the agreement set forth in Section 11.09 and the limitations set forth in Section 11.10 hereof shall be continuing and shall survive any termination of this Agreement.
Section 11.14. Notices. (a) All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing (including electronic communication) unless otherwise expressly permitted hereunder and shall be sent by first-class mail, first-class express mail, courier, electronic mail or other mutually acceptable method of electronic delivery, in all cases with charges prepaid. All notices shall be sent to the applicable party at the notice addresses appearing on the signature page hereof (in the case of each of the Ferguson Parties and the Administrative Agent) or on Schedule I hereto (in the case of the Facility Agents, the Purchasers and the LC Banks) or in accordance with the last unrevoked written direction from such party to the other parties hereto.
(b) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. Notices sent by e-mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient.
Section 11.15. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
Section 11.16. Prior Understandings. This Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral.
Section 11.17. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York, but otherwise without regard to Choice of Laws Principles thereof). Each party hereto hereby submits to the nonexclusive jurisdiction of the federal courts for the Southern District of New York for the purpose of adjudicating any claim or controversy arising in connection with any of
the Transaction Documents or any of the transactions contemplated thereby, and for such purpose, to the extent they may lawfully do so, waive any objection which each may now or hereafter have to such jurisdiction or to venue therein and any claim of inconvenient forum with respect thereto.
Section 11.18. Counterparts; Electronic Signature. This Agreement, the other Transaction Documents and any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to this Agreement or any other Transaction Document (each a “Communication”), including Communications required to be in writing, may be in the form of an Electronic Record (as defined below) and may be executed using Electronic Signatures (as defined below). Each of the parties hereto agrees that any Electronic Signature on or associated with any Communication shall be valid and binding on it to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation enforceable against it in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered. Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by any Facility Agent or the Administrative Agent of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. Each Facility Agent and the Administrative Agent may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record (to the extent permitted by applicable law). Each party shall be entitled to rely on any Electronic Signature purportedly given by or on behalf any other party without further verification and (b) upon the request of any party, any Electronic Signature shall be promptly followed by such manually executed counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.
Section 11.19. Confidentiality. Each Ferguson Party agrees to keep the information contained in the Transaction Documents that relates to Yield, fees and other pricing terms strictly confidential. Each Purchaser, each LC Bank, each Facility Agent and the Administrative Agent shall keep all non-public information obtained pursuant to the Transaction Documents and the transactions contemplated or otherwise relating to the Ferguson Party hereby or thereby or effected in connection herewith or therewith confidential and will not disclose such information to outside parties. Notwithstanding the foregoing, any party hereto may make disclosure (i) if it is obligated to do so pursuant to a request or order under any Law or pursuant to a subpoena or other legal process; (ii) if it is requested to do so by any regulatory authority; (iii) in the case of the Facility Agents, the Purchasers and the LC Banks, to bank examiners, and to potential assignees and participants; (iv) to its Affiliates, to its and its Affiliates’ directors, officers, employees, agents, auditors, counsel, equity holders and advisors; (v) in connection with any
litigation or dispute or the exercise of any remedies under the Transaction Documents; (vi) to any rating agency; or (vii) by way of posting a copy of this Agreement on any website maintained by such party pursuant to the commitment to any Rating Agency relating to such party’s debt rating if required under 17 CFR 240.17g5(a)(3), subject to, in the case of each of clause (iii), (iv), (v) and (vi), reasonable efforts to cause the recipient of such proprietary information to keep it confidential.
Section 11.20. USA Patriot Act. Each Committed Purchaser that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies the Ferguson Parties that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each of the Ferguson Parties, which information includes the name and address of each of the Ferguson Parties and other information that will allow such Committed Purchaser to identify each of the Ferguson Parties in accordance with the Act.
Section 11.21. Acquisitions. At such time as any Originator acquires the assets of another Person, including that Person’s receivables (such receivables, together with receivables generated by that Person after its acquisition by such Originator as well as receivables generated by such Originator through the business groups/branches/division of that Person, until their respective Inclusion Dates, collectively, “Acquisition Receivables”), the Servicer shall notify the Facility Agents. At such time as the Acquisition Receivables relating to a particular acquisition are first reported on an Approved Data Reporting System (which, in some cases, may be their date of acquisition), such Acquisition Receivables will become Receivables hereunder and under the Purchase and Contribution Agreement (each such time, the “Inclusion Date”). In connection with each Inclusion Date, the Required Facility Agents will promptly determine, which determination will be evidenced in writing from the Required Facility Agents, after receipt from the Seller and such Originator of appropriate data and conducting of any necessary due diligence, whether the applicable Acquisition Receivables may be considered to be Eligible Receivables; provided, however, that if, on the applicable Inclusion Date, such related Acquisition Receivables, together with other Acquisition Receivables which became Receivables hereunder on their respective Inclusion Dates during the 12-month period ending the last day of month preceding such Inclusion Date (with the Outstanding Balance of each pool of Acquisition Receivables determined at the applicable Inclusion Date), are less than 5.0% of the average Outstanding Balance of all Receivables during such 12-month period (before giving effect to such most recent Inclusion Date) satisfy all eligibility criteria, then such Receivables shall automatically be determined to be “Eligible Receivables”.
Section 11.22. Waiver of Jury Trial. Each of the parties hereto waives its respective right to a trial by jury of any claim or cause of action based upon or arising out of or related to this Agreement or the transactions contemplated hereby in any action, proceeding or other litigation of any type brought by any of the parties against any other party or parties, whether with respect to contract claims, tort claims or otherwise. Each of the parties hereto agrees that any such claim or cause of action shall be tried by a bench trial without a jury. Without limiting the foregoing, each of the parties hereto further agrees that its respective right to a trial by jury is waived by operation of this Section 11.22 as to any action, counterclaim or other proceeding that seeks, in whole or in part, to challenge the validity or enforceability of this Agreement or any provision hereof. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Agreement.
Section 11.23. Designated Excluded Receivables. (a) The Facility Agents agree that the receivables of the Designated Types specified on Schedule IV hereto shall be Designated Excluded Receivables. Schedule IV shall specify, for each Designated Type, the applicable Exclusion Date and the Originator(s) to which such Designated Types relate.
(b) The Seller shall have the right to add from time to time the receivables owing to an Originator of a Designated Type as Designated Excluded Receivables as of a specified Exclusion Date, upon satisfaction of the following conditions:
(i) the Seller (or the Servicer, on its behalf) shall provide the Facility Agents with a notice in substantially the form of Exhibit G hereto of its intention to add the receivables owing to an Originator of such Designated Type to the list of Designated Excluded Receivables, which notice shall be delivered not less than ten (10) Business Days before the Exclusion Date specified therein and shall further specify and include: (1) the Obligor name and customer number, or the Originator log-on location and log-on number, as applicable, of such Designated Type; (2) the applicable Originator(s) for such Designated Type’s receivables to be excluded; (3) an explanation of the reason for such addition; and (4) an updated Schedule IV (including the new Designated Excluded Receivables);
(ii) as of such Exclusion Date, no Termination Event or Potential Termination Event shall have occurred and be continuing;
(iii) such designation of a new Designated Type shall not result in there being more than 8 such designations during the Lookback Period for such Exclusion Date;
(iv) such designation shall not have been made for reasons relating to the credit quality of the Receivables of such Designated Type or to manipulate the pool characteristics of the Receivables in a manner that would be expected to be materially adverse to the Purchasers; and
(v) (1) the sum of (x) the aggregate, for all Designated Types added to Schedule IV during the Lookback Period for such Exclusion Date, of the aggregate Outstanding Balances of the Receivables on the first Exclusion Date hereunder for each
such prior Designated Type, plus (y) the aggregate Outstanding Balance of Receivables on the first Exclusion Date with respect to such new Designated Type, plus (z) the aggregate Outstanding Balance of Receivables reconveyed to any Originator pursuant to Section 3.03 of the Purchase and Contribution Agreement during the Lookback Period for such Exclusion Date, would not exceed (2) 10.0% of the average aggregate Outstanding Balance of the Receivables (other than Excluded Receivables) on the last date of each calendar month in the Lookback Period for such Exclusion Date (all such calculations based on the information included in the Monthly Reports delivered during the relevant Lookback Periods).
(c) For the avoidance of doubt, with respect to any Designated Type and its related Exclusion Date, all Receivables of that Designated Type which were generated prior to that Exclusion Date shall remain Receivables under this Agreement, the Purchase and Contribution Agreement and all other Program Agreements.
Section 11.24. Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Transaction Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Transaction Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable 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 the applicable Resolution Authority to any such liabilities arising hereunder that may be payable to it by any party hereto that is an Affected 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 Affected 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 Transaction Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of the applicable Resolution Authority.
In Witness Whereof, the parties hereto, by their duly authorized signatories, have executed and delivered this Agreement as of the date first above written.
ROYAL BANK OF CANADA, as Administrative Agent
By:_______________________________
Name:
Title:
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
THUNDER BAY FUNDING, LLC, as a Conduit Purchaser
By: Royal Bank of Canada, as attorney-in-fact
By:__________________________________
Name:
Title:
ROYAL BANK OF CANADA, as a Committed Purchaser and a Facility Agent
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
TRUIST BANK (successor by merger to SunTrust Bank), as a Committed Purchaser and a Facility Agent
By:__________________________________
Name:
Title:]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
SUMITOMO MITSUI BANKING CORPORATION, as a Committed Purchaser
By:___________________________________
Name:
Title:
SMBC NIKKO SECURITIES AMERICA., as a Facility Agent
By:___________________________________
Name:
Title:
SOLELY FOR THE PURPOSE OF ACKNOWLEDGING THE ADJUSTMENT MADE PURSUANT TO ARTICLE IC HEREOF:
MANHATTAN ASSET FUNDING COMPANY LLC, as a Conduit Purchaser
By: MAF Receivables Corp., Its Member
By:
Name:
Title:
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
PNC BANK, NATIONAL ASSOCIATION, as a Committed Purchaser, the Swingline Purchaser and a Facility Agent
By:_____________________________________
Name:
Title:
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
GTA Funding LLC, as a Conduit Purchaser
By:________________________________
Name:
Title:
RELIANT TRUST, as a Conduit Purchaser
By: COMPUTERSHARE TRUST COMPANY OF CANADA, in its capacity as trustee of RELIANT TRUST, by its U.S. Financial Services Agent,
THE TORONTO-DOMINION BANK
THE TORONTO-DOMINION BANK, as a Committed Purchaser and a Facility Agent
By:_________________________________
Name:
Title:
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
STARBIRD FUNDING CORPORATION, as a Conduit Purchaser
By:________________________________
Name:
Title:
BNP PARIBAS, as a Committed Purchaser and a Facility Agent
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
FERGUSON RECEIVABLES, LLC, as Seller
By:_____________________________
Name: Brenda L. Crowder
Title: Treasurer
Address for Notices:
751 Lakefront Commons
12500 Jefferson Ave.
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: (757) 874-7795869-9703
Fax: (757) 989-2985
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
FERGUSON ENTERPRISES, LLC, as Servicer and as an Originator
By:______________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
12500 Jefferson Ave.
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: (757) 874-7795869-9703
Fax: (757) 989-2985
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
ENERGY & PROCESS CORPORATION, as an Originator
By:______________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
12500 Jefferson Ave.
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: (757) 874-7795869-9703
Fax: (757) 989-2985
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
FERGUSON FIRE & FABRICATION, INC., as an Originator
By:________________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
12500 Jefferson Ave.
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: (757) 874-7795869-9703
Fax: (757) 989-2985
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
DBS HOLDINGS, INC., as an Originator
By:________________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
12500 Jefferson Ave.
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: (757) 874-7795869-9703
Fax: (757) 989-2985
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
HP PRODUCTS CORPORATION, as an Originator
By:_________________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
12500 Jefferson Ave.
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: (757) 874-7795869-9703
Fax: (757) 989-2985
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
FERGUSON FIRE DESIGN, LLC, as an Originator
By:
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
Newport News, VA 23606
Attention: Brenda L. Crowder
Telephone: (757) 869-9703
E-mail:
[ ]
[ ]
[Signature Page to A&R Receivables Purchase Agreement (Ferguson Receivables, LLC)]
FERGUSON PLC, as Parent
By:________________________________
Name:
Title:
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: Group General Counsel
E-mail:
[ ]
[ ]
Showing Changes from Conformed Copy
As of February 10, 2023
| | |
ANNEX B TO OMNIBUS AMENDMENT AND CONSENT DATED AS OF JUNE 23, 2023 |
PURCHASE AND CONTRIBUTION AGREEMENT
dated as of July 31, 2013
between
FERGUSON ENTERPRISES, LLC AND THE
VARIOUS SUBSIDIARIES LISTED ON SCHEDULE I HERETO FROM TIME TO TIME,
as Originators,
and
FERGUSON RECEIVABLES, LLC,
as PURCHASER
4821-7079-6461
4883-5564-6567
Table of Contents
| | | | | | | | | | | | | | | | | |
SECTION | HEADING | PAGE |
| ARTICLE I | DEFINITIONS; CONSTRUCTION | 1 |
| Section 1.01. | Certain Definitions | 1 |
| Section 1.02. | Other Defined Terms | 7 |
| Section 1.03. | Interpretation and Construction | 7 |
| Section 1.04. | IFRS; Conversion to GAAP | 7 |
| ARTICLE II | PURCHASES AND SETTLEMENTS | 8 | 7 |
| Section 2.01. | General Terms; Intent of the Parties. | 8 |
| Section 2.01A. | Certain Reconveyances | 9 |
| Section 2.01B. Reconveyance of FFD Receivable | 10 |
| Section 2.02. | Purchase Price | 10 | 9 |
| Section 2.03. | Purchase Price Credits | 11 | 10 |
| Section 2.04. | Payments and Computations, Etc. | 11 | 10 |
| Section 2.05. | Letters of Credit. | 12 | 11 |
| Section 2.06. | Access to Records | 13 | 12 |
| Section 2.07. | Characterization; Granting Clause | 13 | 12 |
| Section 2.08. | Transfer by Purchaser; Third-Party Beneficiary | 14 | 13 |
| ARTICLE III | CLOSING PROCEDURES | 14 | 13 |
| Section 3.01. | Conditions to Each Purchase | 14 | 13 |
| Section 3.02. | Addition of Originators | 14 | 13 |
| Section 3.03. | Removal of Originators; reconveyance of Certain Receivables | 15 | 14 |
| ARTICLE IV | ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE RECEIVABLES | 16 | 15 |
| Section 4.01. | Rights of the Purchaser | 16 | 15 |
| Section 4.02. | Responsibility of each Originator | 16 | 15 |
| Section 4.03. | Further Action Evidencing Purchases | 17 | 16 |
| ARTICLE VI | REPRESENTATIONS AND WARRANTIES | 17 | 16 |
| Section 5.01. | General Representations and Warranties of the Originators | 17 | 16 |
| ARTICLE VII | COVENANTS | 20 | 19 |
| Section 6.01. | Affirmative Covenants of the Originators | 20 | 19 |
| Section 6.02. | Negative Covenants of the Originators | 22 | 21 |
| Section 6.03. | Separateness Covenants | 23 | 22 |
| ARTICLE VII | PURCHASE TERMINATION EVENTS | 23 | 22 |
| Section 7.01. | Purchase Termination Events | 23 | 22 |
| Section 7.02. | Consequences of a Purchase Termination Event | 23 | 22 |
| ARTICLE VIII | INDEMNIFICATION; EXPENSES | 23 | 22 |
| Section 8.01. | Indemnity | 23 | 22 |
| Section 8.02. | Expenses | 26 | 25 |
| ARTICLE IX | MISCELLANEOUS | 26 | 25 |
| | | | | | | | | | | | | | | | | |
| Section 9.01. | Amendments and Waivers | 26 | 25 |
| Section 9.02. | Binding Effect; Assignments | 26 | 25 |
| Section 9.03. | No Implied Waiver; Cumulative Remedies | 26 | 25 |
| Section 9.04. | No Discharge | 27 | 26 |
| Section 9.05. | No Petition | 27 | 26 |
| Section 9.06. | No Recourse | 27 | 26 |
| Section 9.07. | Holidays | 27 | 26 |
| Section 9.08. | Notices | 27 | 26 |
| Section 9.09. | Severability | 27 | 26 |
| Section 9.10. | Prior Understandings | 28 | 27 |
| Section 9.11. | Governing Law; Submission to Jurisdiction | 28 | 27 |
| Section 9.12. | Counterparts | 28 | 27 |
Schedule I __ List of Originators
Schedule II — Schedule of Depositary Banks, Accounts and Lockboxes
Exhibit A — Credit and Collection Policy
Exhibit B — Form of Subordinated Note
Exhibit C — Form of Joinder Agreement
Purchase and Contribution Agreement
Purchase and Contribution Agreement, dated as of July 31, 2013 (this “Agreement”), between Ferguson Enterprises, LLC, a Virginia limited liability company(“Ferguson”) The Various Subsidiaries of Ferguson Listed on Schedule I Hereto (with Ferguson, each, an “Originator” and collectively, the “Originators”), and Ferguson Receivables, LLC, a Delaware limited liability company (the “Purchaser”)
Recitals
Whereas, the Originators in the ordinary course of their business generate certain accounts receivable and rights and interests related thereto; and
Whereas, the Originators desire to sell or contribute (in the case of Ferguson) on each business day to the Purchaser accounts receivable and related rights and interests as more fully described herein and subject to the terms and conditions of this Agreement, and the Purchaser desires to purchase and otherwise acquire such accounts receivable and related rights and interests.
Now, Therefore, the parties hereto hereby agree as follows:
ARTICLE I
Definitions; Construction
Section 1.01. Certain Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Additional Originator” shall mean DBS Holdings, Inc. and HP Products Corporation, the Originators joining this Agreement on the Amendment Effective Date.
“Agreement” shall mean this Purchase and Contribution Agreement, as the same may from time to time be amended, supplemented or otherwise modified.
“Amendment Effective Date” shall mean MayJune 1923, 20212023.
“Anti-Terrorism Law” shall mean each of: (a) the Executive Order; (b) the Patriot Act; (c) the Money Laundering Control Act of 1986, 18 U.S.C. Sect. 1956; and (d) any other Law of the United States or any member state of the European Union now or hereafter enacted to monitor, deter or otherwise prevent terrorism or the funding or support of terrorism.
“Available Funds” shall mean, on any date of determination, monies then held by or on behalf of the Purchaser after deduction of (a) all Aggregate Unpaids, if any, that are accrued or due and owing under the Receivables Purchase Agreement (together with the Aggregate Net
Investment if such date of determination is on and after the Termination Date), (b) all Servicing Fees that are then accrued, and (c) in the Purchaser’s discretion, the accrued and unpaid portion of all current expenses of the Purchaser (whether or not then due and owing), in each of the foregoing cases, whether or not the same have actually been paid as of the time of determination.
“Blocked Account Agreement” shall mean the “control” agreement related to each Lockbox Account, Depositary Account and Blocked Local Account (other than as specified in the proviso in the definition of “Blocked Local Account”) in form and substance reasonably acceptable to the Administrative Agent, by and among the Purchaser, the Servicer, the Administrative Agent and the applicable Depositary Bank.
“Blocked Local Account” shall mean, with respect to an Originator, an account established and maintained at a Depositary Bank by the Purchaser into which Obligor payments with respect to Receivables, as well as payments on cash sales, in each case, generated by such Originator are deposited; provided, however, that during the period from the Amendment Effective Date to September 1, 2021, Account # 10596291661 established and maintained at PNC by Ferguson shall be deemed a Blocked Locked Account for all purposes under this Agreement and the other Transaction Documents.
“Business Day” shall mean any day on which (i) banks are not authorized or required to close under the Laws of New York or (ii) a bond market holiday is not recommended by the Securities Industry and Financial Markets Association.
“Collections” shall mean, for any Receivable as of any date, all cash collections and other cash proceeds (whether in the form of cash, wire transfer, or checks) of that Receivable, including, without limitation, all finance charges, if any, and cash proceeds of the related property with respect to such Receivable, any Deemed Collections of such Receivable and any amounts received with respect to a Participation Interest in such Receivable.
“Contract” shall mean a contract between an Originator and an Obligor, and/or any and all invoices and other writings which, in either case, give rise to a receivable arising from the sale by an Originator of goods or rendering of services in the ordinary course of such Originator’s business.
“Credit and Collection Policy” shall mean the Servicer’s credit, collection, enforcement and other policies and practices relating to Contracts and Receivables existing on the date hereof and as set forth on Exhibit A hereto, as the same may be modified from time to time.
“Deemed Collections” shall mean collections deemed received by an Originator in an amount equal to (i) all Dilutions and (ii) the aggregate Outstanding Balance of any Receivables (a) which were included in the Net Receivables Balance and which were not Eligible Receivables, (b) in which the Administrative Agent does not have a first priority perfected ownership or security interest and (c) as to which the other representations and warranties set forth in Sections 5.01(b), (c), (d) and (e) and made by an Originator or the Servicer are no longer true and correct in all material respects (or, if made as of particular date, were not true and correct in all material respects as of such date).
“Default Rate” shall mean the Alternate Base Rate (excluding clause (iii) of that definition on and after the occurrence of a Benchmark Transition Event) plus 2.0% per annum.
“Depositary Account” shall mean an account maintained at a Depositary Bank into which Collections in the form of wire transfers or electronic funds transfers are made by Obligors.
“Depositary Bank” shall mean, at any time, any financial institution reasonably acceptable to the Administrative Agent which holds a Lockbox Account, a Depositary Account, a Blocked Local Account or the Concentration Account.
“Designated Person” shall mean any Person that is a designated target of any Sanctions or otherwise a subject of any Sanctions, including as a result of being (a) owned or controlled directly or indirectly by any Persons (or Person) that are designated targets of any Sanctions, or (b) organized or operating under the laws of, or a citizen or resident of, any country that is subject to any Sanctions.
“Dilution” shall mean the portion of any Receivable which is reduced or canceled as a result of (i) any defective, rejected, returned or repossessed goods or services, any cash or other discount, or any failure by an Originator to deliver any goods or perform any services or otherwise perform under the underlying Contract, (ii) any change in or cancellation of any of the terms of such Contract or any other adjustment by an Originator which reduces the amount payable by the Obligor on the related Receivable, (iii) any rebates, warranties, allowances or charge-backs, or (iv) any setoff or credit in respect of any claim by the Obligor thereof (whether such claim arises out of the same or a related transaction or an unrelated transaction). An Originator shall be deemed to have received a Collection in an amount equal to the amount of such Dilution of each Receivable on the day such Dilution occurs.
“Discount Factor” means a percentage calculated to provide the Purchaser with a reasonable return on its investment in the Receivables acquired from an Originator after taking into account (i) the time value of money based upon the anticipated dates of collection of the Receivables and the cost to the Purchaser of financing its investment in, or servicing and collecting, such Receivables during such period and (ii) the risk of nonpayment by the Obligors. An Originator and the Purchaser may agree from time to time to change the Discount Factor applicable to Purchases by and from such Originator based on changes in one or more of the items affecting the calculation thereof, provided that any change to the Discount Factor shall take effect as of the commencement of a Calculation Period commencing no earlier than the last day of the current Calculation Period, and shall apply only prospectively.
“Distribution Date” shall mean the second (2nd) Business Day after each Monthly Report Date.
“Excluded Receivables” shall mean (i) the indebtedness and payment obligations owed by Obligors arising in connection with the sale of merchandise or rendering of services by the divisions of Ferguson known as “Lincoln Products/Ferguson Parts and Packaging” and
“Ferguson International”, (ii) Designated Excluded Receivables, and (iii) Acquisition Receivables and (iv) FFD Receivables.
“Executive Order” shall mean Executive Order No. 13224 on Terrorist Financings: Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism issued on 23rd September, 2001.
“Federal Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as amended, and any successor statute thereto.
“FFD” shall mean Ferguson Fire Design LLC, the company resulting from the spin-off of the businesses of the Spun-Off Locations.
“FFD Assets” shall have the meaning specified in Section 2.01B hereof.
“FFD Effective Time” shall mean 5:00 p.m. New York City time on December 31, 2022.
“FFD Receivables” shall mean the Receivables of the Spun-Off Locations.
“Indemnified Parties” shall have the meaning specified in Section 8.01(a) hereof.
“Joinder Agreement” shall mean the agreement signed by a new Originator in substantially the form of Exhibit C hereto.
“Law” shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body.
“Lien,” with respect to any asset, shall mean any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset (including any production payment, proceeds production payment or similar financing arrangement with respect to such asset).
“Local Account” shall mean a deposit account established and maintained by a financial institution in the name of an Originator into which account Obligor payments with respect to Receivables as well as payments on cash sales generated by such Originator are deposited. Each Local Account shall be identified on Schedule II hereto, as amended from time to time with the consent of the Administrative Agent.
“Lockbox” shall mean a post office box to which Collections are sent and which is administered by a Depositary Bank.
“Lockbox Account” shall mean an account maintained in the name of the Purchaser at a Depositary Bank into which Collections are deposited.
“Obligor” shall mean a Person who purchased merchandise or services on credit under a Contract and who is obligated to make payments to an Originator.
“OFAC” shall mean the Office of Foreign Assets Control of the U.S. Department of Treasury.
“Official Body” shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case, whether foreign or domestic.
“Original Closing Date” shall mean July 31, 2013.
“Originator” shall mean Ferguson and each of its Subsidiaries listed on Schedule I hereto from time to time.
“Outstanding Balance” of any Receivable shall mean, at any time, the then outstanding amount thereof.
“Participation Interest” means, with respect to any Reassigned Receivable, a 100% undivided beneficial interest in the applicable Originator’s right, title and interest, whether now owned or hereafter arising, in, to and under such Receivable and all Related Security and Collections with respect thereto.
“Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (commonly known as the USA Patriot Act).
“Permitted Liens” shall mean, on any day, any Liens securing the obligations of any Originator in connection with inventory financing not to exceed, in the aggregate for all Originators, 0.25% of the aggregate Outstanding Balance of Receivables on such day.
“Proceeds” shall mean “proceeds” as defined in the Uniform Commercial Code as in effect in the jurisdiction whose Law governs the perfection of the Purchaser’s ownership or security interests therein.
“Purchase” shall mean a purchase by the Purchaser of Receivables, Related Security and Collections hereunder, including, without limitation, Receivables as to which a portion of the related Purchase Price is paid by means of a contribution of Receivables by Ferguson to the Purchaser’s capital.
“Purchase Date” shall mean the Original Closing Date (or in the case of any Originator which becomes a party hereto after the Closing Date, the day on which such Originator becomes a party hereto pursuant to Section 3.02) and each day thereafter on which Receivables arise.
“Purchase Price” shall have the meaning set forth in Section 2.02(a) hereof.
“Purchase Price Credit” shall have the meaning set forth in Section 2.03 hereof.
“Purchase Termination Event” shall have the meaning set forth in Section 7.01 hereof.
“Reassigned Receivable” shall have the meaning specified in Section 2.01A hereof.
“Receivable” shall mean all indebtedness and any payment obligations of any Obligor owed to an Originator arising from the sale of goods from the sale of merchandise or rendering of services by such Originator under a Contract, including all rights to payment of any interest or finance charges and any security related thereto. “Receivables” shall not include Excluded Receivables.
“Receivables Purchase Agreement” shall mean the Receivables Purchase Agreement dated as of July 31, 2013, by and among Ferguson Receivables, LLC, as seller, Ferguson, as servicer and originator, the Originators party thereto from time to time, the Conduit Purchasers listed on Schedule I thereto from time to time, the Committed Purchasers listed on Schedule I thereto from time to time, the LC Banks listed on Schedule III thereto from time to time, the Facility Agents listed on Schedule I thereto from time to time, Royal Bank of Canada, as administrative agent, and Ferguson plc, as provider of the Parent Undertaking, as the same may from time to time be amended, supplemented or otherwise modified.
“Records” shall mean correspondence, memoranda, computer programs, tapes, discs, reports, papers, books or other documents or transcribed information of any type whether expressed in ordinary or machine readable language; provided that any intellectual property (such as software) or rights therein that are not permitted by applicable Law or contract to be assigned shall not be included herein.
“Related Security” shall mean with respect to any Receivable:
(a) all Contracts with respect to such Receivable:
(b) all of the applicable Originator’s interest, if any, in the goods (including returned goods) sold by such Originator and which gave rise to such Receivable;
(c) all other security interests or Liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable;
(d) all guarantees, indemnities, letters of credit, insurance or other agreements or arrangements of any kind from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise;
(e) all Records relating to, and all service contracts and any other contracts associated with, such Receivable, the related Contracts or the related Obligors; and
(f) all Proceeds of the foregoing.
“Responsible Officer” shall mean, with respect to each Originator, the chief executive officer, the president, the chief financial officer or treasurer of such Originator and any other
Person designated as a Responsible Officer by any such officers, as such Originator may from time to time notify the Purchaser.
“Spun-Off-Locations” shall mean the two locations (namely, 3539 and 3379) of Ferguson Fire & Fabrication, Inc., the businesses of which are spun off to create FFD.
“Subordinated Loan” shall mean a subordinated revolving loan from an Originator to the Purchaser which is evidenced by the Subordinated Note.
“Subordinated Note” shall mean a subordinated promissory note in the form of Exhibit B hereto issued by the Purchaser to an Originator, as the same may be amended or supplemented from time to time.
“UCC” shall mean, with respect to any jurisdiction, the Uniform Commercial Code as in effect from time to time in such jurisdiction.
Section 1.02. Other Defined Terms. Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Receivables Purchase Agreement
Section 1.03. Interpretation and Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular and references to the part include the whole and the words “include”, “includes” and “including” shall be deemed followed by “without limitation”. The words “hereof,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.” The section and other headings contained in this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation hereof in any respect. Section, subsection, exhibit and schedule references are to this Agreement unless otherwise specified. As used in this Agreement, the masculine, feminine or neuter gender shall each be deemed to include the others whenever the context so indicates. Terms not otherwise defined herein which are defined in the UCC as in effect in the State of New York from time to time shall have the respective meanings ascribed to such terms therein unless the context otherwise clearly requires.
Section 1.04. IFRS; Conversion to GAAP. (a) If the relevant IFRS changes during the term of this Agreement such that any tests or covenants contained herein would then be calculated, or reports delivered pursuant to those tests or covenants would then be prepared, in a different manner or with different components, the parties hereto agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those tests or covenants as criteria for evaluating the applicable Originator’s financial condition to substantially the same criteria as were effective prior to such change in the relevant IFRS; provided, however, that, until the parties so amend this Agreement, all such tests or covenants shall be calculated, and all such reports prepared, in accordance with the relevant IFRS, as in effect immediately prior to such change. All accounting terms not specifically defined herein shall be construed in accordance with IFRS.
(b) All references in this Agreement to IFRS and all tests or covenants contained herein required to be calculated in accordance with IFRS, or reports delivered pursuant to this Agreement or any Transaction Document in accordance with IFRS, shall be deemed, on and after August 1, 2021, to be references to GAAP, or tests or covenants calculated in accordance with, or reports or calculations prepared in accordance with, as applicable, GAAP (rather than IFRS), in each case, to the extent covering periods on and after August 1, 2021.
ARTICLE II
Purchases and Settlements
Section 2.01. General Terms; Intent of the Parties. (a) On each Purchase Date, in consideration for the Purchase Price and upon the terms and subject to the conditions set forth herein, each Originator does hereby sell to the Purchaser, without recourse (except to the extent expressly provided herein), and the Purchaser does hereby purchase from such Originator, all of such Originator’s right, title and interest in and to the Receivables originated by such Originator, the Related Security, Collections and all Proceeds of each of the foregoing (other than any such assets contributed to the Purchaser pursuant to Section 2.01(d) below), in each case, whether now existing or hereafter arising or acquired.
(b) The Receivables arising after the initial Purchase Date and while no Purchase Termination Event exists shall be deemed to have been sold by each Originator to the Purchaser immediately (and without further action by any Person) upon the creation of such Receivable by such Originator. Receivables arising while a Purchase Termination Event exists shall not be deemed to have been sold by any Originator to the Purchaser unless and until the first day thereafter on which no Purchase Termination Event exists. The Related Security and Collections with respect to each Receivable (and Proceeds of such Receivable, Related Security and Collections) shall be sold at the same time as such Receivable together with all related Proceeds received thereon.
(c) It is the intention of the parties hereto that each conveyance of Receivables made under this Agreement shall constitute an outright “sale of accounts” or “sale of general intangibles” (as such terms are used in Article 9 of the UCC) or other transfer, in each case which is absolute and irrevocable and shall provide the Purchaser with the full benefits of ownership of the Receivables and the associated Related Security, Collections and Proceeds. Each conveyance of Receivables hereunder is made without recourse to the applicable Originator and without any warranty of collectability or unconventional warranty; provided, however, that (i) each Originator will be liable to the Purchaser for all representations, warranties, covenants and indemnities made by such Originator to the Purchaser pursuant to the terms of the Transaction Documents to which such Originator is a party, and (ii) such conveyance does not constitute and is not intended to result in an assumption by the Purchaser or any assignee thereof of any obligation of such Originator or any other Person arising in connection with the Receivables, the associated Related Security or any other obligations of such Originator. In view of the intention of the parties hereto that the conveyances of Receivables made hereunder shall constitute outright sales or, in the case of Ferguson, contributions, of such Receivables rather
than loans secured thereby, each Originator agrees that it will, on or prior to the applicable initial Purchase Date, mark its Records to indicate that the Receivables have been sold or contributed.
(d) On the initial Purchase Date, Ferguson shall contribute Receivables generated by it having an aggregate Outstanding Balance of $200,000,000.00, together with associated Related Security, Collections and Proceeds, to the Purchaser’s capital. Thereafter, on each Purchase Date, Ferguson may, at its option, contribute to the Purchaser’s capital, in lieu of selling, Receivables originated by Ferguson and all associated Related Security, Collections and Proceeds, and any such contribution is made with the intention that each such contribution, if any, will be made with the same intentions as are set forth in Section 2.01(c) above. Except as provided in Section 2.02(a)(3), the Purchaser hereby acknowledges that Ferguson shall have no obligations to make capital contributions to Purchaser in respect of Ferguson’s equity interest in Purchaser or otherwise in order to provide funds to pay the Purchase Price to Ferguson under this Agreement or for any other reason.
Section 2.01A. Certain Reconveyances. If Ferguson, as Servicer of the Receivables under the Receivables Purchase Agreement, determines in its reasonable judgment that (i) the filing of a mechanics lien or the making of a claim on a payment bond is necessary or advisable in order to collect a Receivable that is due from a contractor or (ii) it desires to recover any sales or similar tax paid with respect to a Receivable, Ferguson shall notify the Purchaser and the Originator which originated such Receivable and shall prepare the necessary documentation for filing such lien, claim or tax refund for signature by such Originator. Immediately prior to the execution of such documentation, and without any further action hereunder, the Purchaser shall be deemed to have sold all of its right, title and interest in and to such Receivable to such Originator (immediately following the Purchaser’s purchase thereof from the Administrative Agent pursuant to the Receivables Purchase Agreement) (each such Receivable, a “Reassigned Receivable”) and such Originator shall be deemed to have repurchased such Receivable for a purchase price equal to a Participation Interest in such Reassigned Receivable (which such Originator shall be deemed to have sold), which shall entitle the Purchaser to receive from such Originator (by deposit into the Concentration Account or other Account subject to a Blocked Account Agreement) all Collections subsequently received with respect to such Reassigned Receivable, but only to the extent actually received. Notwithstanding the foregoing, no additional reconveyances of Receivables to any Originator pursuant to this Section shall occur (A) without the consent of the Administrative Agent, if a Control Event shall have occurred and be continuing or (B) if, during the 12-month period ending on the last day of the month preceding such sale, the sum of the aggregate Outstanding Balance (in each case determined as of the date of reconveyance) of Reassigned Receivables reconveyed hereunder to all Originators plus the Outstanding Balance of such additional Receivables in which a reconveyance is proposed under this Section would exceed 1% of the aggregate Outstanding Balance of the Receivables sold to the Purchaser hereunder by the Originators during such 12-month period.
Section 2.01B. Reconveyance of FFD Receivables.
(a) Effective as of the FFD Effective Time, after giving effect to the reconveyance and release provided in Section 2.01B of the Receivables Purchase Agreement, without recourse and without making any representation or warranty in connection therewith of
any type or kind (except with respect to liens as set forth below), the Seller hereby sells and assigns, without any further action being required on the part of any person or entity to effect such sale and assignment, to Ferguson Fire & Fabrication, Inc., and Ferguson Fire & Fabrication, Inc. hereby purchases and assumes from the Seller all of the right, title and interest of the Seller in and to the FFD Receivables, all Collections with respect thereto and all Related Security with respect thereto (the “FFD Assets”), free and clear of any and all liens in favor of the Seller or any other lien arising by or through the Seller; and all security interests granted to the Seller under any Transaction Document, to the extent they relate to FFD Assets, shall thereupon be released and terminate.
(b) As consideration for the retransfer of the FFD Receivables as of the FFD Effective Time, Ferguson Fire & Fabrication, Inc. will pay the Seller the fair market value of the FFD Receivables as of the FFD Effective Time, which amount shall be paid by reducing the principal amount of the Subordinated Note owed by the Seller to Ferguson Fire & Fabrication, Inc.
(c) The Seller acknowledges and agrees that on and after the FFD Effective Time, unless and until FFD is added as an “Originator” hereunder, the receivables generated by FFD will not be sold to the Seller pursuant to this Agreement and consequently, not sold, transferred or assigned by the Seller to the Facility Agents, for the benefit of their respective Purchasers, pursuant to the Receivables Purchase Agreement.
Section 2.02. Purchase Price. (a) The purchase price (the “Purchase Price”) for the Receivables, Related Security, Collections and Proceeds payable on each Purchase Date to each Originator shall be equal to 100% of the aggregate Outstanding Balance of the Receivables conveyed by such Originator on that date multiplied by the Discount Factor. Each Originator and the Purchaser have each determined the Purchase Price payable on each Purchase Date approximates the fair value of the Receivables, Related Security, Collections and Proceeds sold by such Originator on such Purchase Date. Such Purchase Price will be payable in full by the Purchaser to such Originator on the related Purchase Date, and shall be paid to such Originator in the following manner:
(1) first, by delivery of immediately available funds, to the extent of the Available Funds;
(2) second, if such Originator has requested a Letter of Credit pursuant to Section 2.05, by the Purchaser’s requesting and delivering such Letter of Credit; and
(3) third, by increasing the amount of the applicable Subordinated Loan, so long as the aggregate principal amount of such Subordinated Loan, together with the aggregate principal amount of all Subordinated Loans owed by the Purchaser, does not cause the Purchaser’s tangible net worth to be less than the 6% of the aggregate Outstanding Balance of the Receivables then owned by the Purchaser.
(b) Subject to the limitations set forth in Section 2.02(a)(3), each Originator irrevocably agrees to make each increase in the amount of the Subordinated Loan owing to it as
contemplated in Section 2.02(a)(3), so long as no Purchase Termination Event exists. The Subordinated Loan owing to each Originator will be evidenced by, and shall be payable in accordance with the terms and provisions of the related Subordinated Note and any cash repayment of such Subordinated Loan shall be payable solely from Available Funds at the time of each such payment. Each Originator is hereby authorized by the Purchaser to maintain a record with respect to the related Subordinated Note, evidencing the date and amount of each increase in such Subordinated Loan thereunder, as well as the date of each payment with respect thereto, provided that the failure to maintain such a record shall not affect any obligation of the Purchaser thereunder.
(c) Although the Purchase Price for each Purchase of Receivables, Related Security, Collections and Proceeds shall be due and payable in full by the Purchaser to the applicable Originator on each Purchase Date on which Receivables are purchased from such Originator, settlement of the Purchase Price between the Purchaser and such Originator will be effected on each Distribution Date with respect to all Purchases from such Originator within the most recently ended Calculation Period. Although cash settlements shall be effected on each Distribution Date, increases or decreases in the Subordinated Loan owed to each Originator shall be deemed to have occurred and shall be effective as of the last Business Day of the Calculation Period to which such settlement relates.
(d) Each contribution of Receivables, Related Security, Collections and Proceeds by Ferguson to Purchaser pursuant to Section 2.01(d) shall be deemed to be a Purchase of such Receivables, Related Security, Collections and Proceeds by Purchaser for all purposes of this Agreement.
Section 2.03. Purchase Price Credits. On each Purchase Date, all Deemed Collections with respect to Receivables originated by any Originator shall be credited (each, a “Purchase Price Credit”) against the Purchase Price otherwise payable hereunder to such Originator. If, with respect to any Originator, the aggregate amount of Purchase Price Credits exceeds the Purchase Price of the Receivables to be sold by such Originator on such Purchase Date, then such Originator will pay to the Purchaser the remaining amount of such Purchase Price Credit in cash not later than the next Business Day; provided that if no Termination Event or a Potential Termination Event exists, such Originator may deduct the remaining amount of such Purchase Price Credit from any amount owed to it under the applicable Subordinated Note.
Section 2.04. Payments and Computations, Etc. All amounts to be paid or deposited by the Purchaser hereunder shall be paid or deposited in accordance with the terms hereof on the day when due in immediately available funds to the account of each Originator designated from time to time by such Originator. In the event that any payment owed by any Person hereunder becomes due on a day that is not a Business Day, then such payment shall be made on the next Business Day. If any Person fails to pay any amount hereunder when due, such Person agrees to pay, on demand, interest on the past due amount at the Default Rate until paid in full; provided, however, that such interest shall not at any time exceed the maximum rate permitted by applicable Law. All computations of the Default Rate shall be calculated based on a 365/366 day year.
Section 2.05. Letters of Credit. (a) With respect to any Originator, upon its request and in accordance with Section 2.02, and subject to the terms and conditions for issuing Letters of Credit under the Receivables Purchase Agreement (including any limitations therein on the amount of any such issuance), the Purchaser agrees to cause the applicable LC Bank to issue, on the Purchase Date specified by such Originator, Letters of Credit on behalf of the Purchaser (and, if applicable, on behalf of, or for the account of, such Originator in favor of such beneficiaries as such Originator may elect). The aggregate Stated Amount of the Letters of Credit being issued on any Purchase Date at the request of an Originator shall constitute a credit against the aggregate Purchase Price otherwise payable by the Purchaser on such Purchase Date to such Originator pursuant to Section 2.02. To the extent that the aggregate Stated Amount of the Letters of Credit being issued on any Purchase Date exceeds the aggregate Purchase Price payable by the Purchaser to such Originator on such Purchase Date, such excess shall be deemed to be a reduction in the outstanding principal amount of (and, to the extent necessary, the accrued but unpaid interest on) the applicable Subordinated Note. The aggregate Stated Amount of Letters of Credit to be issued on any Purchase Date cannot exceed the sum of the aggregate Purchase Prices payable on such Purchase Date plus the aggregate outstanding principal amount of and accrued but unpaid interest on the Subordinated Notes on such Purchase Date. In the event that any Letter of Credit issued (i) expires or is cancelled or otherwise terminated with all or any portion of its Stated Amount undrawn or (ii) has its Stated Amount decreased (for a reason other than a drawing having been made thereunder) or that the Purchaser’s Reimbursement Obligation in respect of a Letter of Credit is reduced for any reason other than by virtue of a payment made in respect of a drawing thereunder, then an amount equal to such undrawn amount or such reduction, as the case may be, shall either be paid in cash to the applicable Originator on the next Purchase Date or, if the Purchaser does not then have cash available therefor, shall be deemed to be added to the outstanding principal amount of the Subordinated Note issued to such Originator. Under no circumstances shall any Originator (and no Affiliate thereof (other than the Company)) have any reimbursement or recourse obligations in respect of any Letter of Credit.
(b) In the event that an Originator requests a Letter of Credit hereunder, such Originator shall on a timely basis provide the Purchaser with such information as is necessary for the Purchaser to obtain such Letter of Credit from an LC Bank.
(c) Each Originator agrees to be bound by the terms of each Letter of Credit Application referenced in the Receivables Purchase Agreement and by an LC Bank’s interpretations of any Letter of Credit issued for the Purchaser and by the LC Bank’s written regulations and customary practices relating to letters of credit. The Purchaser agrees to enforce any rights that it has under the Receivables Purchase Agreement against an LC Bank in the event any Originator suffers any direct damages caused by such LC Bank’s failure to exercise care when honoring drafts under a Letter of Credit.
(d) Each Originator appoints the Servicer as its agent (on which appointment the Purchaser, the Facility Agents, the Administrative Agent, the LC Banks and the Purchasers may rely until such Originator provides contrary written notice to all of such Persons) to act on such Originator’s behalf to take all actions and to make all decisions in respect of the issuance, amendment and administration of the Letters of Credit, including, identification of the LC Banks
to issue the Letters of Credit, requests for the issuance and extension of Letters of Credit and the allocation of the Stated Amounts of Letters of Credit against the Purchase Price owed to particular Originators and against Subordinated Notes issued to particular Originators. In the event that the Servicer requests a Letter of Credit in accordance with the terms hereof and the Receivables Purchase Agreement, the Servicer shall on a timely basis provide the Purchaser with such information as is necessary for the Purchaser to obtain such Letter of Credit from an LC Bank, and shall notify the relevant Originator, the Purchaser and the Administrative Agent of the allocations described in the preceding sentence. Such allocations shall be binding on the Purchaser and each Originator, absent manifest error.
Section 2.06. Access to Records. (a) In connection with the transfer of Records hereunder, each Originator hereby agrees that following any replacement of Ferguson as the Servicer, it will promptly grant access to the new Servicer to all data embedded in or created by all software used by such Originator to account for its Receivables.
(b) In addition to the requirements of Section 4.03, each Originator (i) shall take such action reasonably requested by the Purchaser or its assignee that may be necessary or desirable to ensure that the Purchaser has an enforceable ownership interest in the Records relating to the Receivables purchased from, or contributed by, such Originator hereunder and (ii) shall use its reasonable efforts to ensure that the Purchaser and the Servicer each has an enforceable right (whether by license or sublicense or otherwise) to use all of the computer software used to account for the Receivables and/or to recreate such Records.
Section 2.07. Characterization; Granting Clause. (a) If, notwithstanding the intention of the parties expressed in Section 2.01(c), any sale or contribution by any Originator to the Purchaser of Receivables, Related Security, Collections and Proceeds hereunder shall be characterized as a secured loan and not a sale or contribution, as the case may be, then this Agreement shall be deemed to constitute a security agreement under the UCC and other applicable Law. For this purpose and without being in derogation of the parties’ intention that each sale and contribution of Receivables, Related Security, Collections and Proceeds hereunder shall constitute a true sale or contribution, respectively, thereof, each Originator hereby grants to the Purchaser a duly perfected security interest in all of such Originator’s right, title and interest in, whether now existing or hereafter arising, in and to (i) (A) the Receivables originated by such Originator, (B) all Related Security with respect thereto, and (C) all Collections, (ii) with respect to all Reassigned Receivables of such Originator, all Collections subsequently received with respect thereto, and (iii) all Proceeds of any of the foregoing, which security interest shall be prior to all other Liens thereon. The Purchaser and its assigns shall have as against each Originator, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable Law, which rights and remedies shall be cumulative. Each Originator hereby authorizes Purchaser (or any of its assigns), as secured party, within the meaning of Section 9-509 of any applicable enactment of the UCC, to file, without further authorization by such Originator, as debtor, the UCC financing statements contemplated hereby. In the event that a court of competent jurisdiction holds that the transactions hereunder are not true sales or contributions, each of the Purchaser and each Originator represents and warrants, as to itself, that, each remittance of Collections by such Originator to the Purchaser hereunder will have been made (i)
in payment of a debt incurred by such Originator in the ordinary course of such Originator’s and the Purchaser’s business or financial affairs and (ii) made in the ordinary course of such Originator’s and the Purchaser’s business or financial affairs.
Section 2.08. Transfer by Purchaser; Third-Party Beneficiary. (a) The Originators acknowledge and agree that the Purchaser may, pursuant to the Receivables Purchase Agreement, sell and assign undivided interests in the Receivables and assign its rights under this Agreement to the Administrative Agent (for the benefit of the Facility Agents and their Purchase Groups) and (b) the Originators and the Purchaser acknowledge and agree that, by virtue of the transactions contemplated in the Receivables Purchase Agreement, the Administrative Agent (for the benefit of the Facility Agents and their Purchase Groups) shall be an assignee of this Agreement and, following the occurrence and continuance of a Termination Event, shall have the right to enforce directly all rights hereunder of Purchaser and all obligations hereunder of the Originators (but without the assumption of any obligations or liabilities hereunder).
ARTICLE III
Closing Procedures; Addition of Originators
Section 3.01. Conditions to Each Purchase. Each Purchase from an Originator hereunder (including the Purchase on the applicable initial Purchase Date) is subject to the conditions precedent that (i) the Purchaser shall have executed and delivered a Subordinated Note in favor of such Originator and (ii) as of such date of such Purchase, no Purchase Termination Event shall have occurred.
Section 3.02. Addition of Originators. Any Subsidiary of Ferguson may become an Originator hereunder with the prior written consent of the Purchaser (and the Administrative Agent and Facility Agents, as assignees of the Purchaser); provided, that such consent shall not be required if the Outstanding Balance of Receivables of such Subsidiary at the time it becomes an Originator hereunder, together with the Outstanding Balance of Receivables at such time of any other Subsidiary of Ferguson that became an Originator hereunder without such consent over the 12 calendar month period ending immediately prior to such date is less than 5.0% of the average Outstanding Balance of all Receivables (other than Excluded Receivables) on the last day of each calendar month during such 12-calendar month period . Each Subsidiary of Ferguson that is proposed to be added as an Originator shall give to the Purchaser (and the Administrative Agent and Facility Agents, as assignees of the Purchaser) prior written notice of its desire to be added as an Originator hereunder. Once the notice has been given, any addition of a Subsidiary of Ferguson as an Originator pursuant to this section shall become effective on the first Business Day following the date on which (i) such Subsidiary and the parties hereto shall have executed a Joinder Agreement and such other agreements, instruments and other documents (including, without limitation, opinions of counsel, lien searches, financing statements, Blocked Account Agreements and a Subordinated Note in favor of the new Originator) and the amendments or other modifications to the Transaction Documents, in form and substance satisfactory to the Purchaser (and the Administrative Agent and Facility Agents, as assignees of the Purchaser), that the Purchaser (and the Administrative Agent and Facility Agents, as assignees of the Purchaser) determines necessary or appropriate to effect the addition;
and (ii) the Parent confirms in writing that the obligations of such new Originator are guaranteed by the Parent under the Parent Undertaking. Upon such effectiveness, Schedule I to this Agreement shall be deemed amended to include such added Originator and any reference to “Originator” in this Agreement or any other Transaction Document shall refer to each existing Originator and each Subsidiary of Ferguson added as an Originator pursuant to this Section 3.02.
Section 3.03. Removal of Originators; Reconveyance of Certain Receivables. (a) In the event that any Receivables and Related Security were originated by an Originator or by a business group of any Originator, in each case, that is being sold or otherwise transferred to a third-party purchaser that is not an Affiliate of Parent (in any case, a “Sold Business”), and, at the request of such third-party purchaser, the Receivables and Related Security related to such Sold Business are to be included in such transfer, such Originator shall provide the Purchaser (and the Administrative Agent and Facility Agents as assignees of the Purchaser) notice of such sale or transfer not less than ten (10) Business Days before the date of the proposed sale or transfer and the resulting request for release and reconveyance of Receivables and Related Security. Such notice shall specify (i) if applicable, the business group being sold or transferred and (ii) the proposed date of such sale or transfer and reconveyance.
(b) On the sale or transfer date, the Purchaser shall, at the request of such Originator acting at the sole direction of such third-party purchaser, release and reconvey all of its right, title and interest in such Receivables and Related Security (other than any Collections or proceeds received in connection with such sale, assignment or transfer or received prior to the date thereof) (collectively, the “Transferred Assets”) to such Originator (or its designee) acting on behalf of such third-party purchaser, with such third-party purchaser being obligated to purchase such Transferred Assets, or to the applicable third-party purchaser, free and clear of any Lien created hereby, by executing a release and reconveyance agreement in a form agreed to by such Originator at the time of such release and reconveyance and delivering a copy of such executed release and reconveyance to the Administrative Agent, so long as (a) at the time of any such release and reconveyance, the then Outstanding Balance of any such Transferred Assets, together with the Outstanding Balance of any other Transferred Assets released and reconveyed pursuant to this Section 3.03 during the 12 calendar month period ending immediately prior to the date such Transferred Assets are transferred, plus the aggregate Outstanding Balance of Designated Excluded Receivables designated pursuant to Section 11.23 of the Receivables Purchase Agreement during such period (which Outstanding Balance is determined as to any Designated Type on its first respective Exclusion Date), shall not exceed 10.0% of the average aggregate Outstanding Balance of all Receivables (other than Excluded Receivables) on the last day of each calendar month during such 12-calendar month period, (b) no Termination Event or Potential Termination Event has occurred or will result from such release and reconveyance after the application of all Collections with respect thereto hereunder, and (c) after giving effect to such release and reconveyance and the application of all Collections with respect thereto under the Transaction Documents the Percentage Interest will not be greater than 100%. Any proceeds of any such release and reconveyance shall be treated as Collections hereunder.
(c) From and after the date any such Originator is terminated pursuant to this Section 3.03, such Originator shall have no further obligations hereunder or under any other Transaction Document, other than with respect to Collections or Deemed Collections on
Receivables previously sold by it to the Purchaser and, in respect of Indemnified Amounts arising out of events occurring or circumstances existing prior to such termination, any obligation under Section 8.01.
ARTICLE IV
Additional Rights and Obligations in Respect of the Receivables
Section 4.01. Rights of the Purchaser. Each Originator hereby authorizes the Purchaser and the Servicer (if other than such Originator) to take any and all steps in such Originator’s name necessary or desirable, in their respective determination, to collect all amounts due under any and all Receivables originated by such Originator, including, without limitation, endorsing such Originator’s name on checks and other instruments representing Collections and enforcing such Receivables, the invoices and the provisions of the related Contracts that concern payment and/or enforcement of rights to payment.
Section 4.02. Responsibility of each Originator. Anything herein to the contrary notwithstanding, each Originator hereby agrees that:
(a) Servicing. Ferguson, in its capacity as Servicer, shall be responsible for the servicing, administration and collection of the Receivables, all on the terms set out in the Receivables Purchase Agreement. Each Originator shall be responsible for sub-servicing the Receivables originated by it.
(b) Power of Attorney. It hereby grants to the Servicer (if other than such Originator) an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of such Originator all steps which are necessary or advisable to endorse, negotiate, enforce, or otherwise realize on any writing or other right of any kind held or transmitted by such Originator or transmitted or received by such Originator in connection with any Receivable originated by it or under the Related Security (including the Records).
(c) Performance under Contracts. It will perform all of its obligations under the Contracts generated by it to the same extent as if the Receivables had not been sold or contributed, as applicable, hereunder and the exercise by the Purchaser, the Servicer, the Administrative Agent, any of the Facility Agents of their respective rights hereunder or under the Receivables Purchase Agreement shall not relieve such Originator from such obligations.
Section 4.03. Further Action Evidencing Purchases. Each Originator agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action that the Purchaser (or its assigns) may reasonably request in order to perfect, protect or more fully evidence the Purchaser’s ownership of the Receivables generated by such Originator (and the Related Security and Collections) purchased by the Purchaser hereunder, or to enable the Purchaser to exercise or enforce any of its rights hereunder or under any other Transaction Document.
(b) Each Originator hereby authorizes the Purchaser or the Administrative Agent (as Purchaser’s assignee) to file one or more financing or continuation statements, and amendments thereto and assignment thereof, relative to all or any of the Receivables (and the Related Security and Collections) now existing or hereafter sold or contributed by such Originator. If any Originator fails to perform any of its agreements or obligations under this Agreement, the Purchaser (or its assigns) may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Purchaser or its designee incurred in connection therewith shall be payable by such Originator as provided in Article VIII.
ARTICLE V
Representations and Warranties
Section 5.01. General Representations and Warranties of the Originators. Each Originator hereby represents and warrants to the Purchaser as to itself on and as of the date hereof and on and as of each Purchase Date that:
(a) Corporate Existence, Power and Authority, Etc. It is duly organized, validly existing and in good standing in its jurisdiction of organization; it is duly qualified to do business in each jurisdiction where the conduct of its business so requires and except where failure to be so qualified would not be reasonably expected to have a Material Adverse Effect; it has power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to carry out the transactions contemplated hereby and thereby; each of this Agreement and each of the other Transaction Documents to which it is a party has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (subject to usual and customary bankruptcy and equitable principles exceptions); it has all necessary authorizations and approvals to execute, deliver and perform its obligations under this Agreement and all of the other Transaction Documents to which it is a party, except where failure to obtain any such authorization or approval would not reasonably be expected to result in a Material Adverse Effect; no notices to, or filings with, any Governmental Authority or regulatory body are required for the due execution, delivery or performance by it of this Agreement or any of the other Transaction Documents to which it is a party, except for the filing of financing statements referred to therein and except where the failure to provide any such notice or make any such filing would not reasonably be expected to result in a Material Adverse Effect;
(b) Eligible Receivables. All Receivables generated by such Originator and represented to be Eligible Receivables are Eligible Receivables at such time;
(c) Accuracy of Information. The written reports, financial statements, certificates and other written information furnished by it or on its behalf in connection with the negotiation of this Agreement and the other Transaction Documents or delivered in connection therewith (as modified or supplemented by other written information when so furnished), when taken as a whole, did not contain as of the date such written reports, financial statements or other written information were so furnished, any material
misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(d) Good Title. Each Receivable sold by such Originator under this Agreement is owned by it free and clear of any lien or adverse claim (except as provided herein and Permitted Liens);
(e) Ownership/Security Interest. It has taken or caused to be taken all actions, including necessary filings, to evidence the Purchaser’s first priority ownership or security interest in all Receivables (whether existing or thereafter arising) sold by it;
(f) Changes to Credit and Collection Policy. It has complied in all material respects with the Credit and Collection Policy with regard to each Receivable originated by it and the related Contract. It has not made any change in the Credit and Collection Policy that would (i) impair the collectability of any Receivables in any material respect or (ii) otherwise be reasonably likely to have a Material Adverse Effect;
(g) Collections. All of its Obligors have been directed to remit their Collections to Lockboxes, Lockbox Account, or Depositary Accounts, as applicable, listed on Schedule II hereto, except for those Obligors who pay by credit card or who, in the normal course of such Originator’s business and consistent with such Originator’s past practices, pay directly to such Originator;
(h) Payments from the Purchaser. The Purchase Price payable by Purchaser hereunder in connection with each sale by such Originator of Receivables hereunder represents a reasonable arms-length price for the Receivables sold by such Originator and constitutes reasonably equivalent value for the Receivables so sold. No sale of Receivables by such Originator hereunder was made for or on account of an antecedent debt owed by such Originator to the Purchaser or is or may be voidable as a fraudulent transfer under Section 548 of the Federal Bankruptcy Code or a voidable preference under Section 547 of the Federal Bankruptcy Code;
(i) Taxes. It has filed or caused to be filed all material United States federal, state and local income tax returns and all other material tax returns on or before the applicable due date (as such due date may have been timely extended), and has paid or caused to be paid all taxes due pursuant to such returns or pursuant to any assessment received by it (other than those which are currently being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with relevant IFRS shall have been set aside on its books);
(j) ERISA. Such Originator and each of its ERISA Affiliates have fulfilled their respective obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan, except as any noncompliance could not reasonably be expected to result in a Material Adverse Effect. No Reportable Event (as defined in Section 4043 of ERISA or the regulations
thereunder) has occurred with respect to any Plan nor has any prohibited transaction under Section 406 of ERISA occurred with respect to any “Employee Benefit Plan” (as that term is defined in Section 3(3) of ERISA), of such Originator or any of its ERISA Affiliates which, in either case, could reasonably be expected to result in a Material Adverse Effect. No prohibited transaction under Section 406 of ERISA which could be expected to result in a Material Adverse Effect has occurred with respect to such Originator or any of its ERISA Affiliates or will occur on any Purchase Date. No ERISA Event has occurred, is occurring, or is reasonably likely to occur which is reasonably likely to result in a Material Adverse Effect;
(k) Investment Company Act. It is not and is not required to be registered as an “investment company” or a company “Controlled” by an “investment company,” each as defined in the Investment Company Act of 1940, as amended;
(l) Use of Proceeds. It has not taken and will not take any action which would cause the use of the proceeds of the Purchases to violate the provisions of Regulation U of the Board of Governors of the Federal Reserve System; and
(m) Foreign Assets Control, Etc.
(i) Neither it nor any of its Subsidiaries (A) is, or is controlled by, a Designated Person; (B) has received funds or other property from a Designated Person; or (C) is in breach of or is the subject of any action or investigation under any Anti-Terrorism Law. None of the Originators nor any of their respective Subsidiaries engages or will engage in any dealings or transactions, or is or will be otherwise associated, with any Designated Person. Each Originator and each Subsidiary thereof is in compliance, in all material respects, with the Patriot Act. Each Originator and each Subsidiary thereof has taken reasonable measures to ensure compliance with the Anti-Terrorism Laws including the requirement that no Person who owns any direct or indirect interest in any Originator or any Subsidiary thereof is a Designated Person, and funds invested directly or indirectly in any Ferguson Party and each Subsidiary thereof are derived from legal sources.
(ii) No portion of the proceeds of any Purchase made hereunder has been or will be used, directly or indirectly for, and no fee, commission, rebate or other value has been or will be paid to, or for the benefit of, any governmental official, political party, official of a political party or any other Person acting in an official capacity in violation of any applicable law, including the U.S. Foreign Corrupt Practices Act of 1977, as amended.
ARTICLE VI
Covenants
Section 6.01. Affirmative Covenants of the Originators. Until the termination of this Agreement, each Originator covenants to the Purchaser as follows:
(a) General:
(i) Compliance with Laws, Etc. It will comply, and cause each of its Subsidiaries to comply, with all applicable Laws, ordinances, rules, regulations, and requirements of any Governmental Authority (including ERISA and consumer protection laws) except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect;
(ii) Offices, Records, and Books of Account. It will keep its jurisdiction of organization and the office where it keeps its records concerning the Receivables originated by it at the address set forth under its name on the signature pages to this Agreement (or Joinder Agreement, as applicable) or upon 30 days’ prior written notice to the Purchaser (or its assignee), at any other locations in jurisdictions where all actions reasonably requested by the Purchaser (or its assignee) to protect and perfect the interest in the Receivables have been taken and completed. It also will maintain and implement administrative and operating procedures (including, without limitation, the ability to recreate records evidencing Receivables originated by it and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables originated by it (including, without limitation, records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). It will mark its data processing records and other books and records to indicate which Receivables it has sold or contributed to the Purchaser under this Agreement;
(iii) Taxes. It will file all material tax returns and reports required by Law to be filed by it and will promptly pay all taxes and governmental charges at any time owing, except when failure to pay would not reasonably be expected to have a Material Adverse Effect or such as are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established. It will pay when due any sales, use or property taxes payable in connection with the origination or ownership of the Receivables originated by it, except for taxes the validity of which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with relevant IFRS shall have been set aside on its books;
(iv) Performance and Compliance with Credit and Collection Policy. It will, as applicable and at its own expense, timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Receivable originated by it and the related Contracts;
(v) Deposits to Lockboxes or Depositary Accounts. It will instruct all Obligors to remit all their payments in respect of Receivables to Lockbox Accounts or Depositary Accounts (either by check mailed to a Lockbox maintained by the relevant Depositary Bank or directly by wire transfer or electronic funds transfer to a Depositary Account), except for those Obligors who pay by credit card or who, in the normal course of such Originator’s business and consistent with such Originator’s past practices, pay directly to such Originator. If it receives any Collections directly, it will promptly (and in any event within two Business Days) cause such Collections to be deposited into the Concentration Account. It will not direct any funds to be deposited into any Lockbox Account or Depositary Account other than Collections of Receivables; provided, however, that it may direct or allow (i) collections of FFD Receivables and (ii) Collections of Acquisition Receivables being prepared for reporting on an Approved Data Reporting System in accordance with Section 11.21 of the Receivables Purchase Agreement until the applicable Inclusion Date for such Acquisition Receivables (after which Inclusion Date, the following limit will no longer apply) to be so deposited in an aggregate amount not in excess of $15,000,000 (as determined on the last day of each Calculation Period and reported in the related Monthly Report);
(vi) Transfers from Local Accounts. It will direct the Depositary Banks holding the Local Accounts to transfer Collections, within two (2) Business Days of deposit therein, received in such Local Accounts to the Concentration Account; and
(vii) Other Information. It will cause to be provided to the Purchaser (or its assignee) such other information in respect of the Receivables or its condition or operations, financial or otherwise, as the Purchaser (or its assignee) may from time to time reasonably request.
(b) Reporting. Ferguson shall provide to the Purchaser and the Administrative Agent (as Purchaser’s assignee) such information regarding its and its Subsidiaries’ operations, business affairs and financial condition, or compliance with the terms of this Agreement or any other Transaction Document, as may be reasonably requested by the Purchaser or the Administrative Agent (as Purchaser’s assignee).
(c) Notice of Termination. It will cause to be provided to the Purchaser and the Administrative Agent (as Purchaser’s assignee) promptly and in any event within five business days after obtaining knowledge of the occurrence of a Termination Event or Potential Termination Event with a statement of its financial officer setting forth details of such Termination Event or Potential Termination Event; and
Section 6.02. Negative Covenants of the Originators. Except as otherwise specified below, until the termination of this Agreement, each Originator covenants and agrees as follows:
(a) Sales, Liens, Etc. It will not sell, assign (by operation of Law or otherwise) or otherwise dispose of, or create or suffer to exist any adverse claim (except for the interest in favor of the Purchaser created pursuant to this Agreement, the interest in favor of the Administrative Agent (for the benefit of the Purchase Groups (as defined in the Receivables Purchase Agreement)and Permitted Liens) created pursuant to the Receivables Purchase Agreement) upon or with respect to, any Receivable, Related Security, related Contract or Collections, or upon or with respect to any Account, or assign any right to receive income in respect thereof;
(b) Change in Payment Instructions to Obligors. It will not add or terminate any bank as a Depositary Bank from those listed on Schedule II hereto, or make any change in its instructions to Obligors regarding payments to be made in respect of the Receivables or payments to be made to any Depositary Bank, unless the Purchaser and the Administrative Agent (as assignee of Purchaser) will have received notice of such addition, termination or change (including an updated schedule) and a fully executed Blocked Account Agreement in form and substance satisfactory to the Administrative Agent with respect to each new Lockbox Account or Depositary Account;
(c) Change in Name or Jurisdiction of Origination, Etc. It will not change its name, identity or organizational structure unless the Purchaser and the Administrative Agent (as Purchaser’s assignee) shall have received at least thirty (30) days’ advance written notice of such change and all action by such Originator, necessary or appropriate to perfect or maintain the perfection of the Purchaser’s ownership or security interest in the Receivables originated by it, the Related Security and the Collections (including, without limitation, the filing of all financing statements and the taking of such other action as the Purchaser or the Administrative Agent (as Purchaser’s assignee) may request in connection with such change or relocation) will have been duly taken;
(d) Treatment as Sales. It will not account for or treat (whether in financial statements or otherwise) the transactions contemplated by this Agreement in any manner other than as the sale and/or absolute conveyance of Receivables to the Purchaser (it being understood that the Purchaser is consolidated with Ferguson and the Parent under IFRS). It (or Parent) shall treat the transactions under this Agreement, for U.S. federal income tax purposes, as indebtedness secured by the Receivables and shall take no position inconsistent therewith; and
(e) Merger. It will not consolidate or merge with or into any other Person other than the Parent, Ferguson or any other Originator, and if the Parent is the surviving entity, unless the Parent assumes the obligations of such Originator hereunder.
Section 6.03. Separateness Covenants. Until the termination of this Agreement, each Originator covenants and agrees that it will take such actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinions issued by Mayer Brown LLP, as counsel for Purchaser, in connection with the Facility on the Original Closing Date and on the Amendment Effective Date and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times.
ARTICLE VII
Purchase Termination Events
Section 7.01. Purchase Termination Events. The occurrence of the Termination Date under the Receivables Purchase Agreement shall constitute a “Purchase Termination Event” hereunder:
Section 7.02. Consequences of a Purchase Termination Event. (a) Upon the occurrence of a Purchase Termination Event, there shall be no further sales or contributions of Receivables under this Agreement; provided, however, that the termination of this Agreement shall not discharge any Person from any obligations incurred prior to such termination, including, without limitation, any indemnification obligations.
(b) Upon the occurrence and continuance of a Purchase Termination Event, the Purchaser shall have, in addition to all rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and under other applicable Laws, which rights shall be cumulative.
ARTICLE VIII
Indemnification; Expenses
Section 8.01. Indemnity. (a) Each Originator shall indemnify the Purchaser and its assigns, officers, directors and employees (each, an “Indemnified Party”) against all liabilities, claims, damages, costs, expenses, or losses (“Losses”) arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by Purchaser of the Receivables, excluding, however, (i) Losses to the extent resulting from the gross negligence or willful misconduct of the Indemnified Party or from the Indemnified Party’s breach of this Agreement or any other Transaction Document or (ii) recourse (except as expressly provided in this Agreement) for uncollectable Receivables.
Without limiting the foregoing, each Originator shall indemnify the Indemnified Parties for all Losses resulting from:
(i) False or incorrect representations, warranties or certifications of such Originator in this Agreement or any report or document delivered by such Originator to the Purchaser pursuant to this Agreement;
(ii) Failure by such Originator to comply with applicable Law, rules or regulations related to the Receivables;
(iii) Failure to vest in the Purchaser a first priority perfected ownership or security interest in the Receivables originated by such Originator;
(iv) Failure to file, or delay in filing, any financing statements or similar instruments or documents under the UCC of any applicable jurisdiction or other applicable Laws with respect to the Receivables originated by such Originator, the Related Security or the Collections;
(v) Any dispute, claim or defense of an Obligor to the payment of any Receivable originated by such Originator including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid or binding obligation of such Obligor, or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with respect to such Receivable or any Contract related thereto, or any adjustment, cash discount, rebate, return of product or cancellation with respect to such Receivable (provided that this clause (v) shall not be applied to provide credit recourse in respect of the portion of the Outstanding Balance of any Receivable which has been discharged in bankruptcy);
(vi) Failure by such Originator to perform any of its duties or other obligations, or to comply with any of its covenants, under this Agreement;
(vii) Any products liability, environmental or other claim by an Obligor or other third party arising out of the goods or services which are the subject of any Receivable;
(viii) Any third-party investigation, litigation or proceeding (actual or threatened) related to this Agreement or the transactions contemplated hereby or thereby, or the use of proceeds of Purchases under this Agreement or in respect of any Receivable;
(ix) Commingling of Collections with any other funds of such Originator or any of its Affiliates or Subsidiaries or any set-off against Collections by any credit card servicers;
(x) Third party claims arising from such Originator’s administration of the Receivables;
(xi) The sale of any Receivable in violation of applicable Law;
(xii) Any setoff by any Obligor;
(xiii) Any Letter of Credit issued at the request of an Originator (other than costs associated with the issuance of such Letter of Credit or reimbursement obligations
with respect to draws made thereunder) or the use of the proceeds thereof by the applicable beneficiary or any affiliate, agent, employee or assignee thereof;
(xiv) The failure of such Originator to pay when due any sales, excise, motor fuel, business and occupation, property or other similar taxes payable in connection with the Receivables;
(xv) Any dispute, suit or claim arising out of any provision in any Contract restricting or prohibiting sale and assignment of the related Receivables;
(xvi) Overstatement of the balance of any Receivable of such Originator due to provisions in the related Contract relating to retainage, data assumptions cash on delivery sales, or bill and hold sales or other similar provisions of comparable effect; and
(xvii) Taxes, other than Excluded Taxes (as defined in the Receivables Purchase Agreement except modified by replacing the term “Indemnified Party” in each relevant place with “Purchaser and its assigns”), imposed on the Purchaser on account of payments made by or on account of its entering into this Agreement, and Other Taxes (as defined in the Receivables Purchase Agreement except modified by replacing the term “Transaction Document” with “this Purchase and Contribution Agreement”).
(b) Promptly upon receipt by any Indemnified Party under this Section 10.01 of notice of the commencement of any suit, action, claim, proceeding or governmental investigation against such Indemnified Party, such Indemnified Party shall, if a claim in respect thereof is to be made against an Originator hereunder, notify such Originator in writing of the commencement thereof. Any notice claiming compensation under this Section shall set forth in reasonable detail the amount or amounts to be paid to it hereunder and shall be conclusive in the absence of manifest error. Such Originator may participate in and assume the defense and settlement of any such suit, action, claim, proceeding or investigation at its expense, and no settlement thereof shall be made without the approval of such Originator and the Indemnified Party. The approval of such Originator and the Indemnified Party will not be unreasonably withheld or delayed. After notice from such Originator to the Indemnified Party of its intention to assume the defense thereof with counsel reasonably satisfactory to the Purchaser (and its assignee), and so long as such Originator so assumes the defense thereof in a manner reasonably satisfactory to the Purchaser (and its assignee), such Originator shall not be liable for any legal expenses of counsel unless there shall be a conflict between the interests of such Originator and the Indemnified Party, in which case the Indemnified Party(ies) shall have the right to employ one counsel to so represent it (them).
(c) Each Originator against which an indemnification claim is made will promptly pay to each Indemnified Party such indemnity amount as shall be specified to such Originator in a certificate of the Indemnified Party setting forth the calculations of such amount, together with the basis therefor.
(d) Each Indemnified Party, on behalf of itself, its assigns, officers, directors, officers and employees, shall use its good faith efforts to mitigate, reduce or eliminate any losses, expenses or claims for indemnification.
Section 8.02. Expenses. The Originators, jointly and severally, are obligated to pay or cause to be paid, to the Purchaser (a) all reasonable out-of-pocket expenses (excluding salaries and overhead costs) incurred by or on behalf of the Purchaser in connection with the negotiation, execution, delivery and preparation of this Agreement and (b) all reasonable out-of-pocket expenses (including, without limitation, the reasonable fees and expenses of counsel for the Purchaser) from time to time (i) relating to any requested amendments, waivers or consents hereunder, or (ii) arising in connection with the Purchaser’s enforcement or preservation of its rights (including, without limitation, the perfection and protection of the Purchaser’s ownership of the Receivables) hereunder.
ARTICLE IX
Miscellaneous
Section 9.01. Amendments and Waivers. The provisions of this Agreement may from time to time be amended, restated, otherwise modified or waived, if such amendment, modification or waiver is in writing and consented to by the Originators, the Purchaser and the Administrative Agent. No failure or delay on the part of the Purchaser (or its assigns) in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right.
Section 9.02. Binding Effect; Assignments. This Agreement shall be binding upon and inure to the benefit of the Originators, the Purchaser and their respective successors and permitted assigns. Except as a result of a merger or consolidation permitted by Section 6.02(e), no Originator may assign its rights hereunder or any interest herein without the prior written consent of the Purchaser, the Administrative Agent and the Required Facility Agents. Until the Facility Termination, the Purchaser may not assign its rights hereunder or any interest herein except to the Administrative Agent. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Facility Termination. The rights and remedies with respect to any breach of any representation and warranty made by any Originator pursuant to Article V and the indemnification and payment provisions of Article VIII and the provisions of Sections 9.05 and 9.06 shall be continuing and shall survive any termination of this Agreement.
Section 9.03. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of the parties hereto (or, in the case of the Purchaser, its assigns) in exercising any right, power or privilege under this Agreement shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the parties hereto (and, in the case of the
Purchaser, its assigns) under this Agreement are cumulative and not exclusive of any rights or remedies which such Person would otherwise have.
Section 9.04. No Discharge. The respective obligations of the Originators and the Purchaser under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by any exercise or nonexercise of any right, remedy, power or privilege under or in respect of this Agreement or any other Transaction Documents or applicable Law.
Section 9.05. No Petition. Each Originator agrees not, prior to the date which is one (1) year and one (1) day after the Facility Termination, to acquiesce, petition or otherwise, directly or indirectly, invoke, or cause the Purchaser to invoke, the process of any Official Body for the purpose of (a) commencing or sustaining a case against the Purchaser under any federal or state bankruptcy insolvency or similar Law (including the Federal Bankruptcy Code), (b) appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the Purchaser or any substantial part of the property of the Purchaser, or (c) ordering the winding up or liquidation of the affairs of the Purchaser.
Section 9.06. No Recourse. The obligations of the Purchaser payable in cash under this Agreement shall be payable solely out of the Available Funds and shall be solely the limited liability company obligations of the Purchaser.
Section 9.07 Holidays. Except as may be otherwise provided in this Agreement, if any payment due hereunder shall be due on a day which is not a Business Day, such payment shall instead be due on the next Business Day.
Section 9.08. Notices. (a) All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing (including electronic communication) unless otherwise expressly permitted hereunder and shall be sent by first-class mail, first-class express mail, electronic mail or courier, in all cases with charges prepaid. All notices shall be sent to the applicable party at the notice addresses appearing on the signature pages hereof (or such other address as such party may give by notice to the other).
(b) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. Notices sent by e-mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient.
Section 9.09. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
Section 9.10. Prior Understandings. This Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral.
Section 9.11. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York, but Otherwise without regard to Choice of Laws Principles thereof). Each party hereto hereby submits to the nonexclusive jurisdiction of the federal courts for the Southern District of New York for the purpose of adjudicating any claim or controversy arising in connection with this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby, and for such purpose, to the extent they may lawfully do so, waive any objection which each may now or hereafter have to such jurisdiction or to venue therein and any claim of inconvenient forum with respect hereto or thereto.
Section 9.12. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
In Witness Whereof, the parties hereto, by their duly authorized signatories, have executed and delivered this Agreement as of the date first above written.
Ferguson Receivables, LLC, as Purchaser
By:________________________
Name: Brenda L. Crowder
Title: Treasurer
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: 757-874-7795757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
Ferguson Enterprises, LLC, as an Originator
By:_________________________________
Name: WilliamBrenda SL. BrundageCrowder
Title: Chief Financial OfficerAssistant Treasurer
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: 757-874-7795757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
Energy & Process Corporation, as an Originator
By:______________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: 757-874-7795757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
Ferguson Fire & Fabrication, Inc., as an Originator
By:_____________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: 757-874-7795757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
DBS Holdings, Inc., as an Originator
By:_____________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: 757-874-7795757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
HP Products Corporation, as an Originator
By:_______________________________
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
12500 Jefferson Avenue
751 Lakefront Commons
Newport News, VA 2360223606
Attention: General CounselBrenda L. Crowder
Telephone: 757-874-7795757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
Ferguson Fire Design, LLC, as an Originator
By:
Name: Brenda L. Crowder
Title: Assistant Treasurer
Address for Notices:
751 Lakefront Commons
Newport News, VA 23606
Attention: Brenda L. Crowder
Telephone: 757-869-9703
Fax: 757-989-2985
E-mail: [ ]
[ ]
| | |
Annex C to Omnibus Amendment and Consent Dated as of June 23, 2023 |
Closing Index
FERGUSON ENTERPRISES, INC. EXECUTIVE RETIREMENT PLAN
(Amended and Restated
Effective January 1, 2004)
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
| | | | | | | | |
| | Page |
| PREAMBLE | 1 |
| | |
| ARTICLE I | 4 |
| DEFINITIONS | 4 |
| 1.1 | Account | 4 |
| 1.2 | Annual Account Balance | 4 |
| 1.3 | Beneficiary | 4 |
| 1.4 | Board | 4 |
| 1.5 | Change in Control | 4 |
| 1.6 | Code | 5 |
| 1.7 | Company | 5 |
| 1.8 | Compensation | 5 |
| 1.9 | Declared Investment Rate | 6 |
| 1.10 | Deferral or Deferrals | 6 |
| 1.11 | Deferral Election | 6 |
| 1.12 | Deferred Bonus Plan | 6 |
| 1.13 | Disability | 7 |
| 1.14 | Discretionary Company Contributions | 7 |
| 1.15 | Distributable Event | 7 |
| 1.16 | Distribution Election | 7 |
| 1.17 | Distribution Election Period | 7 |
| 1.18 | Effective Date | 7 |
| 1.19 | Eligible Employee | 7 |
| 1.20 | Employer | 7 |
| 1.21 | Installment Distribution | 8 |
| 1.22 | Lump Sum Distribution | 8 |
| 1.23 | Matching Contribution | 8 |
| 1.24 | Normal Retirement Age | 8 |
| 1.25 | Participant | 8 |
| 1.26 | Plan | 8 |
| 1.27 | Plan Year | 8 |
| 1.28 | Retirement | 8 |
| 1.29 | Retirement Age | 8 |
| 1.30 | Retirement Plan Committee | 8 |
| 1.31 | Rollover | 8 |
| 1.32 | Scheduled Distribution | 9 |
| 1.33 | SERP | 9 |
| 1.34 | SERP Contributions | 9 |
| 1.35 | SERP Vesting Date | 9 |
| 1.36 | Years of Service | 9 |
| 1.37 | 401(k) Plan | 9 |
| | | | | | | | |
| ARTICLE II | 10 |
| ELIGIBILITY | 10 |
| | |
| ARTICLE III | 11 |
| CONTRIBUTIONS TO ACCOUNTS | 11 |
| 3.1 | Accounts | 11 |
| 3.2 | Deferrals | 11 |
| 3.3 | Matching Contributions | 12 |
| 3.4 | Annual SERP Contributions | 13 |
| 3.5 | Discretionary Credits | 13 |
| 3.6 | Deferred Bonus Plan Account Transfers | 13 |
| | |
| ARTICLE IV | 14 |
| ADJUSTMENTS TO ACCOUNTS FOR EARNINGS | 14 |
| 4.1 | Adjustments to Accounts | 14 |
| 4.2 | Charge Against Accounts | 15 |
| 4.3 | Statement of Account Balances | 15 |
| | |
| ARTICLE V | 16 |
| BENEFITS | 16 |
| 5.1 | Distributable Event | 16 |
| 5.2 | Forms of Payment | 16 |
| 5.3 | Distribution Election Procedure | 16 |
| 5.4 | Emergency Benefit | 17 |
| 5.5 | Scheduled Distributions | 17 |
| 5.6 | Death Benefits | 18 |
| 5.7 | Lump Sum Payment Following Change in Control | 18 |
| 5.8 | Acceleration of Payments | 19 |
| 5.9 | Small Benefit | 19 |
| 5.10 | Withholding: Payroll Taxes | 19 |
| | |
| ARTICLE VI | 20 |
| BENEFICIARY DESIGNATION | 20 |
| | |
| ARTICLE VII | 22 |
| CONTRIBUTIONS | 22 |
| | |
| ARTICLE VIII | 24 |
| ADMINISTRATION OF PLAN | 24 |
| 8.1 | Plan Administrator | 24 |
| 8.2 | Examination of Records | 25 |
| 8.3 | Reliance on Reports and Certificates | 25 |
| 8.4 | Action by the Retirement Plan Committee | 25 |
| 8.5 | Nondiscriminatory Exercise of Authority | 25 |
| 8.6 | Indemnification of Retirement Plan Committee | 26 |
| 8.7 | Compensation, Indemnity and Liability | 26 |
| | |
| ARTICLE IX | 27 |
| MISCELLANEOUS | 27 |
| 9.1 | Alienability and Assignment Prohibition | 27 |
| | | | | | | | |
| 9.2 | Binding Obligation of Employer and Any Successor in Interest | 27 |
| 9.3 | Amendment or Termination | 27 |
| 9.4 | Claims Procedure | 28 |
| 9.5 | Employment and Other Rights | 28 |
| 9.6 | Governing Law | 28 |
| 9.7 | Construction of Plan Provisions | 29 |
| 9.8 | Successors and Assigns | 29 |
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN
(Amended and Restated,
Effective January 1, 2004)
THIS EXECUTIVE RETIREMENT PLAN, amended and restated in the City of Newport News, Virginia, effective this 1st day of January, 2004, by FERGUSON ENTERPRISES, INC., a Virginia corporation (the “Company”), and any related corporation which joins in the adoption of this Plan (the Company and each adopting affiliate are collectively referred to hereinafter as the “Employer”).
PREAMBLE
Effective August 1, 1991, and amended effective January 1, 1997, the Company adopted the Ferguson Enterprises, Inc. Supplemental Retirement Plan (the “SERP”) for the purpose of supplementing the retirement income of executive employees whose elective deferrals and matching contributions under the Ferguson Enterprises, Inc. Retirement Savings Plan (the “Ferguson 401(k) Plan”) are restricted by the limitations on includible compensation under § 401(a)(17) of the Internal Revenue Code of 1986, as well as other executive employees who may be designated as eligible for the SERP by the Board.
On April 1, 1996, the Company adopted the Ferguson Enterprises, Inc. Executive Retirement Plan (the “Plan”). The purpose of the Plan is to provide a means whereby the Company may afford a measure of financial security to certain executive employees of the Company and its subsidiaries who have rendered and continue to render valuable services for their Employer. The Plan is intended to provide for future income needs of these employees, so that their services may be retained and their productive efforts encouraged. Effective January 1, 1997, the Plan was amended and restated in its entirety to allow the Participants to select “deemed” investments for the purpose of calculating earnings on their Account balances.
Effective October 1, 1997, the Plan was amended to reflect the liability shown on the Employer’s books and records for SERP benefits for all Participants in the SERP, after they became fully vested in their accrued benefits following attainment of age 55 and completion of 20 Years of Service, as part of such Participant’s Account under this Plan.
Effective April 28, 1998, the Ferguson Enterprises, Inc. Deferred Bonus Plan (the “Deferred Bonus Plan”) was discontinued as a separate plan and, instead, incorporated into the Plan, and the liability shown on the Employer’s books and records for all Participants who had account balances under the Deferred Bonus Plan was transferred on the books and records of the Employer to this Plan. This Plan was amended effective April 28, 1998, to reflect the account balances Participants had earned under the Deferred Bonus Plan, prior to its discontinuance as a separate program.
Effective July 1, 2000, this Plan was amended and restated in its entirety to incorporate various changes desired by the Company and to revise the distribution provisions of the Plan.
Effective January 1, 2004, all account balances and liabilities accrued under the SERP are transferred on the Employer’s books and records to such Participants’ Accounts under this Plan, and this Plan is amended and restated in its entirety to incorporate the prior provisions of the SERP and various plan changes desired by the Company.
The rights and benefits of a Participant who had any balance or accrued benefit under the SERP or the Plan on December 31, 2003, shall be governed by the terms and conditions of this amended and restated Plan. Amounts accrued, distributed or forfeited under the Deferred Bonus Plan, the SERP or this Plan prior to December 31, 2003, are governed by the provisions of each such respective document, as then in effect.
The Company intends that this amended and restated Plan be considered an unfunded arrangement, maintained primarily to provide deferred compensation benefits for the Participants, members of a select group of management or highly compensated employees of the Company, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA’), and regulations thereunder.
By separate agreement, the Employer may create a trust (the “Trust”) to facilitate the payment of deferred compensation to Participants under this Plan. The Trust and any assets held by the Trust to assist the Employer in meeting its obligations under this Plan will conform to the terms of the model trust described in Revenue Procedure 92-64.
ARTICLE I
DEFINITIONS
1.1 “Account” means the bookkeeping reserve account established on the Employer’s financial records to record the aggregate interest of a Participant in this Plan. Within each Account, separate subaccounts shall be maintained to the extent necessary for the administration of the Plan, including method of payment elections related to contribution amounts for different Plan Years.
1.2 “Annual Account Balance” means the portion of a Participant’s Account representing his Deferral, Matching, Discretionary Company, SERP, and Rollover Contributions made in a particular Plan Year, together with all earnings thereafter credited to such Contributions.
1.3 “Beneficiary” means the person or persons, estate or trust entitled to receive any amount in the event of the death of a Participant or former Participant in accordance with Article VI.
1.4 “Board” means the Board of Directors of the Company.
1.5 “Change in Control” means (i) the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (“Act”), or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 30 percent or more of the combined voting power of the then outstanding voting securities issued by the Company or any of its “parent corporations,” as defined below; provided, however, that a purchase or other acquisition of such securities by an entity controlled immediately prior to such purchase or acquisition by an ultimate parent corporation common to both the Company and such purchasing or acquiring entity shall be disregarded for purposes of this definition; (ii) the approval by the stockholders of the Company or any of its parent corporations of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of the Company or any of its parent corporations immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50 percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company or parent corporation’s then outstanding securities; provided, however, that a reorganization, merger or consolidation of the Company or any of its parent corporations which
leaves the Company or parent corporation subject to control by the same ultimate parent corporation as had control immediately prior to such reorganization, merger or consolidation shall be disregarded for purposes of this definition; (iii) a liquidation or dissolution of the Company; (iv) the sale of fifty percent (50%) or more of the Company’s assets; (v) a sale of any portion of the Company’s assets or operations which, on the basis of the Company’s most recent audited financial statement, will result or is projected to result in a thirty percent (30%) or more reduction in the Company’s gross revenues for the current period, compared to the period covered by such audited financial statement; (vi) any other corporate transaction, including a layoff or reduction in force, which results in the involuntary termination of employment of fifty percent (50%) or more of the Participants in this Plan; or (vii) a majority of members of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the Company’s board of directors immediately prior to the date of the appointment or election. “Parent Corporations,” as used herein, means the corporation which owns 80% or more of the combined voting power of the then outstanding voting securities issued by the Company and any other corporation in the controlled group of parent-subsidiary corporations which, at the time of reference, owns 80% or more of the voting stock of its immediate subsidiary corporation.
1.6 “Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereof, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections.
1.7 “Company” means Ferguson Enterprises, Inc., and any successor which shall maintain this Plan.
1.8 “Compensation” means the total amount of Salary, Bonus and other payments received by a Participant during the Plan Year, plus pretax salary deferral amounts under this or any other non-qualified deferred compensation arrangement sponsored by the Employer, and pretax payroll savings contributions under the § 401(k) Plan and/or the § 125 plan, but excluding expense allowances, moving allowances, and excess group term life insurance.The following sub-definitions of Compensation apply for the specific provisions of the Plan noted:
(i)“Qualified Plan Compensation,” for purposes of determining the Matching Contributions under Section 3.3, means the amount of each Eligible Employee’s “Compensation” up to the adjusted limitation under Code § 401(a)(17) in effect for the current Plan Year ($205,000 for the Plan Year beginning in 2004).
(ii)“SERP Compensation,” for purposes of determining SERP Contributions under Section 3.4, means the amount of each Participant’s “Compensation” in excess of the adjusted limitation under Code § 401(a)(17) in effect for the current Plan Year ($205,000 for the Plan Year beginning in 2004).
(iii)“Salary” means that portion of a Participant’s Compensation which is payable on a regular and periodic basis in accordance with the Employer’s normal and customary payroll procedures.
(iv)“Bonus” means any annual, quarterly or other periodic payment of discretionary incentive Compensation for services rendered which is in addition to a Participant’s regular Salary.
1.9 “Declared Investment Rate” means the deemed rate of return (positive or negative) applied to a Participant’s Account balance that corresponds to the gains or losses actually generated by the various investment funds selected by the Participant from those designated by the Retirement Plan Committee from time to time.
1.10 “Deferral” or “Deferrals” means the amount of voluntary, pre-tax Salary or Bonus payments elected to be deferred and credited to a Participant’s Account under Article III.
1.11 “Deferral Election” means the election by a Participant under this Plan to defer a portion of the Participant’s Salary or Bonus, as the case may be, pursuant to Article III.
1.12 “Deferred Bonus Plan” means the Ferguson Enterprises, Inc. Deferred Bonus Plan which, effective April 28, 1998, was merged into and incorporated as part of this Plan.
1.13 “Disability” means any physical or mental injury, condition or impairment which,
in the opinion of a licensed physician selected by the Employer, renders the Participant incapable or unable to continue the performance of the regular duties of his position and is likely to be of permanent or indefinite duration.
1.14 “Discretionary Company Contributions” means the amount of deferred compensation credited to a Participant’s Account pursuant to Section 3.4.
1.15 “Distributable Event” means, with respect to some portion or all of a Participant’s Account, the first to occur of such Participant’s Scheduled Distribution, Retirement, Disability, or termination of employment.
1.16 “Distribution Election” means, with respect to some portion or all of a Participant’s Account, the most recent election filed by a Participant prior to the end of the Distribution Election Period as to the form of payment of such portion of the amounts credited to a Participant’s Account upon the occurrence of a Distributable Event.
1.17 “Distribution Election Period” means the period ending 13 months prior to the occurrence of the Distributable Event to which the election applies.
1.18 “Effective Date” means January 1, 2004, the effective date of this amended and restated Plan.
1.19 “Eligible Employee” means any employee of the Employer whose Compensation for any Plan Year beginning on or after January 1, 2004, exceeds $205,000 or such higher figure announced by the Internal Revenue Service as the adjusted limitation in effect for the Plan Year concerned under Code § 401(a)(17), and any other employee who is designated by the Retirement Plan Committee to be eligible to participate in the Plan as provided in Article II.
1.20 “Employer” means Ferguson Enterprises, Inc., and any member of the controlled group of corporations which includes Ferguson Enterprises, Inc., which, with the consent of Ferguson Enterprises, Inc., has adopted this Plan.
1.21 “Installment Distribution” means a series of quarterly installments paid on the first day of January, April, July and October over the five (5), ten (10) or fifteen (15) year period beginning on the first day of the first quarter beginning at least 45 days after the date of a
Participant’s retirement or Disability, as elected by the Participant.
1.22 “Lump Sum Distribution” means a single sum payment.
1.23 “Matching Contribution” means the amount credited to a Participant’s Account to match his Deferrals, pursuant to Article III.
1.24 “Normal Retirement Age” means age sixty-five (65).
1.25 “Participant” means an Eligible Employee who has an Account balance in the Plan.
1.26 “Plan” means the Ferguson Enterprises, Inc. Executive Retirement Plan, as herein amended and restated, and all amendments thereto.
1.27 “Plan Year” means a 12-month period beginning on January 1 and ending on the following December 31 of each year.
1.28 “Retirement” means the termination of a Participant’s employment with the Employer after his attainment of Retirement Age.
1.29 “Retirement Age” of a Participant means the date on which he shall have attained the age of fifty-five (55).
1.30 “Retirement Plan Committee” means the committee appointed from time to time by the Board to supervise the administration of the Plan, and to perform the duties described in Section 8.2, and any other duties prescribed by the Board.
1.31 “Rollover” means amounts previously shown on the Employer’s financial records as the accruals of Participants in the SERP, the Deferred Bonus Plan or any other nonqualified deferred compensation plan maintained by an Employer which have been transferred to this Plan, including deferrals and Company contributions under the Familian Northwest, Inc. Deferred Compensation Plan. Rollover balances from each such nonqualified plan shall be accounted for separately, such that there is a record of the source of such balance.
1.32 “Scheduled Distribution” means a lump sum distribution, prior to the Distributable Event, of all or a portion of a Participant’s Account balance on a specified date elected by the Participant pursuant to Article V.
1.33 “SERP” means the Ferguson Enterprises, Inc. Supplemental Retirement Plan, originally effective August 1, 1991, which, pursuant to the provisions of this Plan, as herein amended and restated effective January 1, 2004, is incorporated into this Plan.
1.34 “SERP Contributions” means the amount credited to a Participant’s SERP Account on the basis of his SERP Compensation pursuant to Section 3.4.
1.35 “SERP Vesting Date” means the first to occur of the date (i) of any Change in Control of the Company; (ii) a Participant dies or becomes Disabled while employed by an Employer; or (iii) a Participant attains the age of fifty-five (55) and completes twenty (20) Years of Service, upon which date the Participant shall become fully vested in his SERP contributions and earnings thereon.
1.36 “Years of Service” means the number of 12-month periods of continuous employment with the Company completed by an Eligible Employee between his date of hire and date of termination of employment, calculated with reference to his original date of hire by an Employer and anniversaries thereof.
1.37 “401(k) Plan” means the Ferguson Enterprises, Inc. Retirement Savings Plan, as amended from time to time, or any successor thereto.
ARTICLE II
ELIGIBILITY
The Retirement Plan Committee shall designate the employees who are eligible to participate in the Plan from among those employees who are members of a select group of key members of management or highly compensated employees of the Employer (“Eligible Employees”). Each Eligible Employee shall commence participation in the Plan in accordance with Section 3.2. Once designated by the Retirement Plan Committee as an Eligible Employee, such employee shall remain an Eligible Employee until the Plan Year when the Retirement Plan Committee affirmatively revokes the employee’s designation as an Eligible Employee.
ARTICLE III
CONTRIBUTIONS TO ACCOUNTS
3.1 Accounts. The Employer shall create a special account on its books and financial records (the “Account”) for the purpose of crediting deferred compensation to each Participant under this Plan. The Account of each Participant shall track the total amount of Deferrals, Matching, Rollover, SERP Contributions, or Discretionary Company Contributions to such Account for each Plan Year and earnings thereon. All amounts credited to each Participant’s Account are credited solely for purposes of accounting and computations and shall remain the assets of the Employer subject to the claims of the Employer’s general creditors.
3.2 Deferrals.
(a)Election Procedures. Any Eligible Employee may enroll in the pre-tax compensation deferral feature of the Plan. A Deferral Election must be filed by an Eligible Employee with respect to every Plan Year in which the Eligible Employee wishes to participate. The Deferral Election may be made, effective as of the first day of a Plan Year, by filing a completed and fully executed Deferral Election, on forms provided for this purpose, with the Retirement Plan Committee during enrollment periods established by the Retirement Plan Committee, but in no event later than December 31 preceding the year of the Deferral. Notwithstanding the preceding sentence, an employee who, for the first time, becomes an Eligible Employee during a Plan Year, may file a Deferral Election for the balance of such Plan Year. On his Deferral Election, each Eligible Employee shall irrevocably elect the amount of his Compensation to defer for such Plan Year (“Deferrals”). With respect to any employee who is designated as an Eligible Employee after the commencement of a Plan Year, the Deferral Election shall only pertain to Compensation earned and payable after the date a fully completed and executed Deferral Election is filed with the Retirement Plan Committee.
(b)Restrictions on Deferrals. An Eligible Employee may make a Deferral Election with respect to either Salary and/or Bonus amounts earned and payable during the following Plan Year.
(i)A Deferral Election related to Salary shall be made as a specific dollar amount of such Salary. The maximum amount that may be deferred is one hundred percent (100%) of Compensation available after deductions for § 125 plan contributions and deferrals under the Employer’s 401(k) plan and deferrals under any other non-qualified plan sponsored by the Employer. There is no minimum amount of Salary that can be deferred.
(ii)A Deferral Election related to Bonus payments shall be either a specific dollar amount or a fixed percentage of such Bonus. In the event the Eligible Employee’s Bonus for the year concerned is less than the dollar amount specified, the entire amount of such Bonus shall be deferred under the Plan.
(c) Termination of Deferral Election. A Participant’s Deferral Election shall terminate automatically upon the first to occur of: (i) his termination of employment with an Employer, or (ii) the termination of his status as an Eligible Employee under Article II. Any Compensation otherwise payable to the Participant for services rendered in the Plan Year in which such termination occurs shall be paid to the Participant without regard to his Deferral Election.
3.3 Matching Contributions. In addition to each Participant’s Deferrals, the Employer shall credit to such Participant’s Account a Matching Contribution equal to fifty percent (50%) of the Participant’s Deferrals for the Plan Year; provided, however, that the amount credited to each Participant as a Matching Contribution shall not exceed two and one-half percent (2.5%) of the Participant’s Qualified Plan Compensation. Matching Contributions shall be credited to Participants’ Accounts on the last day of each month.
(a) Forfeiture of Match. Notwithstanding anything hereinabove to the contrary, the Matching and Discretionary Company Contributions credited to a Participant’s Account under this Plan for a Plan Year, and all earnings thereon, shall be forfeited if the Participant elects to defer more than two percent (2%) of his Qualified Plan Compensation into the 401(k) Plan for the same Plan Year. All amounts forfeited hereunder shall be reallocated at the end of the Plan Year in which the forfeiture occurred to the Accounts of Participants who made proper Deferral Elections for such Plan Year, in the proportion that each such Participant’s Qualified Plan Compensation for the year bears to all such Participants’ Qualified Plan
Compensation for the year. The forfeiture provision of this Section 3.3(a) shall not apply to the 401(k) Plan deferrals made by new Eligible Employees prior to entering this Plan.
3.4 Annual SERP Contributions. The Company shall credit to the Account of each Participant an amount equal to three and one-half percent (3.5%) of such Participant’s SERP Compensation, if any, for the preceding Plan Year.
(a) Forfeiture of SERP Balances. All SERP Contributions credited to an Participant’s Account, together with earnings thereon, shall be forfeited if the Participant terminates employment with the Company for any reason prior to the SERP Vesting Date.
3.5 Discretionary Credits. In addition to the amount credited to the Accounts of each Participant under Sections 3.3 and 3.4 above, the Board may irrevocably declare, in writing, an additional amount, or formula for determining an additional amount, to be credited by the Employer to the Account of each Participant under this Plan for a Plan Year. In making its determinations hereunder, the Board shall not be bound by the amount or formula declared for any previous Plan Year, but shall have full discretion to declare a higher or lower amount than that specified previously, and shall have discretion to establish varying amounts for different classes of, or for particular, Participant’s. Once the amount or formula for determining the amount to be credited to each Participant’s Account has been declared for a Plan Year, however, the Board may not subsequently revoke or reduce such credits for any reason.
3.6 Deferred Bonus Plan Account Transfers. Effective April 28, 1998, the account balance of each participant in the Deferred Bonus Plan was transferred on the books and records of the Employer from the Deferred Bonus Plan to this Plan. Such transferred account balances are recorded as “Rollover” contributions for the year concerned under this Plan and, effective April 28, 1998, such amounts accrued earnings in accordance with the Allocations Election made by the Participant with respect to his other contributions (Deferral, Matching or Discretionary Company Contributions) for the Plan Year in which such Rollover occurred, pursuant to Section 4.1. The distribution provisions of Article V apply to all such Rollovers.
ARTICLE IV
ADJUSTMENTS TO ACCOUNTS FOR EARNINGS
4.1 Adjustments to Accounts. Contribution amounts (Deferrals, Matching, Discretionary Company, and Rollover Contributions), credited to each Participant’s Account shall be credited with deemed earnings, commencing when any amount is credited to the Participant’s Account and continuing until all amounts credited to the Account have been distributed to the Participant or his Beneficiary. Each Participant’s Account shall be credited at the end of each month with the applicable Declared Investment Rates, described in subsection 4.1(a) below.
Notwithstanding anything above to the contrary, unvested SERP balances shall be credited with earnings at the rate declared by the Retirement Plan Committee with respect to the “Stable Value Fund,” maintained by the Retirement Plan Committee as one of the investment funds under the Plan. The Retirement Plan Committee shall adjust the interest crediting rate for the Stable Value Fund every six (6) months, by reference to the interest crediting rate announced by CIGNA under the CIGNA Guaranteed Investment Contract (“CIGNA GIC”) under the Ferguson 401(k) Plan, or any replacement or successor to the CIGNA GIC. SERP balances, from and after the SERP Vesting Date, shall continue to be credited with interest at the rate announced by the Retirement Plan Committee for the Stable Value Fund, unless and until the Participant affirmatively elects to have his vested SERP balance credited with one or more alternate Declared Investment Rates.
Each Participant’s Account shall be credited each day that the financial markets in the United States are open with the applicable Declared Investment Rates as follows:
(a) By filing an Allocations Election with the Retirement Plan Committee, a Participant may elect to have his Account (or any future Deferrals, Matching, Discretionary Company and Rollover Contributions), other than unvested SERP balances, credited with any combination of Declared Investment Rates in 5% increments, provided the total does not exceed 100% of the contribution amounts. The Participant’s Account will be credited with a rate of return (positive or negative) for the Declared Investment Rates which he elects based upon the notional gain or loss that would have been generated if the Account balance had been invested in the
investment funds elected by the Participant, less fund management and administrative charges as determined by the Retirement Plan Committee.
(b)A Participant may change his Allocations Election as of any business day that the U.S. financial markets are open, pursuant to the procedures established by the Retirement Plan Committee. Unless the Participant indicates otherwise, any such new Allocations Election shall apply to all of the Participant’s Account; provided, however, that a Participant may have separate Allocations Elections in effect, one applicable to all amounts contributed to the Plan before a specified date, other than SERP balances, and a second Allocations Election applicable to all amounts, other than SERP balances, contributed to the Plan on and after such date.
(c)Accounts are subject to investment risk because the actual performance of the investment fund that is chosen to measure the Declared Investment Rate may be either positive or negative. Account balances will not necessarily be invested in these investment funds by the Employer, even though the actual performance of the investment fund that is chosen to measure the Declared Investment Rate will determine the rate of return (positive or negative) on the Participant’s Account.
4.2 Charge Against Accounts. There shall be charged against each Participant’s Account any payments made to the Participant or Beneficiary in accordance with Article V.
4.3 Statement of Account Balances. The Retirement Plan Committee shall submit to each Participant, within sixty (60) days after the close of each quarter of a Plan Year, a statement of the balance in each such Participant’s Account, in such form as the Retirement Plan Committee deems appropriate.
ARTICLE V
BENEFITS
5.1 Distributable Event. All or a portion of a Participant’s Account balance shall be paid or shall commence to be paid to him or his Beneficiary, in the form of payment selected by the Participant in his Distribution Election, following the occurrence of one or more “Distributable Events,” as defined below. The phrase “Distributable Event,” for purposes of this Plan, shall mean, with respect to some portion or all of the Participant’s Account, the first to occur of the following events:
(a)Retirement at or after the Participant’s attainment of Retirement Age;
(b)Disability; or
(c)Termination of the Participant’s employment for any reason other than Retirement or Disability.
(d)Scheduled Distribution(s) pursuant to Section 5.5.
5.2 Forms of Payment. The forms of payment available under the Plan are: (a) a lump sum in cash paid within forty-five (45) days of the Distributable Event; (b) twenty (20) substantially equal quarterly installments over a period of five (5) years; (c) forty (40) substantially equal quarterly installments over a period of ten (10) years; or (d) sixty (60) substantially equal quarterly installments over a period of fifteen (15) years, or any combination thereof. Installment payments shall commence on the first day of the first calendar quarter beginning at least forty-five (45) days after the date of the Distributable Event.
If a Participant elects to receive all or any part of his Account balance in installments, the amount to be paid on the first day of each January, April, July and October during the installment period shall be the then value of the portion of the Participant’s Account balance to be paid in said installments, divided by the number of installment payments then remaining.
5.3 Distribution Election Procedure. Each Participant may file one or more Distribution Elections prior to the end of the Distribution Election Period, specifying the form or forms of payment pursuant to which all or any portion of his Account shall be paid upon the occurrence of a Distributable Event. A Participant’s Distribution Election, once filed, may be superseded by one or
more later filed Distribution Election(s) as long as the second or subsequent Distribution Election is filed prior to the end of the Distribution Election Period for the Distributable Event to which such Election applies. In the event a Participant fails to file any Distribution Election with respect to a Distributable Event prior to the end of the Distribution Election Period, the portion of the Participant’s Account which becomes payable as a result of such Distributable Event shall be paid to him in a single lump sum in cash.
5.4 Emergency Benefit. In the event that the Retirement Plan Committee determines, in its sole discretion, upon written petition of the Participant or Beneficiary, that the Participant or Beneficiary has suffered an unforeseeable financial emergency, the Employer shall pay to the Participant or Beneficiary, as soon as practicable following such determination, the amount necessary to meet the emergency not in excess of the Participant’s Account balance. For purposes of this Plan, an unforeseeable financial emergency is an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence. The Participant’s Account balance shall be reduced by the amount paid to him on account of such financial emergency.
5.5 Scheduled Distributions.
(a)In General. A Participant may, when filing his Deferral Election, elect to receive one or more lump sum distributions while employed of all or a specified portion or percentage of the amounts credited to his Annual Account Balance to which such Deferral Election relates. The election of a Scheduled Distribution may only be cancelled or changed if the Participant files a new Distribution Election applicable to such portion or percentage of such Annual Account Balance prior to the end of the Distribution Election Period.
(b)Timing and Form of Distribution. The Participant may elect to receive a Scheduled Distribution during any Plan Year, beginning with the third Plan Year following the Plan Year to which the Participant’s Deferral Election applies. The Participant may elect to receive more than one Scheduled Distribution for each Annual Account Balance, and may elect to receive Scheduled Distributions from different Annual Account Balances on the same date or
dates. A Participant will receive his Scheduled Distribution(s) in a lump sum in January of the Plan Year specified in his Deferral Election, unless such Scheduled Distribution(s) is superceded by a subsequent and timely filed Distribution Election.
(c) Election Preserved Upon Prior Occurrence of Distributable Event. If a Distributable Event occurs with respect to a Participant prior to the date selected by the Participant for his Scheduled Distribution(s), the election to receive the Scheduled Distribution(s) shall not be voided but shall be preserved and honored to the extent compatible with the form of payout selected by the Participant prior to the end of the Distribution Election Period to take effect upon such Distributable Event.
5.6 Death Benefits. Notwithstanding the form of payment elected by a Participant with respect to the Distributable Event, in the event of the death of the Participant, whether prior to or after the occurrence of the Distributable Event, the Employer shall pay all remaining amounts credited to the Participant’s Account to the Beneficiary or Beneficiaries, and in the form, designated by the Participant pursuant to Article VI.
5.7 Lump Sum Payment Following Change in Control. Notwithstanding anything hereinabove to the contrary, each Participant will receive his full Account balance in a lump sum within ninety (90) days of the date of any Change in Control of the Company, regardless of any previous Distribution Election by the Participant and regardless of whether the Participant has terminated employment, died, become Disabled or is eligible for Retirement unless, prior to the ninetieth (90th) day after the date of such Change in Control, (i) Participants whose Account Balances comprise at least seventy-five percent (75%) of the value of the balances of all Participants who were actively employed by the Employer on the day before the date of the Change in Control, and (ii) the board of directors of the successor to the Company following the Change in Control agree that no Participant shall receive any such lump sum payment and that the Plan, as in effect on the day before the Change in Control, is to be continued on an uninterrupted basis following the Change in Control.
5.8 Acceleration of Payments. The Board may, in its sole discretion, without the consent of any Participant or Beneficiary or other party and without incurring any liability to any Participant or Beneficiary, direct the Employer to accelerate the payment of all or any portion of a Participant’s Account to the Participant or his Beneficiary, on any date prior to the date on which such amounts would have otherwise been paid under this Article V or under Sections 3.5 and 3.6; provided, however, that any such direction by the Board to accelerate the payout of Account balances shall apply uniformly and consistently to all Participants similarly situated.
5.9 Small Benefit. Notwithstanding anything herein to the contrary, in the event the total amount owed to a Participant or a Beneficiary after the Participant ceases to be an Employee is $15,000 or less, the Retirement Plan Committee, in its sole and absolute discretion, may elect to distribute any such amount in a single lump sum payment.
5.10 Withholding: Payroll Taxes. To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder the minimum taxes required to be withheld by the federal or any state or local government. As to any payroll tax that is due from a Participant for Compensation deferred under this Plan, the Employer shall collect such tax from funds paid to such Participant with respect to other compensation not deferred under the Plan unless said other compensation is insufficient to pay such payroll taxes whereupon the shortfall shall serve to reduce the elected Deferral amount.
ARTICLE VI
BENEFICIARY DESIGNATION
Each Participant shall have the right, at any time, to designate any person or persons as Beneficiary or Beneficiaries to whom payment under this Plan shall be made and the form of such payment, i.e., lump sum or installment payout, in the event of the Participant’s death prior to complete distribution of his Account. Each Beneficiary designation shall become effective only when filed in a notarized writing with the Retirement Plan Committee on a form prescribed by the Retirement Plan Committee.
The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed.
If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Retirement Plan Committee shall direct the distribution of such benefits to the Participant’s estate.
The Participant may designate one or more Primary and Contingent Beneficiary(ies), and the form of payment, i.e., lump sum or installment payout, applicable to each. If more than one Primary Beneficiary is designated, each Primary Beneficiary shall receive the percentage of the Participant’s Account balance specified on his Beneficiary designation form or, if no such percentage is specified, each Primary Beneficiary shall share equally in the Account. In the event one or more Primary Beneficiaries predecease the Participant, the Participant’s Account will be paid to such Primary Beneficiaries as survive him in proportion to their relative percentage shares. If any Beneficiary who is receiving installment payments dies prior to receipt of all such payments, the remaining amounts will be paid to the estate of such Beneficiary in a lump sum. If the Participant fails to designate a form of payment for a Beneficiary, such undesignated amount shall be paid in a lump sum.
Contingent Beneficiaries will receive payments from the Plan only if no Primary Beneficiaries survive the Participant. If more than one Contingent Beneficiary is designated, the rules for dividing the Participant’s Account balance are the same as those set forth above for Primary Beneficiaries.
The Employer shall pay or begin to pay the Participant’s Account balance to the proper Beneficiary(ies), as per the above rules and the Participant’s Beneficiary designation form, in the form selected by the Participant, within forty-five (45) days of the Retirement Plan Committee’s receipt of satisfactory certification of the death of the Participant.
ARTICLE VII
CONTRIBUTIONS
All Participants and Beneficiaries shall have the status of general unsecured creditors of the Employer. The Plan constitutes a mere promise by the Employer to pay the Participants’ Accounts in the future. Consequently, no Employer shall have any obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Plan. All Participants and Beneficiaries shall be and remain general creditors of the Employer in the same manner as any other creditor having a general claim for matured and unpaid compensation. The Participant, his Beneficiary, or any other person claiming through the Participant, shall only have the contractual right to receive from the Employer the benefits specified in this Plan. The Employer’s obligation to pay the Participant the full amount of his Account balance shall be offset by any amounts paid from any Trust established by the Employer to facilitate the payment of benefits to the Participant or his Beneficiaries.
The Employer reserves the absolute right at its sole discretion either to set aside funds to assist in fulfilling the obligations undertaken by this Plan or to refrain from so setting aside funds and to determine the extent, nature, and method of so setting aside funds. Should the Employer elect to make contributions to a Trust, through the purchase of life insurance, mutual funds, stocks, bonds, disability policies, annuities, or other properties, and the contribution of such properties to such Trust, the Employer reserves the absolute right, in its sole discretion, to terminate such contributions at any time, in whole or in part; provided, however, that no such termination of contributions to a Trust shall entitle the Employer to any reversion of assets from such Trust, other than in accordance with the terms and conditions of such Trust.
Notwithstanding anything hereinabove to the contrary, upon a Change in Control of the Company, the Employer shall, as soon as possible, but in no event later than thirty (30) days following the Change in Control, make an irrevocable contribution to the Trust in an amount equal to the full amount credited to each Participant’s Account under the Plan as of the day before the date on which the Change in Control occurred.
At no time shall any Participant be deemed to have any lien, right, title or interest in or to any specific investment of such Trust, if one exists, or to any assets of the Employer. No term or condition of this Plan shall be construed to create a fiduciary relationship between the Company, any Employer, the Retirement Plan Committee, and any Participant or Beneficiary.
Each Employer shall be responsible for the payment of benefits to its Participants hereunder and shall share in the payment of such benefits (and may make contributions to any Trust established in connection with the Plan) in the proportion that the liabilities of its Participants bear to the liabilities of all Participants under this Plan.
ARTICLE VIII
ADMINISTRATION OF PLAN
8.1 Plan Administrator. The administration of the Plan shall be under the supervision of the Retirement Plan Committee. The Retirement Plan Committee shall consist of three or more individuals appointed by and serving at the pleasure of the Board. The duties of the Retirement Plan Committee shall be to designate Eligible Employees and to select the investment funds from which are determined the Declared Investment Rates to be offered to Participants for the purpose of making their Allocation Elections.
It shall be a principal duty of the Retirement Plan Committee to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination among them. The Retirement Plan Committee will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Retirement Plan Committee’s powers will include, but will not be limited to, the following authority, in addition to all other powers provided by this Plan:
(a)To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;
(b)To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan;
(c)To decide all questions concerning the Plan (other than the eligibility of any person to participate in the Plan);
(d)To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan; and
(e)To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocation, delegation or designation to be in writing.
8.2 Examination of Records. The Retirement Plan Committee will make available to
each Participant such of his records under the Plan as pertain to him, for examination at reasonable times during normal business hours.
8.3 Reliance on Reports and Certificates. In administering the Plan, the Retirement Plan Committee will be entitled to the extent permitted by law to rely conclusively upon any information furnished by any Employer, Participant, Beneficiary, accountant, controller, attorney, actuary, consultant or other advisor, and any agent of the foregoing, as the case may be.
8.4 Action by the Retirement Plan Committee.
(a)Any action of the Retirement Plan Committee shall be taken only upon the vote or the affirmation expression of a majority of the committee members qualified to vote with respect to such action. If the members of the committee qualified to vote on any question are unable to determine such question by a majority vote or other affirmative expressions, the question shall be determined by the Board.
(b)Action of the Retirement Plan Committee may be taken without a meeting of the committee members; provided, however, that any action without a meeting shall be taken only upon the unanimous vote or affirmative expression of all the committee members qualified to vote with respect to such action; such action must be evidenced by written documentation thereafter.
(c)If a member of the committee is a Participant, he shall not participate in any decision which solely affects his own Accounts.
(d)The committee shall, for purposes of administering the Plan, choose a secretary who shall keep minutes of the committee’s proceedings and all records and documents pertaining to the administration of the Plan. The secretary may execute any certificate or any other written direction on behalf of the committee on all persons claiming benefits under the Plan.
8.5 Nondiscriminatory Exercise of Authority. Whenever, in the administration of the Plan, any discretionary action by the Retirement Plan Committee is required, the Retirement Plan Committee shall exercise its authority in a nondiscriminatory manner so that all persons similarly
situated will receive substantially the same treatment.
8.6 Indemnification of Retirement Plan Committee. The Employer agrees to indemnify and to defend to the fullest extent permitted by law any employee serving as a member of the Retirement Plan Committee (including any employee or former employee who formerly served as a member of such committee) against all liabilities, damages, costs and expenses (including attorneys’ fees amounts paid in settlement of any claim approved by the Employer) occasioned by any act or omission to act in connection with the Plan, except such liability or expense as may result from the employee’s own willful misconduct or gross negligence. No member of a committee hereunder shall be liable for any act or omission of another member of the committee, except such liability as may result from his own willful misconduct or gross negligence.
8.7 Compensation, Indemnity and Liability.
(a)The members of the Retirement Plan Committee shall serve without bond and without compensation for their services as such. The expenses of the Retirement Plan Committee properly incurred in the performance of its duties under the Plan shall be paid by the Company.
(b)The Company shall indemnify and hold harmless each member of the Retirement Plan Committee against any personal liability or expense arising out of his membership on the Retirement Plan Committee, except such liability or expense as may result from his own willful misconduct or gross negligence. No member of the Retirement Plan Committee shall be liable for any act or omission of another member of the Retirement Plan Committee, or any act or omission of his own, excepting his own willful misconduct or gross negligence.
ARTICLE IX
MISCELLANEOUS
9.1 Alienability and Assignment Prohibition. A Participant’s or Beneficiary’s right to benefit payments under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiaries.
9.2 Binding Obligation of Employer and Any Successor in Interest. The Company expressly agrees that it shall not merge or consolidate into or with another corporation or sell substantially all of its assets to another corporation, firm or person until such corporation, firm or person expressly agrees, in writing, to assume and discharge the duties and obligations of the Company under this Plan.
9.3 Amendment or Termination. The Company expects the Plan to be permanent but, since future conditions affecting the Company cannot be anticipated or foreseen, the Company must necessarily and does hereby reserve the right to amend, modify or terminate the Plan at any time and for any reason (including a change or impending change in the tax laws of the United States or any state) by resolution of the Board. All amendments shall be stated in a written instrument signed by an officer on behalf of the Company. No amendment or termination of the Plan shall have the effect of (i) canceling or reducing in any way the amounts previously credited to any Participant’s Account, including deemed earnings thereon, or (ii) amending the Matching Contribution provided in Paragraph 3.3 with respect to the Participant’s Deferrals during the Plan Year in which such amendment is made.
Notwithstanding anything hereinabove to the contrary, upon and after a Change in Control of the Company, no amendment may be made to: (i) Paragraph 5.7, concerning lump sum payments after the Change in Control; (ii) the third paragraph of Article VII, concerning the Employer’s obligation to irrevocably fund the Trust after the Change in Control; or (iii) this Paragraph 9.3, concerning amendment or termination of the Plan.
In the event that the Plan is terminated, the Participant’s Deferral Election shall cease to be effective as of the effective date of the termination of the Plan. The termination of the
Plan shall not have the effect of canceling or reducing in any way amounts previously credited to any Participant’s Account. If the Plan is terminated, an amount equal to the full amount credited to each Participant’s Account shall be paid to the Participant or his Beneficiary in a lump sum within ninety (90) days after the effective date of the Plan termination.
Each Employer other than the Company may terminate its adoption of this Plan with respect to its employees upon appropriate Board of Directors action, but no Employer except the Company shall have the right to otherwise amend the Plan in any respect. Notwithstanding anything hereinabove to the contrary, a corporate liquidation, dissolution or reorganization which results in one or more Participants transferring their employment without interruption from the Employer involved to another Employer shall not result in a Distributable Event for such Participants, unless such corporate transaction is a Change in Control, as defined in Section 1.7.
9.4 Claims Procedure. In the event any claim by a Participant or Beneficiary is denied as to the amount and/or the method of payment under the Plan, such Participant or Beneficiary shall be given prompt notice in writing of such denial, which notice shall set forth the reason for the denial. The Participant or Beneficiary may, by filing notice in writing with the Board within sixty (60) days after the date of such notice of denial, request review of such denial. The Board shall review such denial, and shall state its decision, in writing, in a manner calculated to be understood, to the Participant or Beneficiary concerned.
9.5 Employment and Other Rights. This Plan creates no rights whatsoever in any Participant to continue in the employ of the Employer for any length of time, nor does it affect the right of any Participant to participate in or be covered by any other pension, profit sharing, welfare benefit, bonus or other supplemental compensation plan or fringe benefit program of the Employer.
9.6 Governing Law. To the extent not preempted by ERISA, this Plan shall be construed, administered, governed and enforced according to the laws of the Commonwealth of Virginia. If any provision of this instrument is held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.
9.7 Construction of Plan Provisions. Singular words used in this Plan may indicate the plural, the plural may indicate the singular, and the masculine may indicate the feminine. Headings of Sections and subsections of this Plan are inserted for convenience of reference only and are not considered in the construction of the provisions hereof.
9.8 Successors and Assigns. This Plan shall inure to the benefit of, and be binding upon, the parties thereto, their successors and assigns, heirs, executors, administrators and legal representatives. Except as provided in Sections 5.2 and 5.10, the rights of any Participant or Beneficiary to and in any benefits under the Plan shall not be subject to assignment or alienation, and any purported transfer, assignment, pledge, encumbrance, or attachment of a Participant’s interest hereunder shall be void and of no effect. In the event of a dispute involving any individual’s right to receive payment with respect to a Participant’s Accounts, the Retirement Plan Committee or the Company may enter an interpleader action. Payment of the Accounts to a court of competent jurisdiction with proper notice to the appropriate parties in dispute shall be in full satisfaction of all claims against the Retirement Plan Committee and the Company as to the Accounts, and shall be equivalent to a receipt and release.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on its behalf by its duly authorized officer on the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
Title: Vice President
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
TABLE OF CONTENTS | | | | | | | | |
| | Page |
| PREAMBLE | 1 |
| | |
| ARTICLE I | 3 |
| DEFINITIONS | 3 |
| 1.1 | Account | 3 |
| 1.2 | Annual Account Balance | 3 |
| 1.3 | Beneficiary | 3 |
| 1.4 | Board | 3 |
| 1.5 | Change in Control Event | 3 |
| 1.6 | Code | 5 |
| 1.7 | Company | 5 |
| 1.8 | Compensation | 5 |
| 1.9 | Declared Investment Rate | 6 |
| 1.10 | Deferral or Deferrals | 6 |
| 1.11 | Deferral Election | 6 |
| 1.12 | Disability | 6 |
| 1.13 | Discretionary Company Contributions | 7 |
| 1.14 | Distributable Event | 7 |
| 1.15 | Distribution Election | 7 |
| 1.16 | Distribution Election Period | 7 |
| 1.17 | Effective Date | 7 |
| 1.18 | Eligible Employee | 7 |
| 1.19 | Employer | 7 |
| 1.20 | Installment Distribution | 8 |
| 1.21 | Lump Sum Distribution | 8 |
| 1.22 | Matching Contribution | 8 |
| 1.23 | Participant | 8 |
| 1.24 | Plan | 8 |
| 1.25 | Plan Year | 8 |
| 1.26 | Predecessor Plan | 8 |
| 1.27 | Retirement | 8 |
| 1.28 | Retirement Age | 8 |
| 1.29 | Retirement Plan Committee | 8 |
| 1.30 | Rollover Balance | 9 |
| 1.31 | Scheduled Distribution | 9 |
| 1.32 | SERP | 9 |
| 1.33 | SERP Contributions | 9 |
| 1.34 | Specified Employee | 9 |
| 1.35 | Subsequent Distribution Election | 13 |
| 1.36 | Transitional Year Distribution Election | 14 |
| 1.37 | Vesting Date | 14 |
| 1.38 | Years of Service | 14 |
| 1.39 | 401(k) Plan | 14 |
| | | | | | | | |
| ARTICLE II | 15 |
| ELIGIBILITY | 15 |
| 2.1 | Eligibility | 15 |
| | |
| ARTICLE III | 16 |
| CONTRIBUTIONS TO ACCOUNTS | 16 |
| 3.1 | Accounts | 16 |
| 3.2 | Initial Account Balance | 16 |
| 3.3 | Deferrals | 16 |
| 3.4 | Matching Contributions | 18 |
| 3.5 | Annual SERP Contributions | 18 |
| 3.6 | Discretionary Company Contributions | 19 |
| 3.7 | Rollover Balance | 19 |
| | |
| ARTICLE IV | 20 |
| ADJUSTMENTS TO ACCOUNTS FOR EARNINGS | 20 |
| 4.1 | Adjustments to Accounts | 20 |
| 4.2 | Allocation Election | 20 |
| 4.3 | Charge Against Accounts | 21 |
| 4.4 | Statement of Account Balances | 21 |
| | |
| ARTICLE V | 22 |
| BENEFITS | 22 |
| 5.1 | Distributable Event | 22 |
| 5.2 | Forms of Payment | 22 |
| 5.3 | Distribution Election Procedure | 23 |
| 5.4 | Unforeseeable Financial Emergency Benefit | 24 |
| 5.5 | Scheduled Distributions | 25 |
| 5.6 | Death Benefits | 26 |
| 5.7 | Termination of Plan Following Change in Control of Employer | 26 |
| 5.8 | Acceleration of Payments | 26 |
| 5.9 | Small Benefit | 26 |
| 5.10 | Withholding: Payroll Taxes | 27 |
| 5.11 | Payments upon Income Inclusion under Code Section 409A | 27 |
| 5.12 | Distributions to Specified Employees | 27 |
| 5.13 | Qualified Domestic Relations Orders | 27 |
| | |
| ARTICLE VI | 29 |
| BENEFICIARY DESIGNATION | 29 |
| | |
| ARTICLE VII | 31 |
| FUNDING | 31 |
| | |
| ARTICLE VIII | 33 |
| ADMINISTRATION OF PLAN | 33 |
| 8.1 | 8.1 Plan Administrator | 33 |
| 8.2 | 8.2 Examination of Records | 34 |
| 8.3 | 8.3 Reliance on Reports and Certificates | 34 |
| | | | | | | | |
| 8.4 | Action by the Retirement Plan Committee | 34 |
| 8.5 | Nondiscriminatory Exercise of Authority | 34 |
| 8.6 | Indemnification of Retirement Plan Committee | 35 |
| 8.7 | Compensation | 35 |
| | |
| ARTICLE IX | 36 |
| MISCELLANEOUS | 36 |
| 9.1 | Alienability and Assignment Prohibition | 36 |
| 9.2 | Binding Obligation of Employer and Any Successor in Interest | 36 |
| 9.3 | Amendment or Termination | 36 |
| 9.4 | Claims Procedure | 38 |
| 9.5 | Employment and Other Rights | 38 |
| 9.6 | Governing Law | 38 |
| 9.7 | Construction of Plan Provisions | 38 |
| 9.8 | Successors and Assigns | 39 |
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
THE FERGUSON ENTERPRISES, INC. EXECUTIVE RETIREMENT PLAN II was adopted in the City of Newport News, Virginia, effective on the 1st day of January, 2005, by FERGUSON ENTERPRISES, INC., a Virginia corporation (the “Company”), and any related corporation which joins in the adoption of this Plan (the Company and each adopting affiliate are collectively referred to hereinafter as the “Employer”).
PREAMBLE
Effective January 1, 2005, the Company adopted the Ferguson Enterprises, Inc. Executive Retirement Plan II (the “Plan”). The purpose of the Plan is to provide a means whereby the Employer may afford a measure of financial security to certain executive employees who have rendered and continue to render valuable services. The Plan is intended to provide for future income needs of these employees, so that their services may be retained and their productive efforts encouraged in compliance with requirements of Sections 83 and 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations thereunder.
This Plan, when adopted, was a new plan, intended to comply with provisions of Section 409A taking effect on and after January 1, 2005. The rights and benefits to any unvested balance of any Participant under the Ferguson Enterprises, Inc. Executive Retirement Plan (the “Predecessor Plan”) or of any amounts credited to Participant’s Accounts under Article III of this Plan on or after January 1, 2005, shall be governed by the terms and conditions of this Plan. Notwithstanding that the Plan first took effect on January 1, 2005, pursuant to the transitional relief from the written plan requirement under Code § 409A announced by the U.S. Treasury and Internal Revenue Service in IRS Notice 2007-86, the terms and conditions of this Plan document take effect on January 1, 2009. During the interim period between January 1, 2005, and December 31, 2008, the Plan has been operated and administered in “good faith compliance” with all applicable guidance under Code § 409A, and in accordance with the working draft of the Executive Summary to the Plan attached hereto as Exhibit 1.
The rights and benefits to any vested balance of any Participant credited under the Predecessor Plan prior to January 1, 2005, shall be governed by the terms and conditions of the
Predecessor Plan, as in effect on December 31, 2004.
The Company intends that this Plan be considered an unfunded arrangement, maintained primarily to provide deferred compensation benefits for the Participants, members of a select group of management or highly compensated employees, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and regulations thereunder.
By separate agreement, an Employer may create a trust (the “Trust”) to facilitate the payment of Participants’ Accounts under this Plan. The Trust and any assets held by the Trust to assist the Employer in meeting its obligations under this Plan will conform to the terms of the model trust described in Revenue Procedure 92-64 and will not constitute an offshore trust as described in Code section 409A(b)(1).
ARTICLE I
DEFINITIONS
1.1 “Account” means the bookkeeping reserve account established in accordance with Section 3.1 on the Employer’s financial records to record the aggregate interest of a Participant in this Plan. Within each Account, separate subaccounts shall be maintained to the extent necessary for the administration of the Plan.
1.2 “Annual Account Balance” means the portion of a Participant’s Account representing the Participant’s Deferral, Matching Contribution, Discretionary Company Contributions, SERP Contributions and Rollover Balances made in a particular Plan Year, together with all earnings thereafter credited to such contributions.
1.3 “Beneficiary” means the person or persons, estate or trust entitled to receive any amount in the event of the death of a Participant or former Participant in accordance with Article VI.
1.4 “Board” means the Board of Directors of the Company.
1.5 “Change in Control Event” means a change in (a) ownership of an Employer, (b) effective control of an Employer, or (c) substantial ownership of the assets of an Employer that qualifies as a “Change in Control Event” for purposes of Code Section 409A pursuant to regulations and guidance issued by the Internal Revenue Service as defined in paragraphs (1) through (5) below:
(1)Change in the Ownership of Employer. A change in the ownership of an Employer occurs if any person acquires ownership of stock of the Employer that, together with stock held by such person, constitutes more than 50% of the total fair market value or total voting power of the stock of the Employer. An increase in the percentage of stock owned by any person as a result of the Employer redeeming its stock in exchange for property will be treated as an acquisition of stock for purposes of this Section 1.5.
(2)Change in the Effective Control of Employer. A change in the effective control of an Employer occurs if: (A) any person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by the person) ownership of stock of the Employer possessing 35% or more of the total voting power of the stock of the Employer; or (B) a majority of members of the Employer’s board of directors is
replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Employer’s board of directors prior to the date of the appointment or election.
(3)Change in the Ownership of a Substantial Portion of the Employer’s Assets. (A) A change in the ownership of a substantial portion of an Employer’s assets occurs on the date that any person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by that person) assets from the Employer that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Employer immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value is determined without regard to any liabilities associated with such assets. (B) A transfer of assets by the Employer is not treated as a change in the ownership of such assets if transferred to: (i) a shareholder of the Employer (immediately before the asset transfer) in exchange for or with respect to its stock; (ii) an entity, 50% or more of the total value or voting power of which is owned by the Employer; (iii) a person that owns 50% or more of the total value or voting power of all the outstanding stock of the Employer; or (iv) an entity, at least 50% of the total value or voting power of which is owned by a person described in subparagraph (iii) of (B) above. For purposes of (B) above, a person’s status is determined immediately after the transfer of the assets.
(4)Relevant Corporation. With respect to each Participant, the Change in Control Event must relate to the “relevant corporation.” For purposes of this section, the “relevant corporation” is (A) the corporation for whom the Participant is performing services at the time of the Change in Control Event; (B) the corporation that is liable for the payment of the deferred compensation (or all the corporations that are liable for the payment) but only if either the deferred compensation is attributable to the performance of service by the service provider for such corporation (or corporations) or there is a bona fide business purposes for such corporation or corporations to be liable for such payment and, in either case, the avoidance of Federal income tax is not a significant purpose of making such corporation or corporations liable for such payment; or (C) a corporation that is a majority shareholder of a corporation described in (A) or (B) above, or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation
described in (A) or (B) above. A “majority shareholder” is a shareholder owning more than 50% of the total fair market value and total voting power of such corporation.
(5) Other Rules. The following rules apply for purposes of this Section 1.5: (A) stock ownership shall be determined applying the rules of section 318(a) of the Code; (B) all references to a “person” shall include more than one person acting as a group; (C) if any person effectively controls an Employer, the acquisition of additional control of the Employer by the same person will not cause a change in the ownership of the Employer or a change in the effective control of the Employer as defined in subparagraphs (1) and (2), respectively; (D) if any person is considered to own more than 50% of the total fair market value or total voting power of the stock of an Employer, the acquisition of additional stock by the same person will not cause a change in the ownership of the Employer or a change in the effective control of the Employer as defined in subparagraphs (1) and (2), respectively; and (E) for purposes of paragraph (2), the term “Employer” refers solely to the “relevant corporation” identified in subparagraph (4), for which no other corporation is a majority shareholder.
1.6 “Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereof, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections.
1.7 “Company” means Ferguson Enterprises, Inc., and any successor which shall maintain this Plan.
1.8 “Compensation” means the total amount of Salary, Bonus and other payments received by an Eligible Employee from their Employer during the Plan Year, plus pre-tax salary deferral amounts under this or any other non-qualified deferred compensation arrangement sponsored by their Employer and pre-tax payroll savings contributions under their Employer’s 401(k) plan and/or any Employer-sponsored § 125 plan, but excluding expense allowances, moving allowances, and excess group term life insurance and other executive benefits, as reported on IRS Form W-2. The following sub-definitions of Compensation apply for the specific provisions of the Plan noted:
(i)“Qualified Plan Compensation,” for purposes of determining the Matching Contributions under Section 3.4, means the amount of each Eligible Employee’s Compensation up to the adjusted limitation under Code § 401(a)(17) in effect for the applicable Plan Year.
(ii)“SERP Compensation,” for purposes of determining SERP Contributions under Section 3.5(a), means the amount of each Participant’s Compensation in excess of Qualified Plan Compensation in effect for the applicable Plan Year
(iii)“Salary” means that portion of a Participant’s Compensation which is payable on a regular and periodic basis in accordance with their Employer’s normal and customary payroll procedures.
(iv)“Bonus” means any annual payment of incentive Compensation for services rendered which is in addition to a Participant’s regular Salary.
1.9 “Declared Investment Rate” means the deemed rate of return (positive or negative) applied to a Participant’s Account balance that corresponds to the gains or losses actually generated by the various investment funds selected by the Participant from those designated by the Retirement Plan Committee from time to time.
1.10 “Deferral” or “Deferrals” means the amount of voluntary, pre-tax Salary or Bonus payments elected to be deferred and credited to a Participant’s Account under Article III.
1.11 “Deferral Election” means the election by a Participant under this Plan to defer a portion of the Participant’s Salary or Bonus, as the case may be, pursuant to Article III.
1.12 “Disability” means any medically determinable physical or mental impairment that is expected to last for a continuous period of not less than 12 months or result in death and either (i) renders the Participant unable to engage in any substantive gainful activity or (ii) results in the Participant receiving income replacement benefits for a period of not less than three (3) months under his Employer’s long term disability plan.
1.13 “Discretionary Company Contributions” means all amounts credited to a Participant’s Account pursuant to Section 3.6.
1.14 “Distributable Event” means, with respect to some portion or all of a Participant’s Account, the first to occur of such Participant’s Scheduled Distribution, Retirement, Disability, termination of employment, or termination of the Plan as to the Participant following a Change in Control Event.
1.15 “Distribution Election” means the last election, if any, filed by a Participant prior to end of the Distribution Election Period for each Plan Year, designating the time of payment, form of payment or both the time and form of payment of some portion or all of a Participant’s vested Annual Account Balance upon the occurrence of a Distributable Event.
1.16 “Distribution Election Period” means the period ending on the last day of the Plan Year immediately prior to the Plan Year in which services subject to the Distribution Election will be performed.
1.17 “Effective Date” of the Plan, as originally adopted, means January 1, 2005; notwithstanding that the Plan first took effect on January 1, 2005, pursuant to the transitional relief from the written plan requirement under Code § 409A announced by the U.S. Treasury and Internal Revenue Service in IRS Notice 2007-86, the terms and conditions of this Plan document take effect on January 1, 2009. During the interim period between January 1, 2005, and December 31, 2008, the Plan has been operated and administered in “good faith compliance” with all applicable guidance under Code § 409A, and in accordance with the working draft of the Executive Summary to the Plan attached hereto as Exhibit 1.
1.18 “Eligible Employee” means any employee who is designated by the Retirement Plan Committee to be eligible to participate in the Plan as provided in Article II.
1.19 “Employer” means Ferguson Enterprises, Inc., and each corporation or other business organization within the controlled group of corporations and business organizations that includes Ferguson Enterprises, Inc. and which would be considered a single employer under section 414(b) or (c) of the Code, provided such entity has adopted this Plan; and where the context requires, or it is specifically provided in the Plan, Employer shall mean solely the entity that employs the referenced Participant or Participants.
1.20 “Installment Distribution” means a series of quarterly installments, as elected by the Participant pursuant to Section 5.2, paid in January, April, July and October over a five (5), ten (10) or fifteen (15) year period.
1.21 “Lump Sum Distribution” means a single sum cash payment of a balance in the Participant’s Account.
1.22 “Matching Contribution” means the amount credited to a Participant’s Account to match the Participant’s Deferrals pursuant to Article III.
1.23 “Participant” means an individual who has an Account balance in the Plan.
1.24 “Plan” means the Ferguson Enterprises, Inc. Executive Retirement Plan II, as amended from time to time.
1.25 “Plan Year” means a 12-month period beginning on January 1 and ending on the following December 31 of each year.
1.26 “Predecessor Plan” means the Ferguson Enterprises, Inc. Executive Retirement Plan as in effect prior to January 1, 2005.
1.27 “Retirement” means the termination of a Participant’s employment with their Employer for any reason other than death or Disability after the Participant’s attainment of Retirement Age.
1.28 “Retirement Age” of a Participant means the date on which the Participant shall have attained the age of fifty-five (55).
1.29 “Retirement Plan Committee” means the committee appointed from time to time by the Board to supervise the administration of the Plan and to perform the duties described in Section 8.2, and any other duties prescribed by the Board.
1.30 “Rollover Balance” means an amount previously shown on an Employer’s financial records as a Participant’s accrual (other than a Participant’s accrual under the Company’s SERP) in any nonqualified deferred compensation plan maintained by such Employer that has been transferred to this Plan or, if applicable, to the Predecessor Plan. Rollover Balances from each such nonqualified plan shall be accounted for separately, such that there is a record of the source of such balance, and a record of any vesting requirement applicable to the Rollover Balance.
1.31 “Scheduled Distribution” means a Lump Sum Distribution of all or a portion of the vested portion of a Participant’s Account balance on a specified date elected by the Participant pursuant to Article V.
1.32 “SERP” means the Ferguson Enterprises, Inc. Supplemental Retirement Plan, originally effective August 1, 1991, which, pursuant to the provisions of the Predecessor Plan, was merged into and incorporated within the Predecessor Plan.
1.33 “SERP Contributions” means (i) the unvested portion of a Participant’s Account as of December 31, 2004 in the Predecessor Plan that was transferred to this Plan and (ii) all amounts credited to a Participant’s Account after December 31, 2004 either (x) based on the Participant’s SERP Compensation pursuant to Section 3.5(a) or (y) as a discretionary contribution pursuant to Section 3.5(b).
1.34 “Specified Employee” means a Participant who, as of the date of the Participant’s separation from service, is a key employee of an Employer if any of the Employer’s stock is publicly traded on an established securities market or otherwise. Whether any stock of the Employer is publicly traded on an established securities market or otherwise shall be determined as of the date of the Eligible Employee’s separation from service.
(a) Key Employee. A Participant is a “key employee” if the Participant meets the requirements of section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding section 416(i)(5) of the Code) with respect to an Employer at any time during the 12-month period ending on a Specified Employee Identification Date. If the Participant is a key employee of a Specified Employee Identification Date, the Participant is treated as key employee for purposes of the Plan for the entire 12-month period beginning on the Specified Employee Effective Date.
(b) Specified Employee Identification Date and Effective Date. Unless another date is designated by the Retirement Plan Committee in accordance with the regulations under Code section 409A, the Specified Employee Identification Date is December 31 and the Specified Employee Effective Date is April 1. Notwithstanding the preceding sentence, the Specified Employee Effective Date may not be later than the first day of the fourth month following the Specified Employee Identification Date. The Retirement Plan Committee may designate any other date as the Specified Employee Identification Date, provided that the Employer must use the same Specified Employee Identification Date and Specified Employee Effective Date with respect to all nonqualified deferred compensation plans, and any change to the Specified Employee Identification Date or the Specified Employee Effective Date may not be effective for a period of at least 12 months.
(c)Compensation. For purposes of identifying a Specified Employee by applying the requirements for a “key employee” as described in (a) above, the definition of compensation under § 1.415(c)-2(a) of the Treasury Regulations shall be used, without regard to any safe harbor provided in § 1.415(c)-2(d), the special timing rules provided in § 1.415(c)-2(e), and the special rules provided in § 1.415(c)-2(g). Notwithstanding the foregoing, the Retirement Plan Committee may elect to use any available definition of compensation under section 415 of the Code and the regulations thereunder, including any available safe harbor and any available election under the timing rules or special rules, provided that the definition is applied consistently to all employees of the Employer for purposes of identifying Specified Employees.
(d)Nonresident alien employees. For purposes of determining whether an employee is a “key employee” as defined in (a) above, compensation that is excludible from an employee’s gross income on account of the location of the services or the identity of the employer that is not effectively connected with the conduct of a trade or business within the United States under section 1.415(c)-2(g)(5)(ii) of the Treasury Regulations shall not be compensation for purposes of paragraph (c) above. This exclusion shall apply with respect to all deferred compensation arrangements subject to Code section 409A of the Employer, and any election to include such amounts as compensation for that period may not be changed once a list of Specified Employees has become effective.
(e) Corporate Transactions. In the event of a corporate transaction, the following rules shall apply for purposes of identifying Specified Employees:
(1) Mergers and acquisitions of public service recipients. If as a result of a corporate transaction, two or more separate service recipients, more than one of which has stock outstanding that is publicly traded on an established securities market or otherwise immediately before the transaction, become one employer (as defined in section 414(b) or (c) of the Code), any stock of which is publicly traded on an established securities market or otherwise immediately after the transaction (“resulting public service recipient”), the resulting public service recipient’s next specified employee identification date and specified employee effective date following the corporate transaction are the specified employee identification date and specified employee effective date that the acquiring service recipient (as defined in section 1.409A-1(i)(6)(i) of the regulations) would have been required to use absent such transaction.
For the period between the date of the transaction and the next specified employee effective date, the list of specified employees of the resulting public service recipient is determined by combining the lists of specified employees of all service recipients participating in the transaction that were in effect at the date of the corporate transaction, ranking such specified employees in order of the amount of compensation as defined in paragraph (d) above, and treating the top fifty (50) of such specified employees, plus any employees described in section 416(i)(1)(ii) or section 416(i)(1)(iii) and the regulations thereunder who are not included in such top fifty specified employees, as the specified employees for the period between the corporate transaction and the next specified employee effective date. Alternatively, the resulting service recipient may elect to use any reasonable method to determine the specified employees of the resulting service recipient, provided that such method is adopted no later than 90 days after the corporate transaction and applied prospectively from the date the method is adopted.
(2)Mergers and acquisitions of nonpublic service recipients. If as part of a corporate transaction a service recipient that does not have outstanding stock that is publicly traded on an established securities market or otherwise immediately
before the transaction (“initial private service recipient”), and a service recipient with stock outstanding that is publicly traded on an established securities market or otherwise immediately before the transaction (“initial public service recipient”), become a resulting public service recipient, the resulting public service recipient’s next specified employee identification date and specified employee effective date following the corporate transaction are the specified employee identification date and specified employee effective date that the initial public service recipient would have been required to use absent such transaction.
For the period after the date of the corporate transaction and before the next specified employee effective date, the specified employees of the initial public service recipient immediately before the transaction continue to be the specified employees of the resulting public service recipient, and no service providers of the initial private service recipient are required to be treated as specified employees.
(3)Spinoffs. If as part of a corporate transaction, an initial public service recipient becomes two or more separate service recipients, each with stock outstanding that is publicly traded on an established securities market or otherwise immediately after the transaction (“post-transaction public service recipients”), the next specified employee identification date of each of the post-transaction public service recipients is the specified employee identification date that the initial public service recipient would have been required to use absent such transaction. For the period after the date of the corporate transaction and before the next specified employee effective date, the specified employees of the initial public service recipient immediately before the transaction continue to be the specified employees of the post-transaction public service recipients.
(4) Public offerings and other corporate transactions. If as part of an initial public offering or corporate transaction not described in subparagraph (2) or (3) above, an initial private service recipient becomes one or more post-transaction public service recipients, then each post-transaction public service recipient has a specified employee identification date of December 31 and a specified employee effective date of April 1, effective retroactively to the December 31 and April 1 next preceding the offering or other transaction for purposes of identifying the specified employees between the corporation transaction and the next December 31.
Alternatively, a post-transaction public service recipient may elect a specified employee identification date and specified employee effective date on or before the date of the offering or other transaction. If a public service recipient makes such an election, for the period after the offering or other transaction and before the next specified employee effective date, the specified employees of the post-transaction public service recipient consist of the service providers that at the time of the offering or other transaction would have been classified as specified employees of the initial private service recipient, had the initial private service recipient elected the same specified employee identification date and specified employee effective date as selected by the post-transaction public service recipient, and had such initial private service recipient had stock publicly traded on an established securities market or otherwise as of the specified employee identification date preceding the transaction.
1.35 “Subsequent Distribution Election” means a revised distribution election filed by a Participant after the expiration of the Distribution Election Period, in accordance with Section 5.3(b).
1.36 “Transitional Year Distribution Election” means one or more transitional distribution elections filed by a Participant before December 31, 2008, in accordance with IRS guidance on transitional distribution elections, as described in Section 5.3(c).
1.37 “Vesting Date” means (a) with respect to a Participant’s SERP Contributions, the date upon which such contributions are no longer subject to forfeiture pursuant to the provisions of Section 3.5(c) (i.e., the Participant’s SERP Contributions vest), which date shall be the first to occur of the date (i) of any Change in Control Event related to the Participant’s Employer; (ii) a Participant dies or becomes Disabled while employed by an Employer; (iii) a Participant attains the age of fifty-five (55) and completes twenty (20) Years of Service; (iv) a Participant attains the age of fifty-nine and one-half (59’/2) and completes fifteen (15) Years of Service, or (v) the Plan is terminated as provided hereunder; and (b) with respect to a Participant’s unvested Rollover Balance, the date, in accordance with the original vesting schedule applicable to such balance, or the date designated by the Participant’s Employer, if sooner than the original vesting date, such Rollover Balance vests and becomes nonforfeitable.
1.38 “Years of Service” means the number of 12-month periods of continuous employment with the Participant’s Employer (or, if more than one, Employers) completed by the Participant between the Participant’s date of hire and date of termination of employment, calculated with reference to the Participant’s original date of hire by an Employer and anniversaries thereof.
1.39 “401(k) Plan” means the Wolseley North America 401(k) Plan (formerly known as the Ferguson Enterprises, Inc. Retirement Savings Plan), as amended from time to time, or any successor thereto.
ARTICLE II
ELIGIBILITY
2.1 Eligibility. The Retirement Plan Committee shall designate the employees who are eligible to participate in the Plan from among those employees of an Employer who satisfy the requirements of the following guidelines (“Eligible Employees”):
(a)Plan Years 2005 and 2006. For Plan Years ending prior to January 1, 2007, those employees who either (i) had Compensation in excess of Qualified Plan Compensation for the prior fiscal year or (ii) were key members of the management group of an Employer, as designated by the Retirement Plan Committee.
(b)Plan Year 2007 and Thereafter. Effective as of January 1, 2007, a select group of management and highly compensated employees of an Employer who both (i) received Compensation in excess of $175,000 for the prior fiscal year, or such higher amount as is established by the Retirement Plan Committee from time to time, and (ii) are employed in positions designated by the Retirement Plan Committee as eligible to participate in the Plan.
The participation rights of Eligible Employees (e.g., SERP Contributions only, or Deferral only, or full participation rights) may vary from eligible position to eligible position, according to classifications established by the Retirement Plan Committee, in its sole discretion. Once designated by the Retirement Plan Committee as an Eligible Employee, such employee shall remain an Eligible Employee until the Plan Year when the Retirement Plan Committee affirmatively revokes the employee’s designation as an Eligible Employee.
Each Eligible Employee shall commence participation in the Plan in accordance with Section 3.2.
ARTICLE III
CONTRIBUTIONS TO ACCOUNTS
3.1 Accounts. Each Employer shall create a special account on its books and financial records (the “Account”) for the purpose of crediting deferred compensation to each Participant under this Plan. The Account of each Participant shall track the total amount of the initial account balance determined under Section 3.2, Deferrals, Matching Contributions, Rollover Balances, SERP Contributions or Discretionary Company Contributions to such Account for each Plan Year, plus earnings thereon. All amounts credited to each Participant’s Account are credited solely for purposes of accounting and computations and shall remain the assets of the Employer subject to the claims of the Employer’s general creditors.
3.2 Initial Account Balance. The Account of each Participant shall be credited with any amounts that were credited, but unvested, under the account of the Participant (e.g., SERP Contributions) in the Predecessor Plan as of December 31, 2004, as well as with any Rollover Balances. The original source of each portion of the initial Account balance shall be tracked for recordkeeping purposes.
3.3 Deferrals.
(a)In General. Each Employer shall credit the Account of each Participant with Deferrals for each Plan Year for which the Retirement Plan Committee has received a valid Deferral Election from the Participant pursuant to subsections 3.3(b) and 3.3(c).
(b)Election Procedures. A Deferral Election must be filed by an Eligible Employee with respect to every Plan Year in which the Eligible Employee wishes to participate in the pre-tax compensation deferral feature of the Plan. Each Eligible Employee shall irrevocably elect the amount of the Eligible Employee’s Compensation to defer for such Plan Year. The Deferral Election may be made, effective as of the first day of a Plan Year, by filing a completed and fully executed Deferral Election, on forms provided for this purpose, with the Retirement Plan Committee during enrollment periods established by the Retirement Plan Committee, but in no event later than the end of the Distribution Election Period for the applicable Plan Year. Notwithstanding the preceding sentence, an employee who, for the first time, becomes an Eligible Employee during a Plan Year, may within thirty (30) days after the Eligible Employee becomes eligible to participate in the Plan file a Deferral Election for the balance of such Plan Year. With respect to any employee who is designated as an Eligible
Employee after the commencement of a Plan Year, the Deferral Election shall only pertain to Compensation earned and payable after the date a fully completed and executed Deferral Election is filed with the Retirement Plan Committee.
(c) Restrictions on Deferrals. Eligible Employees may make a Deferral Election with respect to either Salary and/or Bonus amounts earned and payable during the following Plan Year.
(i)A Deferral Election related to Salary shall be made as a specific dollar amount of such Salary. The maximum amount that may be deferred is one hundred percent (100%) of Compensation available after deductions for § 125 plan contributions and deferrals under the Employer’s 401(k) plan and deferrals under any other non-qualified plan sponsored by the Employer. There is no minimum amount of Salary that can be deferred.
(ii)A Deferral Election related to Bonus shall be either a specific dollar amount or a fixed percentage of such Bonus. In the event the Eligible Employee’s Bonus for the year concerned is less than the dollar amount specified, the entire amount of such Bonus shall be deferred under the Plan.
(iii)For Compensation that is earned based upon a specified performance period (for example, an annual Bonus), where the Deferral Election is made in the first year of eligibility but after the beginning of the performance period, the Deferral Election shall apply only to the portion of the Compensation equal to the total amount of the Compensation for the performance period multiplied by the ratio of the number of days remaining in the performance period after the Deferral Election over the total number of days in the performance period.
(d) Termination of Deferral Election. An Eligible Employee’s Deferral Election shall terminate automatically upon the first to occur of (i) the Eligible Employee’s termination of employment with an Employer or (ii) the termination of the Eligible Employee’s status as an Eligible Employee under Article II. Notwithstanding the forgoing, any Compensation otherwise payable to the Eligible Employee for services rendered in the Plan Year in which such termination occurs, including any Bonus paid following termination of the Eligible Employee’s employment, shall remain subject to any Deferral Election in effect for such Plan Year.
(e) Effect of Revocation of Eligible Employee Status. In the event that the Retirement Plan Committee revokes an employee’s status as a Eligible Employee under Article II, such Eligible Employee may not be reclassified as a Eligible Employee unless the employee has not been eligible to make Deferrals under this Section 3.3 for a period of twenty-four (24) months ending on the date the employee again becomes a Eligible Employee.
3.4 Matching Contributions. In addition to each Eligible Employee’s Deferrals, the Employer shall credit Eligible Employee’s Account with a Matching Contribution equal to fifty percent (50%) of the Eligible Employee’s Deferrals for the Plan Year; provided, however, that the amount credited to each Participant as a Matching Contribution shall not exceed two and one-half percent (2.5%) of the Eligible Employee’s Qualified Plan Compensation. Matching Contributions shall be credited to Eligible Employees’ Accounts on the last day of each month.
3.5 SERP Contributions.
(a)SERP Compensation Mandatory Contribution. The Employer shall credit to the Eligible Employee’s Account in January of each Plan Year an amount equal to three and one-half percent (3.5%) of such Eligible Employee’s SERP Compensation, if any, for the preceding Plan Year.
(b)SERP Discretionary Contribution. In addition to the amount credited to Participants’ Accounts under Section 3.5(a) above, an Employer’s board of directors may irrevocably declare, in writing, an additional amount, or formula for determining an additional amount, to be credited by the Employer to the Account of any Participant under this Plan for a Plan Year. In making its determinations hereunder, the Employer’s board of directors shall not be bound by the amount or formula declared for any previous Plan Year, but shall have full discretion to declare a higher or lower amount than that specified previously, and shall have discretion to establish varying amounts for different classes of, or for particular, Participants. Once the amount or formula for determining the amount to be credited to each Participant’s Account has been declared for a Plan Year, however, the Employer’s board of directors may not subsequently revoke or reduce such credits for any reason.
(c) Forfeiture of SERP Balances. All SERP Contributions credited to a Participant’s Account, together with earnings thereon, shall be forfeited if the Participant terminates employment with the Participant’s Employer for any reason prior to the Vesting Date.
3.6 Discretionary Company Contributions. In addition to the amount credited to Participants’ Accounts under Sections 3.4 and 3.5 above, an Employer’s board of directors may irrevocably declare, in writing, an additional vested amount, or formula for determining an additional vested amount, to be credited by the Employer to the Account of any Participant under this Plan for a Plan Year. In making its determinations hereunder, the Employer’s board of directors shall not be bound by the amount or formula declared for any previous Plan Year, but shall have full discretion to declare a higher or lower amount than that specified previously, and shall have discretion to establish varying amounts for different classes of, or for particular, Participants. Once the amount or formula for determining the vested amount to be credited to each Participant’s Account has been declared for a Plan Year, however, the Employer’s board of directors may not subsequently revoke or reduce such credits for any reason.
3.7 Rollover Balance. An Employer may request to transfer (and the Company may, at its sole discretion, agree to transfer) amounts from another nonqualified deferred compensation plan maintained by an Employer into this Plan as a Rollover Balance. Any such Rollover Balance that is credited to a Participant’s Account shall retain any vesting schedule to which the amount was subject under the originating nonqualified deferred compensation plan, and upon the effective date of the transfer to this Plan, such Rollover Balances shall accrue earnings in accordance with Section 4.2. All Rollover Balances credited to a Participant’s Account, together with earnings thereon, shall be forfeited if the Participant terminates employment with an Employer prior to the Vesting Date. The distribution provisions of Article V apply to all Rollover Balances, including the requirement for the Participant to timely file a Subsequent Distribution Election under Section 5.3(b), if the Participant elects any change in the time or form of payment of a Rollover Balance upon the occurrence of a Distributable Event, from the original time or form of payment applicable to such Rollover Balance under the transferring plan.
ARTICLE IV
ADJUSTMENTS TO ACCOUNTS FOR EARNINGS
4.1 Adjustments to Accounts. Deferrals, Matching Contribution, Discretionary
Company Contributions and vested Rollover Balances credited to Participant’s Account shall be credited with the applicable Declared Investment Rates described in Section 4.2 until all vested amounts credited to the Account have been distributed to the Participant or the Participant’s Beneficiary.
Prior to the Participant’s Vesting Date, SERP Contributions and unvested Rollover Balances credited to the Participant’s Accounts shall be credited with earnings at the Declared Investment Rate equal to the then current rate for the “stable value fund” contained in the 401(k) Plan (or if such fund does not exist, a comparable rate established by the Retirement Plan Committee).
Effective as soon as administratively practicable on or after the first day of the calendar quarter beginning after the Participant’s Vesting Date, the full amount of such Participant’s SERP Contributions shall be deemed a vested Discretionary Company Contribution and shall be credited to the Participant’s Annual Account Balance in the Plan Year which contains the Participant’s Vesting Date and thereafter, shall be credited with the applicable Declared Investment Rates described in subsection 4.2(a).
4.2 Allocation Election. Participant’s Account shall be credited each day that the
financial markets in the United States are open with the applicable Declared Investment Rates as follows:
(a) A Participant may elect to have the vested portion of the Participant’s
Account credited with any combination of Declared Investment Rates in five percent (5%) increments, provided the total does not exceed one hundred percent, by filing an election with the Retirement Plan Committee (an “Allocations Election”). The vested portion of the Participant’s Account will be credited with a rate of return (positive or negative) for the Declared Investment Rates which the Participant elects based upon the notional gain or loss that would have been generated if the Account balance had been invested in the investment funds elected by the Participant, less fund management and administrative charges, if any, as determined by the Retirement Plan Committee.
(b)A Participant may change the Participant’s Allocations Election as of any business day that the U.S. financial markets are open, pursuant to the procedures established by the Retirement Plan Committee. Unless the Participant indicates otherwise, any such new Allocations Election shall apply to all of the vested portion of the Participant’s Account; provided, however, a Participant may elect to have an Allocations Election in effect for all amounts contributed to the Plan before a specified date and a second Allocations Election applicable to all amounts contributed to the Plan on and after such specified date.
(c)Participant’s Account balances are subject to investment risk as the actual performance of the investment fund that is chosen to measure the Declared Investment Rate may be either positive or negative. Even though the actual performance of the investment fund that is chosen to measure the Declared Investment Rate will determine the rate of return (positive or negative) on the Participant’s Account, the Employer is not required to invest Participant’s Account balances in the investment funds selected by the Participants, and may elect to invest in other investment funds or may elect not invest the funds.
4.3 Charges Against Accounts. There shall be charged against each Participant’s Account any payments made to the Participant or the Participant’s Beneficiary in accordance with Article V.
4.4 Statement of Account Balances. The Retirement Plan Committee shall submit to each Participant, within sixty (60) days after the close of each calendar quarter of a Plan Year, or as soon thereafter as administratively practicable, a statement of the balance in each such Participant’s Account in such form as the Retirement Plan Committee deems appropriate.
ARTICLE V
BENEFITS
5.1 Distributable Event. All or a portion of the vested portion of a Participant’s Account balance shall be paid or shall commence to be paid to the Participant, in the form of payment selected by the Participant in the Participant’s Distribution Election or Subsequent Distribution Election, as applicable, upon the occurrence of one or more “Distributable Events,” as defined below. The phrase “Distributable Event,” for purposes of this Plan, shall mean, with respect to some portion or all of the Participant’s Account, the first to occur of the following events:
(a)Retirement;
(b)Disability;
(c)termination of the Participant’s employment for any reason other than Retirement, Disability or death;
(d)Scheduled Distribution(s) pursuant to Section 5.5; or
(e)termination of the Plan, as to the Participant, on account of a Change in Control Event, pursuant to Section 5.7
5.2 Forms of Payment. The forms of payment available under the Plan are (a) a Lump Sum Distribution, (b) twenty (20) substantially equal quarterly installments over a period of five (5) years, (c) forty (40) substantially equal quarterly installments over a period of ten (10) years or (d) sixty (60) substantially equal quarterly installments over a period of fifteen (15) years, or any combination thereof. All payments shall begin as soon as administratively practicable on or after the first day of the calendar quarter beginning after the date of the Distributable Event; provided, however, if applicable, payment of the Participant’s Annual Account Balance for the Plan Year in which a Distributable Event occurs, other than a Scheduled Distribution, shall be delayed until the Participant’s final Deferral, if any, is made in accordance with Section 3.3(d) and thereafter, payment of such portion of the Participant’s Account Balance shall commence as soon as administratively practicable, on or after the first day of the calendar quarter beginning after the date of the Participant’s final Deferral.
If a Participant elects to receive all or any part of the vested portion of the Participant’s Account balance in installments, the amount to be paid each January, April, July and October during the installment period shall be the then value of the vested portion of the Participant’s Account balance to be paid in said installments, divided by the number of installment payments then remaining.
5.3 Distribution Election Procedure.
(a)Initial Distribution Election. Each Participant may file during the
Distribution Election Period a Distribution Election specifying the form or forms of payment pursuant to which all or any vested portion of the Participant’s Account shall be paid upon the occurrence of a Distributable Event. In the event a Participant fails to file a Distribution Election with respect to a Distributable Event, the portion of the Participant’s Account which becomes payable as a result of such Distributable Event shall be paid to the Participant in a Lump Sum Distribution. A Participant’s Distribution Election, once filed, may be superseded by a Subsequent Distribution Election meeting the requirements of Section 5.3(b) below.
(b)Subsequent Distribution Election. Once filed, a Participant’s initial
Distribution Election with respect to a Distributable Event may only be changed by a distribution election filed after the end of the Distribution Election Period if the subsequent distribution election:
(i)is made at least twelve (12) months prior to the date of the Distributable Event,
(ii)will not take effect until at least twelve (12) months after the date of the subsequent distribution election, and
(iii)postpones the date of the payment with respect to which the earlier Distribution Election was made for a period of not less than five (5) years from the date such payment would otherwise have been made; provided, however, that this clause (iii) calling for a 5 year delay in payment does not apply to a subsequent distribution election with respect to the death, Disability or Unforeseeable Financial Hardship of the Participant. A subsequent distribution election meeting all requirements of this Section 5.3(b) is referred to as a “Subsequent Distribution Election.”
(c) Transitional Year Distribution Elections. Notwithstanding anything hereinabove to the contrary, prior to January 1, 2009, a Participant who is actively employed by an Employer may change his Distribution Election in accordance with the Code § 409A transitional relief guidance issued by the Internal Revenue Service in IRS Notice 2006-79 with respect to transitional distribution elections made on or before December 31, 2007, and IRS Notice 2007-86, with respect to transitional distribution elections made on or before December 31, 2008.
5.4 Unforeseeable Financial Emergency.
(a)In the event that the Retirement Plan Committee determines, in its sole discretion, upon written petition of the Participant or Beneficiary, with such additional supporting documentation as the Retirement Plan Committee may require, that the Participant or Beneficiary has suffered an “unforeseeable financial emergency,” as defined below, the Employer shall pay to the Participant or Beneficiary, as soon as practicable following such determination, the amount reasonably necessary to satisfy the financial emergency (which may include amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution) not in excess of vested portion of the Participant’s Account balance.
(b)Whether a Participant or Beneficiary is faced with an unforeseeable financial emergency permitting a distribution under this Section is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of unforeseeable financial emergency may not be made to the extent that such financial emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under this Plan.
(c)For purposes of this Section, an “unforeseeable financial emergency” means a severe financial hardship of the Participant or the Participant’s Beneficiary resulting from an illness or accident of the Participant or Beneficiary, the Participant’s or Beneficiary’s spouse, or the Participant’s or Beneficiary’s dependent (as defined in section 152(a) of the Code); loss of the Participant’s or Beneficiary’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise adequately covered by insurance); or other
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or Beneficiary
(d)The Participant’s Account balance shall be reduced by the amount paid to the Participant on account of such unforeseeable financial emergency and the Participant’s Deferral Election shall be cancelled. Any subsequent Deferral Election shall not take effect until the Plan Year following the Plan Year in which the distribution under this Section 5.4 occurs.
5.5 Scheduled Distributions.
(a)In General. A Participant may, when filing the Participant’s Deferral Election, elect to receive one or more Lump Sum Distributions while employed of all or a specified portion or percentage of the vested amounts credited to the Participant’s Annual Account Balance to which such Deferral Election relates.
(b)Timing and Form of Scheduled Distribution. The Participant may elect to receive a Scheduled Distribution during any Plan Year beginning with the third Plan Year following the Plan Year to which the Participant’s Deferral Election applies. Participants may elect to receive up to four (4) annual Scheduled Distributions from each Annual Account Balance during consecutive calendar years; provided, however, multiple Scheduled Distributions from the same Annual Account Balance must be identical in amount or percentage. Participants may elect to receive Scheduled Distributions from different Annual Account Balances on the same date or dates. A Participant will receive the Participant’s Scheduled Distribution(s) in a Lump Sum Distribution in January of the Plan Year specified in the Participant’s Deferral Election.
(c)Election Preserved Upon Prior Occurrence of Distributable Event. If a intervening Distributable Event occurs with respect to a Participant prior to the date selected by the Participant for the Participant’s Scheduled Distribution(s), the election to receive the Scheduled Distribution(s) shall not be voided but shall be preserved and honored to the extent compatible with the form of payout selected by the Participant to take effect upon such intervening Distributable Event, to the extent of the available balance in the Participant’s applicable Annual Account Balance(s).
5.6 Death Benefits. Notwithstanding the form of payment elected by a Participant with respect to a Distributable Event, in the event of the death of the Participant, whether prior to or after the occurrence of the Distributable Event, the Employer shall pay all remaining vested amounts credited to the Participant’s Account to the Beneficiary or Beneficiaries in the form designated by the Participant pursuant to Article VI.
5.7 Termination of Plan Following Change in Control of Employer. The board of directors of any Employer which has experienced a Change in Control Event may determine, at its sole discretion, to terminate the Plan as to the Participants employed by such Employer, provided that if it chooses to do so, all substantially similar arrangements sponsored by the Employer experiencing the Change of Control Event must also be terminated. Such Employer’s board of directors’ determination to terminate the Plan as to its Participants shall be made no earlier than 30 days prior to the Change in Control Event and no later than 12 months after the Change in Control Event, and the termination shall be effective no earlier than the effective date of the Change in Control Event and no later than 12 months following the Change in Control Event. Upon termination of the Plan as to such Participants under this provision, each affected Participant will receive the full amount credited to such Participant’s Account in the form of payment designated by the Participant’s Distribution Election with respect to a Change of Control Event, as soon as administratively practicable on or after the first day of the calendar quarter beginning after the date of Plan termination, as established by the board of directors of such Employer.
5.8 Acceleration of Payments. Except as otherwise provided, the acceleration of the time or schedule of any payment or amount scheduled to be paid under the Plan is not permitted.
5.9 Small Benefit. Notwithstanding anything herein to the contrary, in the event the total vested amount owed to a Participant or a Beneficiary under this Plan and any other nonqualified deferred compensation arrangement (as defined in Treasury Regulation section 1.409A-1(c)) of the Employer after the Participant ceases to be an Eligible Employee or at the time of any Distributive Event is less than $15,500 (or such amount as equals the current year adjusted amount under Code § 402(g)(1)(B)), the Employer may elect, in its sole discretion, to distribute such total vested amount to the Participant or Beneficiary in a Lump Sum Distribution payment as soon as administratively practicable on or after the first day of the calendar quarter beginning after (i) the date the Participant ceases to be an Eligible Employee hereunder, or (ii) the date of the first Distributable Event applicable to the Participant, whichever first occurs.
5.10 Withholding; Payroll Taxes. To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder the minimum taxes required to be withheld by the federal or any state or local government. As to any payroll tax that is due from a Participant for Compensation deferred under this Plan, the Employer shall collect such tax from funds paid to such Participant with respect to other compensation not deferred under the Plan unless said other compensation is insufficient to pay such payroll taxes whereupon the shortfall shall serve to reduce the elected Deferral amount.
5.11 Payments upon Income Inclusion under Code Section 409A. Notwithstanding anything herein to the contrary, in the event that this Plan fails to meet the requirements of section 409A of the Code and regulations thereunder, payment of benefits under the Plan shall be made in a Lump Sum Distribution in an amount not in excess of the amount required to be included in income as a result of the failure to comply with the requirements of section 409A and the regulations, together with any income, payroll or excise taxes owed on such amounts.
5.12 Distributions to Specified Employees. In the case of a Participant who is a Specified Employee, payments shall be made not before the date which is six months after the date of such Participant’s separation from service with the Employer (or, if earlier, the date of death of the Specified Employee) as follows (i) if such Participant elected to receive all or any vested portion of the Participant’s Account balance in installments, the amount to be paid in each January, April, July and October during the installment period shall be the then value of the vested portion of the Participant’s Account balance divided by the number of installment payments then remaining with the installment period with payment commencing as soon as administratively practicable in the first month of the first calendar quarter following the elapse of the six-month period and (ii) if such Participant elected to receive a Lump Sum Distribution in cash, payment shall commence as soon as administratively practicable on or after the first day of the first calendar quarter following the elapse of the six-month period.
5.13 Qualified Domestic Relations Orders. Notwithstanding the provisions of Section 5.8, in the case of any domestic relations order received by the Retirement Plan Committee, the Retirement Plan Committee shall (i) notify the Participant and any alternate payee named in such order of the Retirement Plan Committee’s receipt of such order and the Plan’s procedures for determining its status as a “qualified domestic relations order,” as defined by Code § 414(p); (ii) permit any such alternate payee to designate a representative for receipt of copies of notices sent to the alternate payee with respect to such order; (iii) within a reasonable time after receipt,
determine whether such order is a qualified domestic relations order; and (iv) notify the Participant and each alternate payee of such determination. The Retirement Plan Committee shall provide for the payment of a Participant’s benefits under the Plan to such alternate payee in accordance with the terms and requirements of an order which the Retirement Plan Committee determines to be a qualified domestic relations order, provided, however, that the alternate payee designated in such order shall not receive any type, form, or optional benefit not otherwise provided under the Plan, nor shall the Plan provide any increased (determined on the basis of actuarial value) or accelerated benefits to the Participant by virtue of such order. During any period in which the issue of whether a domestic relations order is “qualified” pursuant to Code § 414(p) is being determined, the Retirement Plan Committee shall segregate in a separate account the amounts which would have been payable to the alternate payee during such period if the order had been qualified on the date of its receipt. If within eighteen (18) months from such date, the order is determined to be: (i) qualified, the Retirement Plan Committee shall pay the segregated amounts (plus interest) to the person(s) entitled thereto; or (ii) not qualified, or the issue as to its qualification is still unresolved at the end of 18 months, the Retirement Plan Committee shall pay the segregated amounts (plus interest) to the Participant or Beneficiary who would have been entitled to such amounts if there had been no order. Any determination that an order is qualified which is made after the close of the eighteen (18) month period referred to above shall be applied prospectively only. An arrangement may permit such acceleration of the time or schedule of a payment under the arrangement to an individual other than the service provider as may be necessary to fulfill a domestic relations order (as defined in section 414(p)(1)(B)).
ARTICLE VI
BENEFICIARY DESIGNATION
Each Participant shall have the right, to designate any person or persons as Beneficiary or Beneficiaries to whom payment under this Plan shall be made and the form of such payment (either Lump Sum Distribution or forty (40) substantially equal quarterly installments over a period of ten (10) years) in the event of the Participant’s death prior to complete distribution of the vested portion of the Participant’s Account balance. Each Beneficiary designation shall become effective only when filed in a notarized writing with the Retirement Plan Committee on a form prescribed by the Retirement Plan Committee.
Participant’s Beneficiary designation under the Predecessor Plan, if any, shall apply to the Participant’s Account balance in this Plan, unless the Participant files a new Beneficiary designation in accordance with the procedures outlined herein; in which case, the Participant’s new Beneficiary designation shall apply to the Participant’s account balances in both the Predecessor Plan and this Plan.
A Participant may change the person or persons designated as his Beneficiary at any time, and a new Beneficiary designation form that is properly filed shall, upon receipt by the Retirement Plan Committee, cancel all Beneficiary designations previously filed by the Participant; provided, however, that a Participant’s form of payment election in the event of death shall remain in effect until superseded by a Subsequent Distribution Election filed in accordance with the procedures of Section 5.3(b).
If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Retirement Plan Committee shall direct the distribution of such benefits to the Participant’s estate.
The Participant may designate one or more Primary and Contingent Beneficiary(ies), and the form of payment applicable to each. If more than one Primary Beneficiary is designated, each Primary Beneficiary shall receive the percentage of the Participant’s vested Account balance specified on the Participant’s Beneficiary designation form or, if no such percentage is specified, each Primary Beneficiary shall share equally in the vested Account balance. In the event one or more Primary Beneficiaries predecease the Participant, the Participant’s vested Account balance will be paid to such Primary Beneficiaries as survive the Participant in proportion to their relative percentage shares. If any Beneficiary who is receiving installment payments dies prior to receipt
of all such payments, the remaining amounts will be paid to the estate of such Beneficiary in a Lump Sum Distribution. If the Participant fails to designate a form of payment for a Beneficiary, such undesignated amount shall be paid in a Lump Sum Distribution.
Contingent Beneficiaries will receive payments from the Plan only if no Primary Beneficiaries survive the Participant. If more than one Contingent Beneficiary is designated, the rules for dividing the Participant’s vested Account balance are the same as those set forth above for Primary Beneficiaries.
The Employer shall pay or begin to pay the vested portion of the Participant’s Account balance to the proper Beneficiary(ies), as per the above rules and the Participant’s Beneficiary designation form, in the form selected by the Participant, as soon as administratively practicable on or after the first day of the calendar quarter following the Retirement Plan Committee’s receipt of satisfactory certification of the death of the Participant.
ARTICLE VII
FUNDING
All Participants and Beneficiaries shall have the status of general unsecured creditors of the Employer. The Plan constitutes a mere promise by the Participant’s Employer to pay the vested portion of the Participants’ Account balance in the future. Consequently, no Employer shall have any obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Plan. All Participants and Beneficiaries shall be and remain general creditors of the Employer in the same manner as any other creditor having a general claim for matured and unpaid compensation. The Participant, the Participant’s Beneficiary, or any other person claiming through the Participant, shall only have the contractual right to receive from the Employer the benefits specified in this Plan. The Employer’s obligation to pay the Participant the vested portion of the Participant’s Account balance shall be offset by any amounts paid from any Trust established by the Employer to facilitate the payment of benefits to the Participant or the Participant’s Beneficiaries.
The Employer reserves the absolute right at its sole discretion either to set aside funds to assist in fulfilling the obligations undertaken by this Plan or to refrain from so setting aside funds and to determine the extent, nature, and method of so setting aside funds. Should the Employer elect to make contributions to a Trust, through the purchase of life insurance, mutual funds, stocks, bonds, disability policies, annuities, or other properties, and the contribution of such properties to such Trust, the Employer reserves the absolute right, in its sole discretion, to terminate such contributions at any time, in whole or in part; provided, however, that no such termination of contributions to a Trust shall entitle the Employer to any reversion of assets from such Trust, other than in accordance with the terms and conditions of such Trust.
Notwithstanding anything hereinabove to the contrary, upon a Change in Control Event of an Employer, such Employer shall, as soon as possible, but in no event later than thirty (30) days following the Change in Control Event, make an irrevocable contribution to the Trust in an amount equal to the full amount credited to Accounts of such Employer’s Participants as of the day before the date on which the Change in Control Event occurred.
At no time shall any Participant be deemed to have any lien, right, title or interest in or to any specific investment of such Trust, if one exists, or to any assets of the Employer. No term or condition of this Plan shall be construed to create a fiduciary relationship between the Company,
any Employer, the Retirement Plan Committee, and any Participant or Beneficiary.
Each Employer shall be responsible for the payment of benefits to its Participants hereunder and shall share in the payment of such benefits (and may make contributions to any Trust established in connection with the Plan) in the proportion that the liabilities of such Employer’s Participants bear to the liabilities of all Participants under this Plan.
ARTICLE VIII
ADMINISTRATION OF PLAN
8.1 Plan Administrator. The administration of the Plan shall be under the supervision of the Retirement Plan Committee. The Retirement Plan Committee shall consist of three or more individuals appointed by and serving at the pleasure of the Board. The duties of the Retirement Plan Committee shall be to designate Eligible Employees and to select the investment funds from which are determined the Declared Investment Rates to be offered to Participants for the purpose of making their Allocation Election.
It shall be a principal duty of the Retirement Plan Committee to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination among them. The Retirement Plan Committee will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Retirement Plan Committee’s powers will include, but will not be limited to, the following authority, in addition to all other powers provided by this Plan:
(a)To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;
(b)To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan;
(c)To decide all questions concerning the Plan (other than the eligibility of any person to participate in the Plan);
(d)To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan; and
(e)To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocation, delegation or designation to be in writing.
8.2 Examination of Records. The Retirement Plan Committee will make available to each Participant such of the Participant’s records under the Plan as pertain to the Participant, for examination at reasonable times during normal business hours.
8.3 Reliance on Reports and Certificates. In administering the Plan, the Retirement Plan Committee will be entitled to the extent permitted by law to rely conclusively upon any information furnished by any Employer, Participant, Beneficiary, accountant, controller, attorney, actuary, consultant or other advisor, and any agent of the foregoing, as the case may be.
8.4 Action by the Retirement Plan Committee.
(a)Any action of the Retirement Plan Committee shall be taken only upon the vote or the affirmative expression of a majority of the Retirement Plan Committee members qualified to vote with respect to such action. If the members of the Retirement Plan Committee qualified to vote on any question are unable to determine such question by a majority vote or other affirmative expressions, the question shall be determined by the Board.
(b)Action of the Retirement Plan Committee may be taken without a meeting of the Retirement Plan Committee members; provided, however, that any action without a meeting shall be taken only upon the unanimous vote or affirmative expression of all the Retirement Plan Committee members qualified to vote with respect to such action; such action must be evidenced by written documentation thereafter.
(c)If a member of the Retirement Plan Committee is a Participant, he shall not participate in any decision which solely affects his own Accounts.
(d)The Retirement Plan Committee shall, for purposes of administering the Plan, choose a secretary who shall keep minutes of the Retirement Plan Committee’s proceedings and all records and documents pertaining to the administration of the Plan. The secretary may execute any certificate or any other written direction on behalf of the Retirement Plan Committee on all persons claiming benefits under the Plan.
8.5 Nondiscriminatory Exercise of Authority. Whenever, in the administration of the Plan, any discretionary action by the Retirement Plan Committee is required, the Retirement Plan Committee shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment.
8.6 Indemnification of Retirement Plan Committee. The Company agrees to indemnify and to defend to the fullest extent permitted by law any employee serving as a member of the Retirement Plan Committee (including any employee or former employee who formerly served as a member of the Retirement Plan Committee) against all liabilities, damages, costs and expenses (including attorneys’ fees amounts paid in settlement of any claim approved by the Company) occasioned by any act or omission to act in connection with the Plan, except such liability or expense as may result from the employee’s own willful misconduct or gross negligence. No member of the Retirement Plan Committee hereunder shall be liable for any act or omission of another member of the Retirement Plan Committee, except such liability as may result from his own willful misconduct or gross negligence.
8.7 Compensation. The members of the Retirement Plan Committee shall serve without bond and without compensation for their services as such. The expenses of the Retirement Plan Committee properly incurred in the performance of its duties under the Plan shall be paid by the Company
ARTICLE IX
MISCELLANEOUS
9.1 Alienability and Assignment Prohibition. Except as provided in Sections 5.10 and
5.13, a Participant’s or Beneficiary’s right to benefit payments under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiaries.
9.2 Binding Obligation of Employer and Any Successor in Interest. Each Employer
expressly agrees that it shall not merge or consolidate into or with another corporation or sell substantially all of its assets to another corporation, firm or person until such corporation, firm or person expressly agrees, in writing, to assume and discharge the duties and obligations of such Employer under this Plan.
9.3 Amendment or Termination.
(a) The Company expects the Plan to be permanent but, since future conditions affecting the Company cannot be anticipated or foreseen, the Company must necessarily and does hereby reserve the right to amend, modify or terminate the Plan at any time and for any reason (including a change or impending change in the tax laws of the United States or any state) by resolution of the Board. All amendments shall be stated in a written instrument signed by an officer on behalf of the Company. No amendment or termination of the Plan shall have the effect of (i) canceling or reducing in any way the amounts, whether vested or unvested, previously credited to any Participant’s Account, including deemed earnings thereon or (ii) amending the Matching Contribution provided in Section 3.4 with respect to an Eligible Employee’s Deferrals during the Plan Year in which such amendment is made. Termination of the Plan by the Company, other than as a result of a Change in Control (see Section 5.7), may only occur if (i) all substantially similar arrangements sponsored by all Employers which have adopted the Plan are terminated, so that the Participants in this Plan and all participants under substantially similar arrangements sponsored by all such Employers are required to receive all amounts of compensation deferred under the terminated arrangements within twenty-four (24) months of the date of termination of the arrangements and no earlier than twelve (12) months after the date of termination, and (ii) all other requirements under section 409A of the Code and the regulations thereunder are satisfied.
(b) Notwithstanding anything hereinabove to the contrary, upon and after a Change in Control Event with respect to the Company, no amendment may be made to (i) Section 5.7, concerning events following a Change in Control Event, (ii) the third paragraph of Article VII, concerning the obligation to irrevocably fund the Trust after a Change in Control Event or (iii) this Section 9.3, concerning amendment or termination of the Plan.
(c) In the event that the Plan is terminated, the Participant’s Deferral Election shall cease to be effective as of the effective date of the termination of the Plan. The termination of the Plan shall not have the effect of canceling or reducing in any way amounts, whether vested or unvested, previously credited to any Participant’s Account. If the Plan is terminated by Board action of the Company, other than on account of a Change in Control Event, an amount equal to the full amount credited to each Participant’s Account shall be paid to the Participant or the Participant’s Beneficiary in a Lump Sum Distribution within twenty-four (24) months, but no sooner than twelve (12) months, of the effective date of the Plan termination.
(d) Each Employer, other than the Company, may revoke its adoption of this Plan with respect to its employees upon action by such Employer’s board of directors, but no Employer, except the Company, shall have the right to otherwise amend (or terminate) the Plan in any respect, other than as provided under Section 5.7 with respect to termination by an Employer following a Change in Control Event as to such Employer. Except as provided in Section 5.7, with respect to Change in Control Events, revocation of adoption of the Plan by an adopting Employer shall not constitute a Distributable Event. Notwithstanding anything hereinabove to the contrary, a corporate liquidation, dissolution or reorganization which results in one or more Participants transferring their employment without interruption from the Employer involved to another Employer shall not result in a Distributable Event for such Participants, unless such corporate transaction is a Change in Control Event as defined in Section 1.5.
9.4 Claims Procedure. In the event any claim by a Participant or Beneficiary is denied as to the amount and/or the method of payment under the Plan, such Participant or Beneficiary shall be given prompt notice in writing of such denial, which notice shall set forth the reason for the denial. The Participant or Beneficiary may, by filing notice in writing with the Board within sixty (60) days after the date of such notice of denial, request review of such denial. The Board shall review such denial, and shall state its decision, in writing, in a manner calculated to be understood, to the Participant or Beneficiary concerned.
9.5 Employment and Other Rights. This Plan creates no rights whatsoever in any Participant to continue in the employ of their Employer for any length of time, nor does it affect the right of any Participant to participate in or be covered by any other pension, profit sharing, welfare benefit, bonus or other supplemental compensation plan or fringe benefit program of the Employer.
9.6 Governing Law. To the extent not preempted by ERISA, this Plan shall be construed, administered, governed and enforced according to the laws of the Commonwealth of Virginia. If any provision of this instrument is held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.
9.7 Construction of Plan Provisions. Singular words used in this Plan may indicate the plural, the plural may indicate the singular, and the masculine may indicate the feminine. Headings of Sections and subsections of this Plan are inserted for convenience of reference only and are not considered in the construction of the provisions hereof.
9.8 Successors and Assigns. This Plan shall inure to the benefit of, and be binding upon, the parties thereto, their successors and assigns, heirs, executors, administrators and legal representatives. Except as provided in Sections 5.10 and 5.13, the rights of any Participant or Beneficiary to and in any benefits under the Plan shall not be subject to assignment or alienation, and any purported transfer, assignment, pledge, encumbrance, or attachment of a Participant’s interest hereunder shall be void and of no effect. In the event of a dispute involving any individual’s right to receive payment with respect to a Participant’s Accounts, the Retirement Plan Committee or the Company may enter an interpleader action. Payment of the Accounts to a court of competent jurisdiction with proper notice to the appropriate parties in dispute shall be in full satisfaction of all claims against the Retirement Plan Committee and the Company as to the Accounts, and shall be equivalent to a receipt and release.
IN WITNESS WHEREOF, the Company has caused this Plan document to be executed
on its behalf by its duly authorized officer effective as of January 1, 2009.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
AMENDMENT NO. ONE
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
THIS AMENDMENT NO. ONE made effective as of this 1st day of January, 2009, by FERGUSON ENTERPRISES, INC. (the “Corporation”), a Virginia corporation.
WHEREAS, initially effective January 1, 2005, the Corporation adopted the Ferguson Enterprises, Inc. Executive Retirement Plan Il (the “Plan”); and
WHEREAS, pursuant to Section 9.3 of the Plan, the Corporation reserved the right to amend the Plan and now desires to do so, effective January 1, 2009, in order to align the Change in Control and Plan termination distribution provisions of the Plan with the final regulations issued by the IRS under Code § 409A.
NOW, THEREFORE, the Corporation hereby amends the Plan, effective January 1, 2009, as follows:
1. Section 1.14 (“Distributable Event”) of the Plan is deleted in its entirety, and the
following is substituted in lieu thereof:
1.14 “Distributable Event” shall have the meaning set forth in Section 5.1 hereof.
2. Subsection (e) of Section 5.1 (“Distributable Event”) of the Plan is deleted in its
entirety, and the following is substituted in lieu thereof:
(e) a Change in Control Event as to the Participant’s “relevant corporation,” as defined in Section 1.5(4).
3.Section 5.7 (“Termination of Plan Following Change in Control”) is deleted in its entirety, and the following is substituted in lieu thereof:
5.7 Termination of Plan Following Change in Control of Employer. The board of directors of any Employer which has experienced a Change in Control Event may determine, at its sole discretion, to terminate the Plan as to the Participants employed by such Employer, provided that if it chooses to do so, all substantially similar arrangements sponsored by the Employer experiencing the Change of Control Event must also be terminated. Such Employer’s board of directors’ determination to terminate the Plan as to its Participants shall be made no earlier than 30 days prior to the Change in Control Event and no later than 12 months after the Change in Control Event, and the termination shall be effective no earlier than the effective date of the Change in Control Event and no later than 12 months following the Change in Control Event. Upon termination of the Plan as to such Participants under this provision, each affected Participant will receive the full amount credited to such Participant’s Account in a single lump sum in cash, notwithstanding the Participant’s Distribution Election, as soon as administratively practicable on or after the first day of the calendar quarter beginning after the date of Plan termination, as established by the board of directors of such Employer, and in all events within twelve (12) months of the date of termination of the Plan by such Employer’s board of directors.
4.In all other respects, the Plan as originally adopted is hereby ratified and affirmed.
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, has caused this Amendment No. One to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
Terry E. Hall, Vice President & General Counsel
AMENDMENT NO. TWO
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
THIS AMENDMENT NO, TWO is made effective as of the 1st day of January, 2013, by FERGUSON ENTERPRISES, INC. (the “Corporation”), a Virginia corporation.
WHEREAS, initially effective January 1, 2005, the Corporation adopted the Ferguson Enterprises, Inc. Executive Retirement Plan II (the “Plan”); and
WHEREAS, pursuant to Section 9.3 of the Plan, the Corporation reserved the right to amend the Plan and now desires to do so, effective January 1, 2013.
NOW, THEREFORE, the Corporation hereby amends the Plan, effective January 1, 2013, as follows:
1, Section 1,38 (“Years of Service”) of the Plan is deleted in its entirety, and the
following is substituted in lieu thereof:
1.38 “Years of Service” means the number of 12-month periods of continuous employment with the Participant’s Employer (or, if more than one, Employers) completed by the Participant between the Participant’s date of hire and date of termination of employment, calculated with reference to the Participant’s original date of hire by an Employer and anniversaries thereof; provided however, that any Participant employed by a business organization or unit acquired by an Employer (“Predecessor Employer”) who was employed by such Predecessor Employer on the date of such acquisition shall receive vesting credit under the Plan for all service such Participant completed for such Predecessor Employer prior to its acquisition by an Employer, calculated with reference to the Participant’s original date of hire by the Predecessor Employer and anniversaries thereof.
2. In all other respects, the Plan as originally adopted is hereby ratified and affirmed.
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, has caused this Amendment No. Two to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
Terry E. Hall, Senior Vice President
AMENDMENT NO. THREE
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
THIS AMENDMENT NO. THREE is made effective as of the 1st day of January, 2013, by FERGUSON ENTERPRISES, INC. (the “Corporation”), a Virginia corporation.
WHEREAS, initially effective January 1, 2005, the Corporation adopted the Ferguson Enterprises, Inc. Executive Retirement Plan II ( “FERP II”); and
WHEREAS, pursuant to Section 9.3 of FERP II, the Corporation reserved the right to amend the plan and now desires to do so, effective January 1, 2013.
NOW, THEREFORE, the Corporation hereby amends FERP II, effective January 1, 2013, as follows:
1.Section 1.34(d) (“Nonresident Alien Employees”) is deleted in its entirety.
2.Section 1.34(e) is re-designated as Section 1.34(d).
3.In all other respects, FERP II as originally adopted is hereby ratified and affirmed.
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, has caused this Amendment No. Three to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
Terry E. Hall, Senior Vice President
AMENDMENT NO. FOUR
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
THIS AMENDMENT NO. FOUR is made effective as of the 1st day of January, 2014, by FERGUSON ENTERPRISES, INC. (the “Corporation”), a Virginia corporation.
WHEREAS, initially effective January 1, 2005, the Corporation adopted the Ferguson Enterprises, Inc. Executive Retirement Plan II ( the “Plan”); and
WHEREAS, pursuant to Section 9.3 of the Plan , the Corporation reserved the right to amend the Plan and now desires to do so, effective January 1, 2014.
NOW, THEREFORE, the Corporation hereby amends the Plan, effective January 1, 2014, as follows:
1.Section 1.37 of the Plan is deleted in its entirety and replaced with the following:
1.37 “Vesting Date” means the earliest date upon which any portion of a Participant’s SERP Contributions is no longer subject to forfeiture pursuant to the provisions of Section 3.5(c) (that is, the Participant’s SERP Contributions vest and become non-forfeitable in any percentage or increment).
2.Subsection 3.5(b) shall be amended by adding the following paragraph immediately after the final sentence of existing Subsection 3.5(b):
Notwithstanding anything in this Plan to the contrary, all SERP Discretionary Contributions credited to a Participant’s Account on or after January 1, 2014, together with earnings thereon, and whether otherwise vested or unvested, shall be forfeited if the Participant’s employment with the Employer terminates as a result of “gross misconduct”, as defined below. The term “gross misconduct”, as used herein, shall mean (i) the Participant’s conviction of any felony involving fraud, embezzlement or misappropriation involving the Employer or (ii) the Participant’s knowing and willful breach of a material policy of the Employer resulting in substantial harm to the Corporation.
3. Subsection 3.5(c) of the Plan is deleted in its entirety and replaced with the following:
3.5(c) Vesting of SERP Balances: SERP Contributions credited to a
Participant’s Account shall vest and become non-forfeitable in the percentages corresponding to the first to occur of the applicable events described below:
| | | | | |
Event | Vested Percentage |
(i) Change of Control related to the Participant’s Employer | 100% |
(ii) Death or Disability of Participant while employed by Employer | 100% |
(iii) Termination of Plan as to Participant pursuant to Section 5.7 or 9.3 | 100% |
(iv) Participant’s completion of the following
numbers of Years of Service: | |
4 Years of Service | 25% |
8 Years of Service | 50% |
12 Years of Service | 75% |
15 or more Years of Service | 100% |
4. In all other respects, the Plan, as originally adopted and amended from time to time is hereby ratified and affirmed.
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, has caused this Amendment No. Four to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
Terry E. Hall, Senior Vice President
AMENDMENT NO. FIVE
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN II
THIS AMENDMENT NO. FIVE is made effective as of December 31, 2015, by FERGUSON ENTERPRISES, INC. (the "Corporation"), a Virginia corporation.
WHEREAS, initially effective January 1, 2005, the Corporation adopted the Ferguson Enterprises, Inc. Executive Retirement Plan II ( the "Plan"); and
WHEREAS, the Corporation is adopting the Ferguson Enterprises, Inc. Executive Retirement Plan III effective January 1, 2016, as a replacement to the Plan; and
WHEREAS, the Corporation wishes to freeze this Plan to any new participants and any additional contributions as of December 31, 2015; and
WHEREAS, pursuant to Section 9.3 of the Plan, the Corporation reserved the right to amend the Plan and now desires to do so;
NOW, THEREFORE, the Corporation hereby amends the Plan as follows:
1.Investment Allocations. Section 4.2(a) of the Plan shall be amended by deleting the phrase "five percent (5%) increments" and replacing it with "one percent (1%) increments".
2.No Additional Contributions. Notwithstanding anything in the Plan to the contrary, no deferrals or contributions of any type or from any source (whether made by a Participant or the Company) shall be made to the Plan after December 31, 2015. Notwithstanding the foregoing sentence, this paragraph shall not be construed to prohibit the actual contribution or deposit of funds into the Plan or Trust after December 31, 2015, to the extent such additional contributions or deposits arose from services performed on or before December 31, 2015, but were paid or made available to a Participant after December 31, 2015, due to minor timing differences in payroll or other administrative factors rendering their actual contribution to the Plan or Trust on or before December 31, 2015, impossible or impractical.
3.No New Participants. Notwithstanding anything in the Plan to the contrary, no person shall become a Participant in the Plan after December 31, 2015.
4.Interpretation and Impact of Freeze. For the avoidance of doubt, and to carry out the Corporation's intent, notwithstanding the previous paragraphs of this Amendment Five: (i) any person who is a Participant as of December 31, 2015, shall continue to accrue Years of Service after December 31, 2015, for purposes of vesting in accordance with the applicable terms of the Plan; (ii) Participants may continue to direct the investment allocation of their Accounts in accordance with Article IV of the Plan; (iii) Participants' Accounts shall continue to be credited with earnings and losses in accordance with Article IV of the Plan; and (iv) nothing contained in this Amendment Five shall be interpreted to enlarge or restrict any other rights, benefits, or
obligations of the Company or any Participant except to the extent required by the amendments set forth in this Amendment Five.
***
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, has caused this Amendment No. Five to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ William Brundage
Title: VP of Finance
FERGUSON ENTERPRISES. INC.
EXECUTIVE RETIREMENT PLAN III
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIREMENT PLAN III
Ferguson Enterprises, Inc., a Virginia corporation (the “Company”), hereby establishes the Ferguson Enterprises, Inc. Executive Retirement Plan III (the “Plan”), effective January 1, 2016 (the “Effective Date”), for the purpose of attracting and retaining high quality executives and promoting in them increased efficiency and an interest in the successful operation of the Company. The Plan is intended to, and shall be interpreted to, comply in all respects with Code Section 409A and those provisions of ERISA applicable to an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees.”
ARTICLE I
DEFINITIONS
1.1 “Account” or “Accounts” shall mean the bookkeeping account or accounts
established under this Plan pursuant to Article 4.
1.2 “Base Salary” shall mean a Participant’s annual base salary, excluding incentive
and discretionary bonuses, commissions, reimbursements and other non-regular remuneration, received front the Company prior to reduction for any salary deferrals under benefit plans sponsored by the Company, including but not limited to, plans established pursuant to Code Section 125 or qualified pursuant to Code Section 401(k).
1.3 “Beneficiary” or “Beneficiaries” shall mean the person, persons or entity
designated as such pursuant to Section 7.1.
1.4 “Board” shall mean the Board of Directors of the Company.
1.5 “Bonus(es)” shall mean amounts paid to the Participant by the Company in the
form of discretionary or annual incentive compensation or any other bonus designated by the Committee, prior to reduction for any deferrals under benefit plans sponsored by the Company, including but not limited to, plans established pursuant to Code Section 125 or qualified pursuant to Code Section 401(k).
1.6 “Change in Control” shall mean the occurrence of a “change in the ownership,”
a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of a corporation, as determined in accordance with this Section.
In order for an event described below to constitute a Change in Control with respect to a Participant, except as otherwise provided in part (b)(ii) of this Section, the applicable event must relate to the corporation for which the Participant is providing services, the corporation that is liable for payment of the Participant’s Account (or all corporations liable for payment if more than one), as identified by the Committee in accordance with Treas. Reg. §1.409A-
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3(i)(5)(ii)(A)(2), or such other corporation identified by the Committee in accordance with Treas. Reg. §1.409A-3(i)(5)(ii)(A)(3).
In determining whether an event shall be considered a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of a corporation, the following provisions shall apply:
(a) A “change in the ownership” of the applicable corporation shall occur on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of such corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(v). If a person or group is considered either to own more than 50% of the total fair market value or total voting power of the stock of such corporation, or to have effective control of such corporation within the meaning of part (b) of this Section, and such person or group acquires additional stock of such corporation, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the ownership” of such corporation.
(b) A “change in the effective control” of the applicable corporation shall occur on either of the following dates:
(i)The date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of such corporation possessing 30% or more of the total voting power of the stock of such corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi). If a person or group is considered to possess 30% or more of the total voting power of the stock of a corporation, and such person or group acquires additional stock of such corporation, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the effective control” of such corporation; or
(ii)The date on which a majority of the members of the applicable corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such corporation’s board of directors before the date of the appointment or election, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi). In determining whether the event described in the preceding sentence has occurred, the applicable corporation to which the event must relate shall only include a corporation identified in accordance with Treas. Reg. §1.409A-3(i)(5)(ii) for which no other corporation is a majority shareholder.
(c) A “change in the ownership of a substantial portion of the assets” of the applicable corporation shall occur on the date on which any one person, or more
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than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the corporation immediately before such acquisition or acquisitions, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii). A transfer of assets shall not be treated as a “change in the ownership of a substantial portion of the assets” when such transfer is made to an entity that is controlled by the shareholders of the transferor corporation, as determined in accordance with Treas. Reg. §1.409A3 (i)(5)(vii)(B).
1.7 “Code” shall mean the Internal Revenue Code of 1986, as amended, as
interpreted by Treasury regulations and applicable authorities promulgated thereunder.
1.8 “Committee” shall mean the Retirement Plan Committee appointed by the Board
to administer the Plan in accordance with Article 9.
1.9 “Company Contributions” shall mean the contributions made by an Employer
pursuant to Section 3.3, which may consist of SERP Contributions, Company Matching Contributions and/or Discretionary Company Contributions.
1.10 “Company Contribution Account” shall mean the Account maintained for the benefit of the Participant which is credited with Company Contributions, if any, pursuant to Section 4.2.
1.11 “Company Matching Contributions” shall mean the contributions credited to a Participant’s Account to match the Participant’s deferrals in accordance with Section 3.3.
1.12 “Compensation” shall mean the total amount of Base Salary and Bonus received by an Eligible Executive from his or her Employer during the Plan Year.
1.13 “Crediting Rate” shall mean the notional gains and losses credited on the Participant’s Account balance that are based on the Funds made available by the Committee pursuant to Section 3.4 of the Plan.
1.14 “Deferral Account” shall mean an Account maintained for each Participant that is credited with Participant deferrals pursuant to Section 4.1
1.15 “Deferrable Compensation” shall mean all amounts eligible for deferral into this Plan for a particular Plan Year under Section 3.1.
1.16 “Disability” or “Disabled” shall mean (consistent with the requirements of Code Section 409A) that the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) is, by reason of any medically determinable physical or mental impairment which can be
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expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s Employer. For purposes of this Plan, a Participant shall be deemed Disabled if determined to be totally disabled by the Social Security Administration. A Participant shall also be deemed Disabled if determined to be disabled in accordance with the applicable disability insurance program of such Participant’s Employer, provided that the definition of “disability” applied under such disability insurance program complies with the requirements of this Section.
1.17 “Distributable Amount” shall mean the vested balance in the applicable Account as determined under Article 4.
1.18 “Eligible Executive” shall mean a highly compensated or management level employee of an Employer selected by the Committee to be eligible to participate in the Plan.
1.19 “Employer(s)” shall be defined as follows:
(a)Except as otherwise provided in part (b) of this Section, the term “Employer” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.
(b)For the purpose of determining whether a Participant has experienced a Separation from Service, the term “Employer” shall mean:
(1)The entity for which the Participant performs services and with respect to which the legally binding right to compensation deferred or contributed under this Plan arises; and
(2)All other entities with which the entity described above would be aggregated and treated as a single employer under Code Section 414(b) (controlled group of corporations) and Code Section 414(c) (a group of trades or businesses, whether or not incorporated, under common control), as applicable. In order to identify the group of entities described in the preceding sentence, the Committee shall use an ownership threshold of at least 50% as a substitute for the 80% minimum ownership threshold that appears in, and otherwise must be used when applying, the applicable provisions of (A) Code Section 1563 for determining a controlled group of corporations under Code Section 414(b), and (B) Treas. Reg. §1.414(c)-2 for determining the trades or businesses that are under common control under Code Section 414(c).
1.20 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, including Department of Labor and Treasury regulations and applicable authorities promulgated thereunder.
1.21 “Financial Hardship” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B))
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of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, but shall in all events correspond to the meaning of the term “unforeseeable emergency” under Code Section 409A.
1.22 “Fund” or “Funds” shall mean one or more of the investments selected by the Committee pursuant to Section 3.4 of the Plan.
1.23 “Hardship Distribution” shall mean an accelerated distribution of benefits or a cancellation of deferral elections pursuant to Section 6.6 to a Participant who has suffered a Financial Hardship.
1.24 “Participant” shall mean any Eligible Executive who becomes a Participant in this Plan in accordance with Article 2.
1.25 “Participant Election(s)” shall mean the forms or procedures by which a Participant makes elections with respect to (a) voluntary deferrals of his/her Deferrable Compensation, (b) the Funds, which shall act as the basis for crediting of interest on Account balances, and (c) the form and timing of distributions from Accounts. Participant Elections may take the form of an electronic communication followed by appropriate confirmation according to specifications established by the Committee.
1.26 “Payment Date” shall mean the date by which a total distribution of the Distributable Amount shall be made or the date by which installment payments of the Distributable Amount shall commence. Unless otherwise specified, the Payment Date shall be the first day of the calendar quarter commencing after the event triggering the payout occurs, and the applicable amount shall be calculated as of the last business day of the calendar quarter in which the event triggering the payout occurs. Subsequent installments, if any, shall be made in January of each Plan Year following the Plan Year in which the Payment Date occurs, and shall be calculated as of the last business day of the December preceding such installment. In the case of death, the Committee shall be provided with documentation reasonably necessary to establish the fact of the Participant’s death. The Payment Date of a Scheduled Distribution shall be January of the Plan Year in which the distribution is scheduled to commence, and the applicable amount shall be calculated as of the last business day of the preceding December. The Payment Date shall not be before the earliest date on which benefits may be distributed under Code Section 409A without violation of the provisions thereof, as reasonably determined by the Committee.
Notwithstanding the foregoing, to the extent required by Code Section 409A, payments triggered by the Separation from Service of a Participant who is determined to be a Specified Employee at the time of such Separation from Service shall commence as of the first day of the calendar quarter that begins at least six (6) months following the Separation from Service. Subsequent installments, if any, shall be distributed in January of each Plan Year following the Plan Year in which the initial installment payment occurs.
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1.27 “Performance-Based Compensation” shall mean compensation the entitlement to or amount of which is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(e).
1.28 “Plan Year” shall mean the calendar year.
1.29 “Qualified Plan” shall mean the Ferguson Enterprises, Inc. 401(k) Retirement Savings Plan, as amended from time to time, or such other Company sponsored qualified pension plan as may be designated by the Committee.
1.30 “Qualified Plan Compensation” for purposes of determining Company Matching Contributions under Section 3.3 means the amount of each Participant’s Compensation up to the adjusted limitation under Code Section 401(a)(17) in effect for the applicable Plan Year.
1.31 “Retirement” shall mean a Participant’s Separation from Service after having attained age fifty-five (55).
1.32 “Scheduled Distribution” shall mean a scheduled distribution date elected by the Participant for distribution of amounts, including notional earnings thereon, as provided under Section 6.5.
1.33 “Separation from Service” shall mean a termination of services provided by a Participant to his or her Employer, whether voluntarily or involuntarily, other than by reason of death or Disability, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(h). In determining whether a Participant has experienced a Separation from Service, the following provisions shall apply:
(a) For a Participant who provides services to an Employer as an employee,
except as otherwise provided in part (c) of this Section, a Separation from Service shall occur when such Participant has experienced a termination of employment with such employer. A Participant shall be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and his or her employer reasonably anticipate that either (i) no further services will be performed for the employer after a certain date, or (ii) that the level of bona fide services the Participant will perform for the employer after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed by such Participant (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the Participant has been providing services to the Employer less than 36 months).
If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the Participant and the Employer shall be treated as continuing intact, provided that the period of such leave does not exceed 6 months, or if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statute or
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by contract. If the period of a military leave, sick leave, or other bona fide leave of absence exceeds 6 months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of this Plan as of the first day immediately following the end of such 6-month period. In applying the provisions of this paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer.
(b)For a Participant, if any, who provides services to an Employer as an independent contractor, except as otherwise provided in part (c) of this Section, a Separation from Service shall occur upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for such Employer, provided that the expiration of such contract(s) is determined by the Committee to constitute a good-faith and complete termination of the contractual relationship between the Participant and such Employer.
(c)For a Participant, if any, who provides services to an Employer as both an employee and an independent contractor, a Separation from Service generally shall not occur until the Participant has ceased providing services for such Employer as both an employee and as an independent contractor, as determined in accordance with the provisions set forth in parts (a) and (b) of this Section, respectively. Similarly, if a Participant either (i) ceases providing services for an Employer as an independent contractor and begins providing services for such Employer as an employee, or (ii) ceases providing services for an Employer as an employee and begins providing services for such Employer as an independent contractor, the Participant will not be considered to have experienced a Separation from Service until the Participant has ceased providing services for such Employer in both capacities, as determined in accordance with the applicable provisions set forth in parts (a) and (b) of this Section.
Notwithstanding the foregoing provisions in this part (c), if a Participant provides services for an Employer as both an employee and as a member of the Board, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the services provided by such Participant as a member of the Board shall not be taken into account in determining whether the Participant has experienced a Separation from Service as an employee, and the services provided by such Participant as an employee shall not be taken into account in determining whether the Participant has experienced a Separation from Service as a Director.
1.34 “SERP Compensation” shall mean for purposes of determining SERP Contributions under Section 3.3(a), the amount of each Participant’s Compensation in excess of Qualified Plan Compensation in effect for the applicable Plan Year.
1.35 “SERP Contributions” shall mean all amounts credited to a Participant’s Account either (a) based on the Participant’s SERP Compensation pursuant to Section 3.3(a)(i) or (b) as a discretionary contribution pursuant to Section 3.3(a)(ii).
1.36 “Specified Employee” shall mean a Participant who, as of the date of the Participant’s separation from service, is a key employee of an Employer if any of the Employer’s stock is publicly traded on an established securities market or otherwise. Whether any stock of the
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Employer is publicly traded on an established securities market or otherwise shall be determined as of the date of the Participant’s separation from service.
(a)Key Employee. A Participant is a “key employee” if the Participant meets the requirements of section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding section 416(i)(5) of the Code) with respect to an Employer at any time during the 12-month period ending on a Specified Employee Identification Date. If the Participant is a key employee of a Specified Employee Identification Date, the Participant is treated as key employee for purposes of the Plan for the entire 12-month period beginning on the Specified Employee Effective Date.
(b)Specified Employee Identification Date and Effective Date. Unless another date is designated by the Committee in accordance with the regulations under Code section 409A, the Specified Employee Identification Date is December 31 and the Specified Employee Effective Date is April 1. Notwithstanding the preceding sentence, the Specified Employee Effective Date may not be later than the first day of the fourth month following the Specified Employee Identification Date. The Committee may designate any other date as the Specified Employee Identification Date, provided that the Employer must use the same Specified Employee Identification Date and Specified Employee Effective Date with respect to all nonqualified deferred compensation plans, and any change to the Specified Employee Identification Date or the Specified Employee Effective Date may not be effective for a period of at least 12 months.
(c)Compensation. For purposes of identifying a Specified Employee by applying the requirements for a “key employee” as described in (a) above, the definition of compensation under § 1.415(c)-2(a) of the Treasury Regulations shall be used, without regard to any safe harbor provided in § 1.415(c)-2(d), the special timing rules provided in § 1.415(c)-2(e), and the special rules provided in § 1.415(c)-2(g). Notwithstanding the foregoing, the Committee may elect to use any available definition of compensation under section 415 of the Code and the regulations thereunder, including any available safe harbor and any available election under the timing rules or special rules, provided that the definition is applied consistently to all employees of the Employer for purposes of identifying Specified Employees.
(d)Corporate Transactions. In the event of a corporate transaction, the following rules shall apply for purposes of identifying Specified Employees:
(e) Mergers and acquisitions of public service recipients. If as a result of a corporate transaction, two or more separate service recipients, more than one of which has stock outstanding that is publicly traded on an established securities market or otherwise immediately before the transaction, become one employer (as defined in section 414(b) or (c) of the Code), any stock of which is publicly traded on an established securities market or otherwise immediately after the transaction (“resulting public service recipient”), the resulting public service recipient’s next specified employee identification date and specified employee effective date following the corporate transaction are the specified employee identification date and specified employee effective date that the acquiring service recipient (as defined in section 1.409A-1(i)(6)(i) of the regulations) would have been required to use absent such transaction.
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For the period between the date of the transaction and the next specified employee effective date, the list of specified employees of the resulting public service recipient is determined by combining the lists of specified employees of all service recipients participating in the transaction that were in effect at the date of the corporate transaction, ranking such specified employees in order of the amount of compensation as defined in paragraph (d) above, and treating the top fifty (50) of such specified employees, plus any employees described in section 416(i)(1)(ii) or section 416(i)(1)(iii) and the regulations thereunder who are not included in such top fifty specified employees, as the specified employees for the period between the corporate transaction and the next specified employee effective date. Alternatively, the resulting service recipient may elect to use any reasonable method to determine the specified employees of the resulting service recipient, provided that such method is adopted no later than 90 days after the corporate transaction and applied prospectively from the date the method is adopted.
(2)Mergers and acquisitions of nonpublic service recipients. If as part of a corporate transaction a service recipient that does not have outstanding stock that is publicly traded on an established securities market or otherwise immediately before the transaction (“initial private service recipient”), and a service recipient with stock outstanding that is publicly traded on an established securities market or otherwise immediately before the transaction (“initial public service recipient”), become a resulting public service recipient, the resulting public service recipient’s next specified employee identification date and specified employee effective date following the corporate transaction are the specified employee identification date and specified employee effective date that the initial public service recipient would have been required to use absent such transaction.
For the period after the date of the corporate transaction and before the next specified employee effective date, the specified employees of the initial public service recipient immediately before the transaction continue to be the specified employees of the resulting public service recipient, and no service providers of the initial private service recipient are required to be treated as specified employees.
(3)Spinoffs. If as part of a corporate transaction, an initial public service recipient becomes two or more separate service recipients, each with stock outstanding that is publicly traded on an established securities market or otherwise immediately after the transaction (“post-transaction public service recipients”), the next specified employee identification date of each of the post-transaction public service recipients is the specified employee identification date that the initial public service recipient would have been required to use absent such transaction. For the period after the date of the corporate transaction and before the next specified employee effective date, the specified employees of the initial public service recipient immediately before the transaction continue to be the specified employees of the post-transaction public service recipients.
(4)Public offerings and other corporate transactions. If as part of an initial public offering or corporate transaction not described in subparagraph (2) or (3) above, an initial private service recipient becomes one or more post-transaction public service recipients, then each post-transaction public service recipient has a specified employee identification date of December 31 and a specified employee effective date of April 1, effective retroactively to the December 31 and April 1 next preceding the offering or other transaction for purposes of
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identifying the specified employees between the corporation transaction and the next December 31.
Alternatively, a post-transaction public service recipient may elect a specified employee identification date and specified employee effective date on or before the date of the offering or other transaction. If a public service recipient makes such an election, for the period after the offering or other transaction and before the next specified employee effective date, the specified employees of the post-transaction public service recipient consist of the service providers that at the time of the offering or other transaction would have been classified as specified employees of the initial private service recipient, had the initial private service recipient elected the same specified employee identification date and specified employee effective date as selected by the post-transaction public service recipient, and had such initial private service recipient had stock publicly traded on an established securities market or otherwise as of the specified employee identification date preceding the transaction.
1.37 “Termination of Service” shall mean a Participant’s Separation from Service that does not qualify as a Retirement.
1.38 “Vesting Date” shall mean the earliest date upon which any portion of a Participant’s SERP Contributions is no longer subject to forfeiture pursuant to the provisions of Section 3.3(a)(iii) (that is, the Participant’s SERP Contributions vest and become non-forfeitable in any percentage or increment).
1.39 “Years of Service” shall mean the number of 12-month periods of continuous employment with the Participant’s Employer (or, if more than one, Employers) completed by the Participant between the Participant’s date of hire and date of termination of employment, calculated with reference to the Participant’s original date of hire by an Employer and anniversaries thereof; provided, however, that any Participant employed by a business organization or unit acquired by an Employer (“Predecessor Employer”) who was employed by such Predecessor Employer on the date of such acquisition shall receive vesting credit under the Plan for all service such Participant completed for such Predecessor Employer prior to its acquisition by an Employer, calculated with reference to the Participant’s original date of hire by the Predecessor Employer and anniversaries thereof.
ARTICLE II
PARTICIPATION
2.1 Enrollment Requirements; Commencement of Participation
(a)The Committee. shall select the Eligible Executives eligible to participate in the Plan. The Committee may select Eligible Executives for participation in its sole discretion and shall not be required to offer participation to any employee.
(b)As a condition to participation, each Eligible Executive shall complete, execute and return to the Committee the appropriate Participant Elections, as well as such other
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documentation and information as the Committee reasonably requests, by the deadline(s) established by the Committee. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines, in its sole discretion, are necessary.
(c)Each Eligible Executive shall commence participation in the Plan on the date that the Committee determines that the Eligible Executive has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period.
(d)If an Eligible Executive fails to meet all requirements established by the Committee within the period required, that Eligible Executive shall not be eligible to participate in the Plan during such Plan Year.
ARTICLE III
CONTRIBUTIONS & DEFERRAL ELECTIONS
3.1 Elections to Defer Compensation. Elections to defer Deferrable Compensation
shall take the form of a whole percentage of up to a maximum of:
(1)80% of Base Salary, and
(2)80% of Bonuses
The Committee may, in its sole discretion, adjust for subsequent Plan Years on a prospective basis the minimum and maximum deferral percentages for one or more types of Deferrable Compensation (including, without limitation, for particular types of Bonuses) and for one or more subsequent Plan Years; such revised deferral percentages shall be indicated on a Participant Election form approved by the Committee. Notwithstanding the foregoing, in no event shall the minimum and maximum deferral percentages be adjusted after the last date on which deferral elections for the applicable type(s) of Deferrable Compensation must be submitted and become irrevocable in accordance with Section 3.2 below and the requirements of Code Section 409A.
3.2 Timing of Deferral Elections; Effect of Participant Election(s).
(a) General Timing Rule for Deferral Elections. Except as otherwise provided in this Section 3.2, in order for a Participant to make a valid election to defer Deferrable Compensation, the Participant must submit Participant Election(s) on or before the deadline established by the Committee, which shall be no later than the December 31st preceding the Plan Year in which such amounts will be earned.
Any deferral election made in accordance with this Section 3.2(a) shall be irrevocable; provided, however, that if the Committee permits or requires Participants to make a deferral election by the deadline described above for an amount that qualifies as Performance-Based Compensation, the Committee may permit a Participant to subsequently change his or her deferral election for such amounts by submitting new Participant Election(s) in accordance with Section 3.2(d) below.
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(b)Timing of Deferral Elections for New Plan Participants. An Eligible Executive who first becomes eligible to participate in the Plan on or after the beginning of a Plan Year, as determined in accordance with Treas. Reg. §1.409A-2(a)(7)(ii) and the “plan aggregation” rules provided in Treas. Reg. §1.409A-1(c)(2), may be permitted to make an election to defer the portion of Deferrable Compensation attributable to services to be performed after such election, provided that the Participant submits Participant Election(s) on or before the deadline established by the Committee, which in no event shall be later than thirty (30) days after the Participant first becomes eligible to participate in the Plan.
If a deferral election made in accordance with this Section 3.2(b) relates to amounts earned based upon a specified performance period, the amount eligible for deferral shall be equal to (i) the total amount for the performance period, multiplied by (ii) a fraction, the numerator of which is the number of days remaining in the service period after the Participant’s deferral election is made, and the denominator of which is the total number of days in the performance period.
Any deferral election made in accordance with this Section 3.2(b) shall become irrevocable no later than the 30th day after the date the Participant first becomes eligible to participate in the Plan.
(c)Timing of Deferral Elections for Fiscal Year Compensation. In the event that the fiscal year of an Employer is different than the taxable year of a Participant, the Committee may determine that a deferral election may be made for “fiscal year compensation” (as defined below), by submitting Participant Election(s) on or before the deadline established by the Committee, which in no event shall be later than the last day of the Employer’s fiscal year immediately preceding the fiscal year in which the services related to such compensation will begin to be performed. For purposes of this Section, the term “fiscal year compensation” shall only include Bonuses relating to a service period coextensive with one or more consecutive fiscal years of the Employer, of which no • amount is paid or payable during the Employer’s fiscal year(s) that constitute the service period.
A deferral election made in accordance with this Section 3.2(c) shall be irrevocable; provided, however, that if the Committee permits or requires Participants to make a deferral election by the deadline described in this Section 3.2(c) for an amount that qualifies as Performance-Based Compensation, the Committee may permit a Participant to subsequently change his or her deferral election for such compensation by submitting new Participant Election(s) in accordance with 3.2(d) below.
(d)Timing of Deferral Elections for Performance-Based Compensation. Subject to the limitations described below, the Committee may determine that an irrevocable deferral election for an amount that qualifies as Performance-Based Compensation may be made by submitting Participant Election(s) on or before the deadline established by the Committee, which in no event shall be later than six (6) months before the end of the performance period.
In order for a Participant to be eligible to make a deferral election for Performance-Based Compensation in accordance with the deadline established pursuant to this Section 3.2(d), the Participant must have performed services continuously from the later of (i) the beginning of the
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performance period for such compensation, or (ii) the date upon which the performance criteria for such compensation are established, through the date upon which the Participant makes the deferral election for such compensation. In no event shall a deferral election submitted under this Section 3.2(d) be permitted to apply to any amount of Performance-Based Compensation that has become readily ascertainable.
(e) Timing Rule for Deferral of Compensation Subject to Risk of Forfeiture. With respect to compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least twelve (12) months from the date the Participant obtains the legally binding right, the Committee may determine that an irrevocable deferral election for such compensation may be made by timely delivering Participant Election(s) to the Committee in accordance with its rules and procedures, no later than the 30th day after the Participant obtains the legally binding right to the compensation, provided that the election is made at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse, as determined in accordance with Treas. Reg. §1.409A-2(a)(5).
Any deferral election(s) made in accordance with this Section 3.2(e) shall become irrevocable no later than the 30th day after the Participant obtains the legally binding right to the compensation subject to such deferral election(s).
(f) Separate Deferral Elections for Each Plan Year. In order to defer Deferrable Compensation for a Plan Year, a Participant must submit a separate deferral election with respect to each such Plan Year by affirmatively filing a Participant Election during the enrollment period established by the Committee prior to the beginning of such Plan Year (or at such other time contemplated under this Section 3.2).
3.3 Company Contributions.
(a) SERP Contributions.
(i)SERP Compensation Mandatory Contribution. The Employer shall credit to the Participant’s Company Contribution Account in January of each Plan Year an amount equal to three and one-half percent (3.5%) of such Participant’s SERP Compensation, if any, for the preceding Plan Year. For avoidance of doubt, newly eligible Participants shall receive a SERP Compensation Mandatory Contribution based on their SERP Compensation, if any, for the preceding Plan Year, despite not being a Participant during such preceding Plan Year.
(ii)SERP Discretionary Contribution. In addition to the amount credited to Participants’ Company Contribution Accounts under Section 3.3(a)(i) above, an Employer’s board of directors may irrevocably declare, in writing, an additional amount, or formula for determining an additional amount, to be credited by the Employer to the Company Contribution Account of any Participant under this Plan for a Plan Year (each, a “SERP Discretionary Contribution”). In making its determinations hereunder, the Employer’s board of directors shall not be bound by the amount or formula declared for any previous Plan Year, but
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shall have full discretion to declare a higher or lower amount than that specified previously, and shall have discretion to establish varying amounts for different classes of, or for particular, Participants. Once the amount or formula for determining the amount to be credited to each Participant’s Company Contribution Account has been declared for a Plan Year, however, the Employer’s board of directors may not subsequently revoke or reduce such credits for any reason.
Notwithstanding anything in this Plan to the contrary, all SERP Discretionary Contributions credited to a Participant’s Company Contribution Account, together with earnings thereon, and whether otherwise vested or unvested, shall be forfeited if the Participant’s employment with the Employer terminates as a result of “gross misconduct”, as defined below. The term “gross misconduct”, as used herein, shall mean (A) the Participant’s conviction of any felony involving fraud, embezzlement, or misappropriation involving the Employer or (B) the Participant’s knowing and willful breach of a material policy of the Employer resulting in substantial harm to the Company.
(iii) Vesting of SERP Contributions. SERP Contributions credited to a Participant’s Account shall vest and become non-forfeitable in the percentages corresponding to the first to occur of the applicable events described below:
Event Vested Percentage
A.Change in Control related to the Participant’s Employer 100%
B.Death or Disability of Participant prior to Separation from Service 100%
C.Termination of Plan pursuant to Section 10.1 100%
D.Participant’s completion of the following numbers of Years of Service:
4 Years of Service 25%
8 Years of Service 50%
12 Years of Service 75%
15 or more Years of Service 100%
Effective as soon as reasonably practicable on or after the first day of the calendar quarter beginning after the Participant’s Vesting Date, the vested amount of such Participant’s SERP Contributions shall be deemed a vested Discretionary Company Contribution for the Plan Year in which such SERP Contribution was originally contributed to the Plan; such amounts shall be subject to the distribution election(s) applicable to the Plan Year in which such amounts were initially contributed to the Plan.
(b) Company Matching Contributions. The Employer shall credit each Participant’s Company Contribution Account with a Company Matching Contribution equal to fifty percent (50%) of the Participant’s deferrals of Base Salary and/or Bonus for -the Plan Year; provided, however, that the amount credited to each Participant as a Company Matching Contribution shall not exceed two and one-half percent (2.5%) of the Participant’s Qualified Plan Compensation. Company Matching Contributions shall be credited to Participants’ Accounts on the last day of each month.
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(c) Discretionary Company Contributions. In addition to the amount credited to Participants’ Accounts under Sections 3.3(a) and 3.3(b) above, an Employer’s board of directors may irrevocably declare, in writing, an additional vested amount, or formula for determining an additional vested amount, to be credited by the Employer to the Company Contribution Account of any Participant under this Plan for a Plan Year (each, a “Discretionary Company Contribution”). In making its determinations hereunder, the Employer’s board of directors shall not be bound by the amount or formula declared for any previous Plan Year, but shall have full discretion to declare a higher or lower amount than that specified previously, and shall have discretion to establish varying amounts for different classes of, or for particular, Participants. Once the amount or formula for determining the vested amount to be credited to each Participant’s Company Contribution Account has been declared for a Plan Year, however, the Employer’s board of directors may not subsequently revoke or reduce such credits for any reason.
3.4 Investment Elections.
(a) Participant Designation. Except as otherwise provided below, at the time of entering the Plan and/or of making a deferral election under the Plan, the Participant shall designate, on a Participant Election provided by the Committee, the Funds in which the Participant’s Accounts shall be deemed to be invested for purposes of determining the amount of earnings and losses to be credited to each Account. Subject to the limitations herein, the Participant may specify that all or any percentage of his or her Accounts shall be deemed to be invested, in whole percentage increments, in one or more of the Funds selected as alternative investments under the Plan from time to time by the Committee pursuant to subsection (b) of this Section. If a Participant fails to make an election among the Funds as described in this section, the Participant’s Account balance shall automatically be allocated into the lowest-risk Fund, as determined by the Committee in its sole discretion. A Participant may change any designation made under this Section as permitted by the Committee by filing a revised election, on a Participant Election provided by the Committee. Notwithstanding the foregoing, the Committee, in its sole discretion, may impose limitations on the frequency with which one or more of the Funds elected in accordance with this Section may be added or deleted by such Participant; furthermore, the Committee, in its sole discretion, may impose limitations on the frequency with which the Participant may change the portion of his or her Account balance allocated to each previously or newly elected Fund.
Prior to the Participant’s Vesting Date, SERP Contributions credited to the Participant’s Company Contribution Account shall be credited with earnings at the Crediting Rate equal to the then current rate for the “stable value fund” contained in the Qualified Plan (or if such fund does not exist, a comparable rate or fund established by the Committee).
Effective as soon as reasonably practicable on or after the first day of the calendar quarter beginning after the Participant’s Vesting Date, the vested amount of such Participant’s SERP Contributions shall be deemed a vested Discretionary Company Contribution for the Plan Year in which such SERP Contribution was originally contributed to the Plan and thereafter shall be credited with earnings or losses in accordance with the applicable Funds designated by the Participant in accordance with this Section.
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(b) Investment Funds. The Committee may select, in its sole and absolute
discretion, each of the types of commercially available investments communicated to the Participant pursuant to subsection (a) of this Section to be the Funds. The Funds shall be used to determine the amount of earnings or losses to be credited to the Participant’s Account under Article IV. The Participant’s choice among the Funds shall be solely for purposes of calculation of the Crediting Rate on Accounts. The Company and the Employers shall have no obligation to set aside or invest amounts as directed by the Participant and, if the Company and/or the Employer elects to invest amounts as directed by the Participant, the Participant shall have no more right to such investments than any other unsecured general creditor.
3.5 Distribution Elections.
(a)Initial Election. At the time of making a deferral election under the Plan, the Participant shall designate the form of distribution of deferrals made pursuant to such election and any Company Contributions related to such Plan Year (together with any earnings credited thereon) for each of the alternatives specified in Sections 6.1(a), 6.2(a), 6.5(a), and, upon a Participant’s commencement of participation in this Plan, Section 6.7. Such distribution election for a given Plan Year shall relate solely to that Plan Year’s deferrals and Company Contributions. A new distribution election may be made at the time of subsequent deferral elections with respect to deferrals and Company Contributions in Plan Years beginning after the election is made, in accordance with the Participant Election forms.
(b)Modification of Election. A distribution election with respect to
previously deferred amounts may only be changed under the terms and conditions specified in Code Section 409A and this Section. Except as permitted under Code Section 409A, no acceleration of a distribution is permitted. A subsequent election that delays payment or changes the form of payment shall be permitted if and only if all of the following requirements are met:
(1)the new election does not take effect until at least twelve (12) months after the date on which the new election is made;
(2)in the case of payments made on account of Separation from Service or a Scheduled Distribution, the new election delays payment for at least five (5) years from the date that payment would otherwise have been made, absent the new election; and
(3)in the case of payments made according to a Scheduled Distribution, the new election is made not less than twelve (12) months before the date on which payment would have been made (or, in the case of installment payments, the first installment payment would have been made) absent the new election.
For purposes of application of the above change limitations, installment payments shall be treated as a single payment under Code Section 409A. Election changes made pursuant to this Section shall be made in accordance with rules established by the Committee and shall comply with all requirements of Code Section 409A.
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ARTICLE IV
ACCOUNTS
4.1 Deferral Accounts. The Committee shall establish and maintain a Deferral
Account for each Participant under the Plan. Each Participant’s Deferral Account shall be further divided into separate subaccounts (“Fund Subaccounts”), each of which corresponds to a Fund designated pursuant to Section 3.4. A Participant’s Deferral Account shall be credited as follows:
(a)As soon as reasonably possible after amounts are withheld and deferred from a Participant’s Deferrable Compensation, the Committee shall credit the Fund Subaccounts of the Participant’s Deferral Account with an amount equal to the Deferrable Compensation deferred by the Participant in accordance with the designation under Section 3.4; that is, the portion of the Participant’s deferral designated to be deemed to be invested in a Fund shall be credited to the Fund Subaccount to be invested in that Fund;
(b)Each business day, each Fund Subaccount of a Participant’s Deferral Account shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such Fund Subaccount as of the prior day, less any distributions valued as of the end of the prior day, by the Crediting Rate for the corresponding Fund as determined by the Committee pursuant to Section 3.4(b); and
(c)In the event that a Participant elects for a given Plan Year’s deferral of Deferrable Compensation a Scheduled Distribution, all amounts attributed to the deferral for such Plan Year shall be accounted for in a manner which allows separate accounting for the deferral of Deferrable Compensation and investment gains and losses associated with amounts allocated to each such separate Scheduled Distribution.
4.2 Company Contribution Account. The Committee shall establish and maintain a
Company Contribution Account for each Participant under the Plan. Each Participant’s Company Contribution Account shall be further divided into separate Fund Subaccounts corresponding to the Fund designated (or mandated, in the case of unvested SERP Contributions) pursuant to Section 3.4(a). A Participant’s Company Contribution Account shall be credited as follows:
(a)As soon as reasonably possible after a Company Contribution is made, the Company shall credit the Fund Subaccounts of the Participant’s Company Contribution Account with an amount equal to the Company Contributions, if any, made on behalf of that Participant, that is, the proportion of the Company Contributions, if any, designated (or mandated, in the case of unvested SERP Contributions) to be deemed to be invested in a certain Fund shall be credited to the Fund Subaccount to be invested in that Fund; and
(b)Each business day, each Fund Subaccount of a Participant’s Company Contribution Account shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such Fund Subaccount as of the prior day, less
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any distributions valued as of the end of the prior day, by the Crediting Rate for the corresponding Fund as determined by the Committee pursuant to Section 3.4(b).
4.3 Statement of Accounts. The Committee shall provide each Participant with
electronic statements setting forth the Participant’s Account balance as of the end of each applicable period.
ARTICLE V
VESTING
5.1 Vesting of Deferral Accounts. The Participant shall be vested at all times in
amounts credited to the Participant’s Deferral Account.
5.2 Vesting of Company Contribution Account.
(a)SERP Contributions shall be vested in accordance with Section 3.3(a)(iii).
(b)Except as may otherwise be communicated by the Employer, a Participant shall be vested at all times in Company Matching Contributions and Discretionary Company Contributions.
ARTICLE VI
DISTRIBUTIONS
6.1 Retirement Distributions.
(a)Timing and Form of Retirement Distributions. Except as otherwise provided herein, in the event of a Participant’s Retirement, the Distributable Amount credited to the Participant’s Deferral Account and Company Contribution Account shall be paid to the Participant in a lump sum on the Payment Date following the Participant’s Retirement, unless the Participant has made an alternative benefit election on a timely basis to receive substantially equal annual installments over up to fifteen (15) years. In accordance with Section 3.5, a Participant may make a separate election for each Plan Year’s deferrals and Company Contributions as to the form of payment applicable upon Retirement.
(b)Small Benefit Exception. Notwithstanding any Retirement distribution election to the contrary, if at the time of the Participant’s Retirement the sum of the Participant’s Deferral Account and vested Company Contribution Account is less than or equal to one hundred thousand dollars ($100,000), the total Distributable Amount shall be paid in a lump sum on the applicable Payment Date.
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6.2 Termination Distributions.
(a)Timing and Form of Termination Distributions. Except as otherwise provided herein, in the event of a Participant’s Termination of Service, the Distributable Amount credited to the Participant’s Deferral Account and Company Contribution Account shall be paid to the Participant in a lump sum on the Payment Date following the Participant’s Termination of Service, unless the Participant has made an alternative benefit election on a timely basis to receive substantially equal annual installments over up to fifteen (15) years. In accordance with Section 3.5, a Participant may make a separate election for each Plan Year’s deferrals and Company Contributions as to the form of payment applicable upon Termination of Service.
(b)Small Benefit Exception. Notwithstanding any Termination of Service distribution election to the contrary, if at the time of the Participant’s Termination of Service the sum of the Participant’s Deferral Account and vested Company Contribution Account is less than or equal to one hundred thousand dollars ($100,000), the total Distributable Amount shall be paid in a lump sum on the applicable Payment Date.
6.3 Disability Distributions. Except as otherwise provided herein, in the event of a
Participant’s Disability prior to Separation from Service, the Distributable Amount credited to the Participant’s Deferral Account and vested Company Contribution Account shall be paid to the Participant in a lump sum on the Payment Date following the Participant’s Disability.
6.4 Death Benefits. In the event that a Participant dies prior to complete distribution
of his or her Accounts, the Company shall pay to the Participant’s Beneficiary a death benefit equal to the total Distributable Amount remaining in the Participant’s Deferral Account and Company Contribution Account in a lump sum on the Payment Date following the Participant’s death.
6.5 Scheduled Distributions.
(a) Scheduled Distribution Election. Participants shall be entitled to elect to receive a Scheduled Distribution from the Deferral Account and vested portion of the Company Contribution Account associated with a Plan Year. In the case of a Participant who has elected to receive a Scheduled Distribution, such Participant shall receive the Distributable Amount on the applicable Payment Date, including earnings thereon, which have been elected by the Participant to be subject to such Scheduled Distribution election in accordance with Section 3.5 of the Plan. The Committee shall determine the earliest commencement date that may be elected by the Participant for each Scheduled Distribution and such date shall be indicated on the Participant Election. The Participant may elect to receive the Scheduled Distribution in a single lump sum or substantially equal annual installments over a period of up to four (4) years. A Participant may delay and change the form of a Scheduled Distribution, provided such extension complies with the requirements of Section 3.5. In the event all or a portion of the Company Contribution Account associated with a Plan Year is not vested by the Scheduled Distribution’s Payment Date for the lump sum, or the last annual installment if annual installments were elected by the Participant, then such unvested portion of the Company Contribution Account shall not be distributed under this Section 6.5 but rather shall be distributable in accordance with the first to
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occur of the Participant’s Retirement, Termination of Service, Disability or death under the applicable Sections of this Article VI; in the event of the Participant’s Retirement or Termination of Employment, such unvested portion of the Company Contribution Account shall be distributable at the time and in the form elected for the Plan Year in which such applicable portion of the Company Contribution Account was initially contributed to the Plan.
(b) Relationship to Other Benefits. In the event that distribution of a Participant’s Accounts is triggered by the Participant’s Separation from Service, Disability, death or a Change in Control prior to complete distribution of a Scheduled Distribution, the amounts (or remaining amounts) subject to such Scheduled Distribution shall not be distributed under this Section 6.5, but rather shall be distributed in accordance with the other applicable Section of this Article VI.
6.6 Hardship Distributions:
(a) Upon a finding that the Participant has suffered a Financial Hardship, in accordance with Code Section 409A, the Committee may, at the request of the Participant, accelerate distribution of benefits and/or approve cancellation of deferral elections under the Plan, subject to the following conditions:
(1)The request to take a Hardship Distribution shall be made by filing a form provided by and filed with the Committee prior to the end of any calendar month.
(2)Upon a finding that the Participant has suffered a Financial Hardship in accordance with Treasury Regulations promulgated under Code Section 409A, the Committee may, at the request of the Participant, accelerate distribution of benefits and/or approve cancellation of current deferral elections under the Plan in the amount reasonably necessary to alleviate such Financial Hardship. The amount distributed pursuant to this Section with respect to the Financial Hardship shall not exceed the amount necessary to satisfy such Financial Hardship, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).
(3)The amount (if any) determined by the Committee as a Hardship Distribution shall be paid in a single cash lump sum as soon as practicable after the end of the calendar month in which the Hardship Distribution determination is made by the Committee.
(b) In the event a Participant receives a hardship distribution under an Employer’s qualified 401(k) plan pursuant to Treas. Reg. §1.401(k)-1(d)(3), the Committee may (i) cancel the Participant’s current deferral elections under this Plan and/or (ii) preclude the Participant from submitting additional deferral elections pursuant to Article III, to the extent deemed necessary to comply with Treas. Reg. §1.401(k)-1(d)(3).
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6.7 Change in Control. In the event that the Participant has made an irrevocable
election upon commencement of participation in the Plan to receive a distribution upon the occurrence of a Change in Control, then upon a Change in Control the Distributable Amount credited to the Participant’s Deferral Account and Company Contribution Account (or remaining Distributable Amount if the Change in Control occurs following commencement of installment payments) shall be paid to the Participant in a lump sum within sixty (60) days following the Change in Control. If a Participant does not make an irrevocable election upon commencement of participation in the Plan to receive a distribution upon a Change in Control, then such Participant’s Accounts shall remain in the Plan upon a Change in Control and shall be distributable under the other applicable provisions of this Plan.
ARTICLE VII
PAYEE DESIGNATIONS AND LIMITATIONS
7.1 Beneficiaries.
(a)Beneficiary Designation. The Participant shall have the right, at any time, to designate any person or persons as Beneficiary (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant’s death. If the Participant names someone other than his or her spouse as a Beneficiary, the Committee may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Committee, executed by such Participants spouse and returned to the Committee. The Beneficiary designation shall be effective when it is submitted to and acknowledged by the Committee during the Participant’s lifetime in the format prescribed by the Committee.
(b)Absence of Valid Designation. If a Participant fails to designate a Beneficiary as provided above, or if every person designated as Beneficiary predeceases the Participant or dies prior to complete distribution of the Participant’s benefits, then the Committee shall deem the Participant’s estate to be the Beneficiary and shall direct the distribution of such benefits to the Participant’s estate.
7.2 Payments to Minors. In the event any amount is payable under the Plan to a
minor, payment shall not be made to the minor, but instead such payment shall be made (a) to that person’s living parent(s) to act as custodian, (b) if that person’s parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, to act as custodian, or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within sixty (60) days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.
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7.3 Payments on Behalf of Persons Under Incapacity. In the event that any amount
becomes payable under the Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of any and all liability of the Committee and the Company under the Plan.
ARTICLE VIII
LEAVE OF ABSENCE
8.1 Paid Leave of Absence. If a Participant is authorized by the Participant’s
Employer to take a paid leave of absence from the employment of the Employer, and such leave of absence does not constitute a Separation from Service, (a) the Participant shall continue to be considered eligible for the benefits provided under the Plan, and (b) deferrals shall continue to be withheld during such paid leave of absence in accordance with Article III.
8.2 Unpaid Leave of Absence If a Participant is authorized by the Participant’s
Employer to take an unpaid leave of absence from the employment of the Employer for any reason, and such leave of absence does not constitute a Separation from Service, such Participant shall continue to be eligible for the benefits provided under the Plan. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to defer for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan, provided such deferral elections are otherwise allowed and a Participant Election is delivered to and accepted by the Committee for each such election in accordance with Article III above.
ARTICLE IX
ADMINISTRATION
9.1 Plan Administration.
(a) Committee. The administration of the Plan shall be under the supervision of the Committee. The Committee shall consist of three or more individuals appointed by and serving at the pleasure of the Board. The duties of the Committee shall be to designate Eligible Executives and to select the Funds to be offered to Participants. It shall be a principal duty of the Committee to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination among them. The Committee will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Committee’s powers will include, but will not be limited to, the following authority, in addition to all other powers provided by this Plan:
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(i)To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;
(ii)To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan;
(iii)To decide all questions concerning the Plan (including the eligibility of any person to participate in the Plan);
(iv)To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan; and
(v)To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocation, delegation or designation to be in writing.
(b)Examination of Records. The Committee will make available to each Participant such of the Participant’s records under the -Plan as pertain to the Participant, for examination at reasonable times during normal business hours.
(c)Reliance on Reports and Certificates. In administering the Plan, the Committee will be entitled to the extent permitted by law to rely conclusively upon any information furnished by any Employer, Participant, Beneficiary, accountant, controller, attorney, actuary, consultant or other advisor, and any agent of the foregoing, as the case may be.
(d)Action by the Committee.
(i)Any action of the Committee shall be taken only upon the vote or the affirmative expression of a majority of the Committee members qualified to vote with respect to such action. If the members of the Committee qualified to vote on any question are unable to determine such question by a majority vote or other affirmative expressions, the question shall be determined by the Board.
(ii)Action of the Committee may be taken without a meeting of the Committee members; provided, however, that any action without a meeting shall be taken only upon the unanimous vote or affirmative expression of all the Committee members qualified to vote with respect to such action; such action must be evidenced by written documentation thereafter.
(iii)If a member of the Committee is a Participant, he shall not participate in any decision which solely affects his own Accounts.
(iv)The Committee shall, for purposes of administering the Plan, choose a secretary who shall keep minutes of the Committee’s proceedings and all records and documents pertaining to the administration of the Plan. The secretary may execute any
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Executive Retirement Plan III
certificate or any other written direction on behalf of the Committee on all persons claiming benefits under the Plan.
(e) Nondiscriminatory Exercise of Authority. Whenever, in the administration of the Plan, any discretionary action by the Committee is required, the Committee shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment.
(f) Indemnification of Committee. The Company agrees to indemnify and to defend to the fullest extent permitted by law any employee serving as a member of the Committee (including any employee or former employee who formerly served as a member of the Committee) against all liabilities, damages, costs and expenses (including attorneys’ fees amounts paid in settlement of any claim approved by the Company) occasioned by any act or omission to act in connection with the Plan, except such liability or expense as may result from the employee’s own willful misconduct or gross negligence. No member of the Plan Committee hereunder shall be liable for any act or omission of another member of the Committee, except such liability as may result from his own willful misconduct or gross negligence.
(g) Compensation. The members of the Committee shall serve without bond and without compensation for their services as such. The expenses of the Committee properly incurred in the performance of its duties under the Plan shall be paid by the Company.
9.2 Claims Procedure. Any Participant, former Participant or Beneficiary may file a
written claim with the Committee setting forth the nature of the benefit claimed, the amount thereof, and the basis for claiming entitlement to such benefit. The Committee shall determine the validity of the claim and communicate a decision to the claimant promptly and, in any event, not later than ninety (90) days after the date of the claim. The claim may be deemed by the claimant to have been denied for purposes of further review described below in the event a decision is not furnished to the claimant within such ninety (90) day period. If additional information is necessary to make a determination on a claim, the claimant shall be advised of the need for such additional information within forty-five (45) days after the date of the claim. The claimant shall have up to one hundred eighty (180) days to supplement the claim information, and the claimant shall be advised of the decision on the claim within forty-five (45) days after the earlier of the date the supplemental information is supplied or the end of the one hundred eighty (180) day period. Every claim for benefits which is denied shall be denied by written notice setting forth in a manner calculated to be understood by the claimant (a) the specific reason or reasons for the denial, (b) specific reference to any provisions of the Plan (including any internal rules, guidelines, protocols, criteria, etc.) on which the denial is based, (c) description of any additional material or information that is necessary to process the claim, and (d) an explanation of the procedure for further reviewing the denial of the claim and shall include an explanation of the claimant’s right to pursue legal action in the event of an adverse determination on review.
9.3 Review Procedures. Within sixty (60) days after the receipt of a denial on a claim, a claimant or his/her authorized representative may file a written request for review of such denial. Such review shall be undertaken by the Committee and shall be a full and fair
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review. The claimant shall have the right to review all pertinent documents. The Committee shall issue a decision not later than sixty (60) days after receipt of a request for review from a claimant unless special circumstances, such as the need to hold a hearing, require a longer period of time, in which case a decision shall be rendered as soon as possible but not later than one hundred twenty (120) days after receipt of the claimant’s request for review. The decision on review shall be in writing and shall include specific reasons for the decision written in a manner calculated to be understood by the claimant with specific reference to any provisions of the Plan on which the decision is based and shall include an explanation of the claimant’s right to pursue legal action in the event of an adverse determination on review.
ARTICLE X
MISCELLANEOUS
10.1 Amendment or Termination.
(a)The Company expects the Plan to be permanent but, since future conditions affecting the Company cannot be anticipated or foreseen, the Company must necessarily and does hereby reserve the right to amend, modify or terminate the Plan at any time and for any reason (including a change or impending change in the tax laws of the United States or any state) by resolution of the Board. All amendments shall be stated in a written instrument signed by an officer on behalf of the Company. No amendment or termination of the Plan shall have the effect of (i) canceling or reducing in any way the amounts, whether vested or unvested, previously credited to any Participant’s Account, including deemed earnings thereon, or (ii) amending the Company Matching Contribution provided in Section 3.3(b) with respect to Participant’s deferrals during the Plan Year in which such amendment is made. Termination of the Plan by the Company, other than as a result of a Change in Control, may only occur if (i) all substantially similar arrangements sponsored by all Employers which have adopted the Plan are terminated, so that the Participants in this Plan and all participants under substantially similar arrangements sponsored by all such Employers are required to receive all amounts of compensation deferred under the terminated arrangements within twenty-four (24) months of the date of termination of the arrangements and no earlier than twelve (12) months after the date of termination, and (ii) all other requirements under Code Section 409A and the regulations thereunder are satisfied.
(b) The board of directors of any Employer which has experienced a Change in Control may determine, at its sole discretion, to terminate the Plan as to its Participants, provided that if it chooses to do so, all substantially similar arrangements sponsored by the Employer experiencing the Change of Control must also be terminated. Such Employer’s board of directors’ determination to terminate the Plan as to its Participants shall be made no earlier than 30 days prior to the Change in Control and no later than 12 months after the Change in Control, and the termination shall be effective no earlier than the effective date of the Change in Control and no later than 12 months following the Change in Control. The Participants in the impacted Plans shall receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date of the Employer’s board of directors’ determination to terminate the Plan.
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Executive Retirement Plan III
(c)Notwithstanding anything hereinabove to the contrary, upon and after a Change in Control with respect to the Company, no amendment may be made to (i) Section 10.1(b), concerning events following a Change in Control, (ii) the third paragraph of Section 10.2, concerning the obligation to irrevocably fund the Trust after a Change in Control Event or (iii) this Section 10.1, concerning amendment or termination of the Plan.
(d)Each Employer, other than the Company, may revoke its adoption of this Plan with respect to its employees upon action by such Employer’s board of directors, but no Employer, except the Company, shall have the right to otherwise amend (or terminate) the Plan in any respect, other than as provided under Section 10.1(b) above with respect to termination by an Employer following a Change in Control as to such Employer. Except as provided in Section 10.1(b) with respect to Change in Control, revocation of adoption of the Plan by an adopting Employer shall not constitute a distributable event. Notwithstanding anything hereinabove to the contrary, a corporate liquidation, dissolution or reorganization which results in one or more Participants transferring their employment without interruption from the Employer involved to another Employer shall not result in a distributable event for such Participants, unless such corporate transaction is a Change in Control.
10.2 Unsecured General Creditor; Informal Funding. All Participants and Beneficiaries shall have the status of general unsecured creditors of the Employer. The Plan constitutes a mere promise by the Participant’s Employer to pay the vested portion of the Participants’ Account balance in the future. Consequently, no Employer shall have any obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Plan. All Participants and Beneficiaries shall be and remain general creditors of the Employer in the same manner as any other creditor having a general claim for matured and unpaid compensation. The Participant, the Participant’s Beneficiary, or any other person claiming through the Participant, shall only have the contractual right to receive from the Employer the benefits specified in this Plan. The Employer’s obligation to pay the Participant the vested portion of the Participant’s Account balance shall be offset by any amounts paid from any Trust established by the Employer to facilitate the payment of benefits to the Participant or the Participant’s Beneficiaries.
The Employer reserves the absolute right at its sole discretion either to set aside funds to assist in fulfilling the obligations undertaken by this Plan or to refrain from so setting aside funds and to determine the extent, nature, and method of so setting aside funds. Should the Employer elect to make contributions to a Trust, through the purchase of life insurance, mutual funds, stocks, bonds, disability policies, annuities, or other properties, and the contribution of such properties to such Trust, the Employer reserves the absolute right, in its sole discretion, to terminate such contributions at any time, in whole or in part; provided, however, that no such termination of contributions to a Trust shall entitle the Employer to any reversion of assets from such Trust, other than in accordance with the terms and conditions of such Trust.
Notwithstanding anything hereinabove to the contrary, upon a Change in Control of an Employer, such Employer shall, as soon as possible, but in no event later than thirty (30) days following the Change in Control Event, make an irrevocable contribution to the Trust in an amount equal to the full amount credited to Accounts of such Employer’s Participants as of the day before the date on which the Change in Control occurred.
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Executive Retirement Plan III
At no time shall any Participant be deemed to have any lien, right, title or interest in or to any specific investment of such Trust, if one exists, or to any assets of the Employer. No term or condition of this Plan shall be construed to create a fiduciary relationship between the Company, any Employer, the Committee, and any Participant or Beneficiary.
Each Employer shall be responsible for the payment of benefits to its Participants hereunder and shall share in the payment of such benefits (and may make contributions to any Trust established in connection with the Plan) in the proportion that the liabilities of such Employer’s Participants bear to the liabilities of all Participants under this Plan.
10.3 Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or entity. No part of a Participant’s Accounts shall be liable for the debts, contracts, or engagements of any Participant, Beneficiary, or their successors in interest, nor shall a Participant’s Accounts be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, sell, transfer, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. No part of a Participant’s Accounts shall be subject to any right of offset against or reduction for any amount payable by the Participant or Beneficiary, whether to the Company or any other party, under any arrangement other than under the terms of this Plan.
10.4 Withholding. The Participant shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements, Social Security and other employee tax or other requirements applicable to the granting, crediting, vesting or payment of benefits under the Plan. There shall be deducted from each payment made under the Plan or any other Compensation payable to the Participant (or Beneficiary) all taxes that are required to be withheld by the Company in respect to such payment or this Plan. To the extent permissible under Code Section 409A, the Company shall have the right to reduce any payment (or other Compensation) by the amount of cash sufficient to provide the amount of said taxes.
10.5 Code Section 409A. The Company intends that the Plan comply with the requirements of Code Section 409A (and all applicable Treasury Regulations and other guidance issued thereunder) and shall be operated and interpreted consistent with that intent. Notwithstanding the foregoing, the Company makes no representation that the Plan complies with Code Section 409A.
10.6 Binding Obligation of Employer and Any Successor in Interest. Each Employer expressly agrees that it shall not merge or consolidate into or with another corporation or sell substantially all of its assets to another corporation, firm or person until such corporation, firm or person expressly agrees, in writing, to assume and discharge the duties and obligations of the Employer under this Plan.
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10.7 Effect of Payment. Any payment made in good faith to a Participant or the Participant’s Beneficiary shall, to the extent thereof, be in full satisfaction of all claims against the Committee, its members, the Employer and the Company.
10.8 Errors in Account Statements, Deferrals or Distributions. In the event an error is made in an Account statement, such error shall be corrected on the next statement following the date such error is discovered. In the event of an operational error, including, but not limited to, errors involving deferral amounts, overpayments or underpayments, such operational error shall be corrected in a manner consistent with and as permitted by any correction procedures established under Code Section 409A. If any portion of a Participant’s Account(s) under this Plan is required to be included in income by the Participant prior to receipt due to a failure of this Plan to comply with the requirements of Code Section 409A, the Committee may determine that such Participant shall receive a distribution from the Plan in an amount equal to the lesser of (i) the portion of his or her Account required to be included in income as a result of the failure of the Plan to comply with the requirements of Code Section 409A, or (ii) the unpaid vested Account balance.
10.9 Domestic Relations Orders. Notwithstanding any provision in this Plan to the contrary, in the event that the Committee receives a domestic relations order, as defined in Code Section 414(p)(1)(B), pursuant to which a court has determined that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan, the Committee shall have the right to immediately distribute the spouse’s or former spouse’s vested interest in the Participant’s benefits under the Plan to such spouse or former spouse to the extent necessary to fulfill such domestic relations order, provided that such distribution is in accordance with the requirements of Code Section 409A.
10.10 Employment Not Guaranteed. Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continue the provision of services in any capacity whatsoever to the Employer.
10.11 No Guarantee of Tax Consequences. The Employer, Company, Board and Committee make no commitment or guarantee to any Participant that any federal, state or local tax treatment will apply or be available to any person eligible for benefits under the Plan and assume no liability whatsoever for the tax consequences to any Participant.
10.12 Successors of the Company. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.
10.13 Notice. Any notice or filing required or permitted to be given to the Company or the Participant under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, in the case of the Company, to the principal office of the Company, directed to the attention of the Committee, and in the case of the Participant, to the last known address of the Participant indicated on the employment records of the Company. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Notices to the
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Company may be permitted by electronic communication according to specifications established by the Committee.
10.14 Headings. Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof
10.15 Gender, Singular and Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.
10.16 Governing Law. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. To the extent any provision of, or legal issue relating to, this Plan is not fully preempted by federal law, such issue or provision shall be governed by the laws of the Commonwealth of Virginia.
10.17 Entire Agreement. Unless specifically indicated otherwise, this Plan supersedes any and all prior communications, understandings, arrangements or agreements between the parties, including the Employer, the Company, the Board, the Committee and any and all Participants, whether written, oral, express or implied relating thereto.
IN WITNESS WHEREOF, the Company has approved the adoption of this Plan as of the Effective Date and has caused the Plan to be executed by its duly authorized representative this ____day of ___________, 2015.
FERGUSON ENTERPRISES INC.
By: /s/ William Brundage
Name: William Brundage
Title: VP of Finance
Date: 12/15/15
AMENDMENT
to the
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIRMENT PLAN III
THIS AMENDMENT is made effective as of January 1, 2017, by FERGUSON ENTERPRISES, INC., a Virginia corporation (the “Company”).
WHEREAS, the Company adopted the Ferguson Enterprises, Inc. Executive Retirement Plan III, effective January 1, 2016 (the “Plan”); and
WHEREAS, pursuant to Section 10.1 of the Plan, the Company reserved the right to amend the Plan and now desires to do so; and
WHEREAS, the Board of Directors of the Company, by resolution, has authorized the undersigned to amend the Plan on behalf of the Company; and
NOW THEREFORE, the Company hereby amends the Plan as follows:
1.Subsection 3.3(a)(i) is deleted in its entirety and replaced with the following:
(i) SERP Compensation Discretionary Contribution. An Employer’s board of directors may irrevocably declare, in writing, to credit to the Participant’s Company Contribution Account in January of a given Plan Year an amount equal to three and one-half percent (3.5%) of such Participant’s SERP Compensation, if any, for the preceding Plan Year, determined without regard to whether the Participant qualified as a Participant or Eligible Executive during such preceding Plan Year (a “SERP Compensation Discretionary Contribution”). In determining whether to declare a SERP Compensation Discretionary Contribution for a Plan Year, the Employer’s board of directors shall not be bound by any such declaration for any previous Plan Year, but shall have full discretion whether or not to declare a SERP Compensation Discretionary Contribution for the Plan Year. Once a SERP Discretionary Contribution has been declared for a given Plan Year, however, the Employer’s board of directors may not subsequently revoke or reduce such credit for any reason.
2.The first clause of the first sentence of Subsection 3.3(a)(ii) is amended to read as follows:
“In addition to any amount credited to Participants’ Company Contribution Accounts under Section 3.3(a)(i) above, . . . .”
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this AMENDMENT to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ William Brundage
Title: CFO
AMENDMENT
to the
FERGUSON ENTERPRISES, INC.
EXECUTIVE RETIRMENT PLAN III
THIS AMENDMENT is effective January 1, 2019, for contributions (as described herein) made on or after, January 1, 2019, by FERGUSON ENTERPRISES, INC., a Virginia corporation (the “Company”).
WHEREAS, the Company adopted the Ferguson Enterprises, Inc. Executive Retirement Plan III, effective January 1, 2016, as amended effective January 1, 2017 (the “Plan”); and
WHEREAS, pursuant to Section 10.1 of the Plan, the Company reserved the right to amend the Plan and now desires to do so; and
WHEREAS, the Board of Directors of the Company, by resolution, has authorized the undersigned to amend the Plan on behalf of the Company; and
NOW THEREFORE, the Company hereby amends the Plan as follows:
1.The last sentence of Subsection 3.3(a)(i) is deleted in its entirety and replaced with the following:
“Once a SERP Compensation Discretionary Contribution has been declared for a given Plan Year, however, the Employer’s board of directors may not subsequently revoke or reduce such credit for any reason. A Participant shall not be eligible to receive a contribution under this Subsection 3.3(a)(i) if such Participant is not employed by an Employer on the later of the date the
contribution is declared or credited.”
2.A new sentence is added to the end of the first paragraph of Subsection 3.3(a)(ii), which shall read as follows:
“A Participant shall not be eligible to receive a contribution under this Subsection 3.3(a)(ii) if such Participant is not employed by an Employer on the later of the date the contribution is declared or credited.”
3.A new sentence is added is added at the end of Subsection 3.3(c), which shall read as follows:
“A Participant shall not be eligible to receive a contribution under this Subsection 3.3(c) if such Participant is not employed by an Employer on the later of the date the contribution is declared or credited.”
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this AMENDMENT to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ William Brundage
Title: William Brundage
Chief Financial Officer
| | |
THE FERGUSON GROUP INTERNATIONAL SHARESAVE PLAN 2019 |
Approved by resolution of the shareholders of the Company in a general meeting held on 25 April 2019 and amended by resolutions of the Board of the Company on 27 January 2021 and 12 July 2023
Appendix A (UK SAYE) registered with HMRC with reference XH1100000156799
Approved by resolution of the shareholders of the Company in a general meeting held on 25 April 2019 and amended by resolution of the Board of the Company on 27 January 2021 and 12 July 2023
THE FERGUSON GROUP INTERNATIONAL SHARESAVE PLAN 2019
1.Definitions
1.1In this Scheme, unless the context otherwise requires, the following words and expressions shall have the following meanings, namely:
the Act means the UK Income Tax (Earnings and Pensions) Act 2003;
Adoption Date means 25 April 2019 or, if applicable, the date that approval for the Scheme is renewed by the Company’s shareholders in general meeting;
Associated Company means an associated company of the Company within the meaning given to those words by paragraph 47 of Schedule 3 to the Act;
the Board means the board of directors of the Company or a duly authorised committee thereof;
Capital Reorganisation means any capitalisation issue, rights issue, sub-division, consolidation or reduction of capital or any other variation of the share capital of the Company;
the Company means the company incorporated in Jersey as Ferguson plc, with registered number 128484;
Control shall have the meaning given to that word by section 995 of the Income Tax Act 2007;
the Date of Grant means the date on which an Option is granted;
DI means a depositary interest representing an ordinary share in the capital of the Company;
DRS statement means the direct registration system statement of account representing certificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
DTC means the Depository Trust Company, being the system used to settle trades of uncertificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
Eligible Employee means any employee (including an executive director) who is eligible to participate in the Scheme under the provisions of rule 2.3;
Exercise Price means the price per Share, expressed in sterling, payable on the exercise of an Option as determined under rule 2.5 (subject to adjustment under rule 11);
Grant Period means the period of 42 days commencing on:
(a) the Adoption Date;
(b) the day immediately following the day on which the Company makes an announcement of its results for the last preceding financial year, half year or other period; or
(c) any day on which the Board resolves that exceptional circumstances exist which justify the grant of Options;
the Group means the Company and the Subsidiaries and member of the group shall be construed accordingly;
the Invitation Date means the date on which an invitation to apply for an Option is issued;
London Stock Exchange means London Stock Exchange plc or any successor body thereto;
Market Value means, in relation to a Share on any day the middle market quotation for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the dealing day before the Date of Grant or, if the Committee so determines, the average of the middle-market quotations for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) during such period as the Committee may determine but not exceeding 30 dealing days ending with the dealing day before the Date of Grant provided that such dealing day(s) fall within a Grant Period;
the Maturity Date means in relation to any Option or application for an Option, such date as is stipulated by the Board in the invitation to apply for the Option or in any explanatory material relating to the Option (which shall not normally be less than three years from the Date of Grant of an Option);
Maximum Savings Contribution means £500 or such greater amount as is for the time being permitted by the Board under the UK SAYE or (where the Savings Contribution is expressed in a Nominated Currency) the Nominated Currency equivalent thereof where the equivalent amount has been calculated by reference to the rate of exchange determined at the Invitation Date pursuant to rule 2.2 or such other rate as the Board may from time to time determine pursuant to rule 7.6;
Minimum Savings Contribution means £10 or such other minimum amount as the Board shall from time to time determine or (where the Savings Contribution is expressed in a Nominated Currency) the Nominated Currency equivalent thereof where the equivalent amount has been calculated by reference to the rate of exchange determined at the Invitation Date pursuant to rule 2.2 or such other rate as the Board may from time to time determine pursuant to rule 7.6;
Monthly Contribution means the monthly sum which shall not be less than the Minimum Savings Contribution nor more than the Maximum Savings Contribution which an Option Holder has elected to save under his Savings Arrangement which may be expressed either in whole sterling pounds or, at the discretion of the Board, in specified units of a Nominated Currency;
NASDAQ means Nasdaq, Inc. or any successor body thereto;
New York Stock Exchange means New York Stock Exchange, Inc. or any successor body thereto;
Nominated Currency means any currency nominated by the Board pursuant to rule 2.2;
Non-UK Company Reorganisation Arrangement shall have the meaning given to that term in Appendix A to this Scheme;
Option means a right granted under the Scheme to subscribe for or purchase Shares, which is for the time being subsisting
Option Holder means any individual who holds a subsisting Option (including, where the context permits, the legal personal representatives of a deceased Option Holder);
Old Ferguson means Ferguson Holdings Limited, a company incorporated in Jersey with registered number 106605;
Old Ferguson Shares means fully paid ordinary shares in the capital of Old Ferguson;
Participating Company means the Company and each Subsidiary which has been nominated by the Board as a Participating Company for the purposes of the Scheme;
Relevant Date means:
(a) if the Relevant Event falls within rule 9.1(a), the date on which Control is obtained and any conditions to which the offer is made subject are satisfied;
(b) if the Relevant Event falls within rule 9.1(b), either the date on which the scheme of arrangement is sanctioned by the court or the date on which the scheme of arrangement becomes effective (as determined by the Board in its absolute discretion);
(c) if the Relevant Event falls within rule 9.1(c), the date on which the person first becomes so bound or entitled; or
(d) if the Relevant Event falls within rule 9.1(d), the date on which notice of the resolution is given;
Relevant Event shall have the meaning given to that term in rule 9.1;
Savings Arrangement means a savings arrangement relating to an Option which has been approved by the Board for the purposes of the Scheme;
Schedule 3 means Schedule 3 to the Act;
Schedule 3 SAYE Option Scheme has the meaning given to that term by paragraph 49 of Schedule 3;
Scheme of Arrangement means the scheme of arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991, as amended, to introduce the Company as a new, Jersey-incorporated holding company to the Group;
Scheme of Arrangement Effective Date means 10 May 2019 being the date on which the Scheme of Arrangement became effective in accordance with its terms;
the Scheme means this Ferguson Group International Sharesave Plan 2019 as amended from time to time;
Shares means:
(a) fully paid ordinary shares of 10 pence each in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC;
(b) where appropriate the DIs representing such shares; and/or
(c) shares, or DIs representing those shares or DIs following any Capital Reorganisation;
Sharesave Scheme means a sharesave scheme established by the Company or Old Ferguson;
Subsidiary means any subsidiary of the Company within the meaning of section 1159 of and Schedule 6 to the UK Companies Act 2006 over which the Company has Control;
Tax Year means the calendar year or, if it would result in a longer period for the exercise of an Option, the 12 month period in respect of which the Participant’s employing company is obliged to pay tax;
Trustee means the trustee or trustees of any employee benefit trust established by the Company;
UK SAYE means the UK sub-plan which is set out in Appendix A to the Scheme and which is registered with HM Revenue & Customs as a Schedule 3 SAYE option scheme under which options are granted to employees in the UK;
United States Stock Exchange means the New York Stock Exchange, NASDAQ or such other recognised stock exchange in the United States, on which the Shares are listed;
US Tax means taxation under the rules of the United States of America; and
US Taxpayer means a person who is or becomes subject to US Tax.
1.2Where the context permits the singular shall include the plural and vice versa and the masculine shall include the feminine.
1.3References to any act or statutory instrument of UK Parliament or the legislative bodies of Jersey, the United States of America or the European Union (the EU) shall include any modification, amendment or re-enactment thereof (and shall, in respect of any EU legislation, include any UK legislation enacted in replacement thereof following the UK’s departure from the EU).
1.4Notwithstanding any other provisions of the Scheme, where an Eligible Employee and/or Option Holder is paid salary other than on a monthly basis:
(a) references to “months” and “monthly” in the rules shall be interpreted by the Board in such manner as it, in its absolute discretion, considers appropriate; and
(b) the Board shall take all such steps as it considers necessary or desirable to ensure that an Eligible Employee and/or Option Holder who is paid salary other than monthly is no better or worse off under the Scheme than an Eligible Employee and/or Option Holder who is paid salary monthly.
2.Invitation For Options
2.1The Board may, during a Grant Period, but otherwise in its absolute discretion, invite such Eligible Employees as it shall determine to apply for Options at the Exercise Price.
2.2The Board may nominate a currency other than pounds sterling in which Eligible Employees may elect to save pursuant to rule 7.1, and may determine an exchange rate for pounds sterling and such Nominated Currency which shall be used at the Invitation Date for the purpose of calculating the Nominated Currency equivalent of the Monthly Contribution, the Minimum Savings Contribution and the Maximum Savings Contribution. At any time, there may be more than one currency nominated pursuant to this rule.
2.3Any employee (including an executive director) of a Participating Company who has been continuously employed by a Participating Company for a period of up to 12 months is potentially eligible to join the Scheme, unless he has given, or been given, notice to terminate his contract of employment.
2.4Subject to the specific provisions contained in these rules, the form, manner and timing of invitations to apply for Options, the form of any Savings Arrangement, the Maturity Dates of the Options, and the maximum number of Shares in respect of which invitations are made on any day (subject to rule 6), shall be at the absolute discretion of the Board. The Board may adopt Appendices setting out specific requirements in relation to particular overseas countries if that is necessary or desirable to take account of local tax, exchange control or securities laws in such overseas countries.
2.5The Exercise Price shall be determined by the Board but shall not be less than the higher of:
(a) in the case of an Option to subscribe for Shares, the nominal value of a Share on the Date of Grant; and
(b) the International Minimum Price.
2.6For the purposes of rule 2.5(b), the International Minimum Price means such amount as is stipulated by the Board at the Invitation Date being an amount not less than 80 per cent. of the Market Value of a Share on the Date of Grant or other preceding date or dates during a Grant Period as may be determined by the Board.
3.Application for Options
3.1If an Eligible Employee wishes to apply for an Option he must, within such period after the Invitation Date as is stated in the invitation, deliver to the Company (or its appointed agent) a duly completed form of application as prescribed by the Board together with a duly completed and signed application for a Savings Arrangement.
3.2The Board may, in its sole discretion, treat late applications as valid unless they are received after the Date of Grant.
4.Scaling down
4.1If valid applications are received for Options over a number of Shares in excess of that which the Board has determined to make available on a particular occasion, the Board may scale down applications, in such manner as it may consider appropriate.
4.2The Board may, as an alternative, determine in its absolute discretion that no Options shall be granted.
4.3If, in applying the scaling down provisions contained in rule 4.1, Options cannot be granted within the 30 day period referred to in rule 5.1 below, the Board may extend that period by up to 12 days regardless of the expiry of the relevant Invitation Period.
5.Grant of Options
5.1Following the receipt by the Company of valid applications the Board may, subject to rules 3.2 and 4, on a single date which shall not be later than 30 days after the earliest date by reference to which the Exercise Price was calculated, grant all (but not some) of the Options for which application has been made on that occasion by Eligible Employees (provided that they comply with the conditions of eligibility in rule 2.3 on the Date of Grant) in consideration of such Eligible Employees agreeing to enter into the Savings Arrangements. As soon as practicable thereafter, the Board shall procure the issue of an option certificate or letter of grant to each Eligible Employee who has been granted an Option. No cash payment shall be made for the grant of an Option.
5.2No Option shall be granted under the Scheme more than ten years after the Adoption Date.
6.Scheme Limits
6.1No individual may be invited to apply for, or may be granted, an Option over such number of Shares that the granting of such Option and the entry into the related Savings Arrangement would result in the infringement of rules 6.2, 6.3 or 6.4.
6.2No Eligible Employee may be granted an Option if his Monthly Contributions under the related Savings Arrangement, when added to the sum of his monthly contributions under any other subsisting Sharesave Scheme, would exceed £250 or such greater amount as is for the time being permitted by the Board under the UK SAYE or (at the discretion of the Board) the Nominated Currency equivalent thereof where the equivalent amount has been calculated by reference to the rate of exchange determined at the Invitation Date pursuant to rule 2.2 or such other rate as the Board may from time to time determine pursuant to rule 7.6. Prior to any Invitation Date, the Board may determine that, for the purposes of calculating the limit in this rule 6.2, any monthly contributions under savings arrangements entered into in connection with options granted under any other subsisting Sharesave Scheme that the Eligible Employee has cancelled (or which has lapsed pursuant to its terms) before the relevant Maturity Date of such option will be deemed to be monthly contributions being made by such Eligible Employee at the Invitation Date.
6.3No Option to subscribe for Shares shall be granted if the result of that grant would be that the aggregate number of Shares that could be issued on the exercise of that Option and any other Options granted at the same time, when added to the number of Shares or Old Ferguson Shares that:
(a) could be issued on the exercise of any other subsisting share options granted during the preceding ten years from the proposed Date of Grant under the Scheme or any other employee share option scheme operated by the Company or Old Ferguson; and
(b) have been issued on the exercise of any share option granted during the preceding ten years from the proposed Date of Grant under the Scheme or any other employee share option scheme operated by the Company or Old Ferguson; and
(c) have been issued during the preceding ten years from the proposed Date of Grant under any profit sharing or other employee share incentive scheme (not being a share option scheme) operated by the Company or Old Ferguson,
would exceed 10 per cent. of the ordinary share capital of the Company for the time being in issue. Reference in this rule 6.3 to the issue of Shares shall, for the avoidance of doubt, mean the issue and allotment (but not transfer) of Shares. Where Shares are allotted or issued to the Trustee for the purpose of satisfying Options by way of transfer of Shares by the Trustee, that should be treated as an issue of Shares. Where Shares are transferred or to be transferred from treasury under this Scheme or any other employee share scheme, such Shares shall (for so long as it remains a guideline of institutional shareholders) be treated as an issue of Shares.
6.4With respect to any Options to subscribe for Shares granted following 1 June 2023, the aggregate number of Shares with respect to which Options may be granted under this Scheme (including Appendix A) shall not exceed 12,000.
6.5In determining the limits set out in rules 6.3 and 6.4, Shares subject to an Option under the Plan shall again be made available for issuance or delivery under the Plan if the right to acquire the Shares has been surrendered, has lapsed or is otherwise forfeit without issuance of the full number of Shares to which the Options related.
7.Terms of Savings Arrangements
7.1The Monthly Contribution under an Eligible Employee’s Savings Arrangement shall be subject to the limits in rule 6.2. An Eligible Employee may elect to save in either whole sterling pounds, or (at the discretion of the Board) in an equivalent amount in a Nominated Currency. The equivalent amount of the Nominated Currency shall be calculated by reference to the rate of exchange fixed at the Invitation Date pursuant to rule 2.2 or such other rate as the Board may determine from time to time pursuant to rule 7.6.
7.2The Monthly Contribution shall, unless the Board agrees to a different method for collection, be deducted from the Eligible Employee’s net pay on a monthly basis.
7.3If an Option Holder misses more than 12 Monthly Contributions under the Savings Arrangement, the Option shall lapse. If an Option Holder withdraws monies from his Savings Arrangement other than with a view to the exercise of a related Option, that Option shall lapse.
7.4If applications are scaled down under rule 4 on any occasion, the Monthly Contributions under Savings Arrangements which Eligible Employees have specified in their applications shall, where necessary, be scaled down to such sums in whole pounds sterling (or whole units of an equivalent amount in a Nominated Currency, as the case may be where the equivalent amount of the Nominated Currency has been calculated by reference to the exchange rate determined at the Invitation Date pursuant to rule 2.2). The resulting Monthly Contribution shall not be less than the Minimum Savings Contribution.
7.5The Savings Arrangement shall be personal to the Eligible Employee and, regardless of the terms of the Option, any savings arising under it shall be the property of the Eligible Employee concerned.
7.6Where the Monthly Contribution is paid in a Nominated Currency and the amount is equivalent to a sterling amount calculated on the basis of the exchange rate determined at the Invitation Date pursuant to rule 2.2 (the Original Sterling Amount) the Board may, in exceptional circumstances, and on one or more occasions during the course of the Savings Arrangement, alter the exchange rate fixed at the Invitation Date to take account of general currency movements and may permit the Nominated Currency amount of the Monthly Contribution to be altered from such date so that, calculated by reference to such new exchange rate, it is equivalent to the Original Sterling Amount.
7.7Unless the provisions in rule 4 apply, an Option shall be granted to an Eligible Employee over such number of Shares (N) as is calculated according to the following formula and any fraction of a Share shall be rounded down to the nearest whole Share:
Where:
MC represents the Monthly Contribution which the Eligible Employee has elected to save under his Savings Arrangement;
Y represents such number of months as the Board may determine prior to the relevant Invitation Date (the Option Period) plus an additional number of months’ Monthly Contributions which the Board estimates to be equivalent to the likely amount of interest (if any) to be earned on the Savings Arrangement;
EP represents the Exercise Price.
For the avoidance of doubt if, at the Maturity Date, the actual proceeds of the Savings Arrangement are less than MC, the Option Holder may not top-up the proceeds from a separate source.
In no event may the Option Holder acquire on exercise a greater number of Shares than that over which the Option is granted (and the excess savings shall be returned to the Option Holder).
8.Exercise and Lapse of Options
8.1Save as otherwise permitted in these rules, an Option may only be exercised:
(a) during the six months following the Maturity Date relating to it; and
(b) by an Option Holder who is, at the date of exercise, an employee of a Participating Company,
and, if not exercised, shall lapse at the end of the six month period following the Maturity Date. If, during the six months’ exercise period referred to above, the Option Holder is subject to any dealing restrictions under the Financial Conduct Authority’s Listing Rules, Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse or any equivalent or successor legislation or any relevant share dealing code of the Company, the six months’ exercise period shall be suspended until such later date as those dealing restrictions lift. The Option Holder may exercise an Option by written notice to the Company in such form as the Board may prescribe. An Option may only be exercised with Monthly Contributions which have been made as at the date of exercise, including any interest as at such date. No account shall be taken of any Monthly Contribution the due date of which arises after the date of exercise, or any interest in respect of that Monthly Contribution. Notwithstanding any other provision in these rules, no Option may be exercised more than 10 years after its Date of Grant.
8.2Every Option granted under this Scheme shall be personal to the Option Holder and, except to the extent necessary to enable a personal representative to exercise the Option following the death of an Option Holder, neither the Option nor the benefit thereof may be transferred, assigned, charged or otherwise alienated. Any transfer of an Option otherwise than as permitted in this rule 8.2 shall cause the Option to lapse.
8.3Subject to rule 8.6, where an Option Holder ceases to be an employee of a Participating Company before the expiry of six months after the Maturity Date of any outstanding Options:
(a) by reason of redundancy (as determined by the Board), injury, retirement or disability, he may exercise any outstanding Options within six months of the date on which employment ceased, failing which exercise the Options shall lapse automatically: Provided that the Options may not be exercised more than six months following the relevant Maturity Date;
(b) on:
(i) his employing company ceasing to be under the Control of the Company; or
(ii) the business (or part of a business) in which he is employed being transferred to a person who is neither an Associated Company nor a company over which the Company has Control,
he may exercise any outstanding Options within six months of the date on which employment ceased, failing which exercise the Options shall lapse automatically: Provided that the Options may not be exercised more than six months following the relevant Maturity Date; or
(c) for any other reason as the Board in its absolute discretion may determine, he may exercise any outstanding Options within six months of the date on which employment ceased, failing which exercise the Options shall lapse automatically: Provided that the Options may not be exercised more than six months following the relevant Maturity Date.
8.4If an Option Holder ceases to be an employee of a Participating Company before the expiry of six months after the Maturity Date of any outstanding Options:
(a)by reason of dismissal for gross misconduct, serious breach or non-observance of his contract of employment or failure or refusal to carry out the duties assigned to him thereunder; or
(b)for any reason not mentioned in rule 8.3 (other than death),
his Options lapse automatically upon such cessation.
8.5If an Option Holder dies, Options granted to him may be exercised by his personal representatives at any time within the 12 month period following:
(a)the date of death, if the date occurred before the relevant Maturity Date; and
(b)the Maturity Date, if the death occurred within six months following the relevant Maturity Date,
failing which exercise, the Options shall lapse automatically.
8.6For the purposes of rule 8.3, an Option Holder shall not be treated as ceasing to be an employee of a Participating Company until he ceases to hold an office or employment in the Company or any company over which the Company has Control or any Associated Company.
8.7Notwithstanding rule 8.1(b), if, at the Maturity Date, an Option Holder’s employing company has ceased to be a Participating Company but is an Associated Company or a company over which the Company has Control, Options may be exercised within (but no later than) six months following the Maturity Date.
8.8If, before the Option has become exercisable, the Option Holder:
(a)gives notice, or is deemed to have given notice, under the terms of the related Savings Arrangement that he intends to stop paying contributions to that Savings Arrangement; or
(b)makes an application for repayment of the related Savings Arrangement,
the Option shall automatically lapse.
8.9If an Option becomes exercisable under any provision of the Scheme before the Maturity Date, it shall be exercisable only over such number of Shares (S) as is calculated according to the following formula and any fraction of a Share shall be rounded down to the nearest whole Share:
Where:
Z represents the accrued savings under the Savings Arrangement relating to an Option as at the date of exercise of such Option;
EP represents the Exercise Price of an Option (subject to any adjustments made pursuant to rule 11);
8.10If the actual proceeds of the Savings Arrangement exceeds the amount payable on exercise of the Option to acquire the number of Shares determined under rule 8.9, the excess savings shall be returned to the Option Holder.
8.11An Option shall lapse immediately after it is first exercised notwithstanding that it shall not have been exercised in respect of the maximum number of Shares over which the Option was granted.
8.12This rule 8.12 shall apply to US Taxpayers. Notwithstanding anything to the contrary contained in the Scheme, an Option Holder who is a US Taxpayer may only exercise an Option within the shorter of any exercise period specified in the rules of this Scheme and the expiry of two and a half calendar months after the end of the Tax Year in which the Option is no longer subject to a substantial risk of forfeiture, and thereafter, such Option shall immediately lapse and automatically be cancelled and cease to have any further legal force or effect whatsoever. Options granted to US Taxpayers are intended to be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, pursuant to the short-term deferral exemption described in Section 1.409A-1(b)(4) of the treasury regulations issued under the Code, and the Scheme and any option certificate in respect of an Option granted to a US Taxpayer shall be interpreted, operated and administered in a manner consistent with such intention.
9.Take-over and Liquidation
9.1This rule 9 applies if:
(a)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied, the person making the offer will have Control of the Company; or
(ii)a general offer to acquire all of the Shares;
(b)any person proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law;
(c)any person becomes bound or entitled to acquire Shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(d)notice is given of a resolution for the voluntary or compulsory winding-up of the Company, or
(e)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of a Non-UK Company Reorganisation Arrangement which becomes binding on the shareholders covered by it,
(each a Relevant Event).
9.2Where this rule 9 applies and subject to rules 9.3 and 10 below, all outstanding Options will (unless the Board determines otherwise prior to the Relevant Date) be automatically exercised on the Relevant Date (whether or not the Relevant Event occurs before or within six months of the Maturity Date) provided that the Exercise Price is equal to or less than the relevant offer price or consideration (as determined by the Board), if applicable. Where this rule 9 applies, and subject to rule 9.3 below, any outstanding Options that are not exercised on the Relevant Date shall lapse automatically and any savings under the relevant Savings Arrangement relating to such Options shall be returned to the Option Holder save that in the case of any Option which has become exercisable under rule 8.5, such Option shall not lapse under this rule 9.2 on the expiry of the sixth month period following any of the Relevant Events mentioned in rule 9.1(a), (b), (c) or (e) but shall lapse only on the expiry of the relevant 12 month period under rule 8.5. For the avoidance of doubt, any such Option may lapse on the expiry of the six month period arising under rule 9.1(d) even if this occurs before the expiry of the relevant 12 month period under rule 8.5.
9.3Without prejudice to the operation of rule 10, Options shall not be exercisable without the consent of the Board under the foregoing provisions of this rule 9 if the purpose and effect of the Relevant Event, together with any associated transactions, is to create a
new holding company for the Company, such company having substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the Relevant Event. Unless the Board determines otherwise in its absolute discretion, an Option will in such circumstances be exchanged for equivalent options in accordance with rule 10 below.
10.Option rollover
10.1If any company (the acquiring company):
(a)obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the acquiring company will have Control of the Company; or
(ii)a general offer to acquire all the Shares; or
(b)obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(c)becomes bound or entitled to acquire shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or its equivalent under applicable law,
(d)obtains Control of the Company as a result of a Non-UK Company Reorganisation Arrangement which has become binding on the shareholders covered by it,
and notice of a replacement option is given (with the consent of the acquiring company), then, on the Relevant Date, any Option which has not lapsed (the old option) shall automatically be released and shall be replaced by an option (the new option) which (in the opinion of the Board) is equivalent to the old option but relates to shares in a different company (whether the acquiring company itself or another company) (the new grantor).
10.2The provisions of the Scheme shall be construed as if:
(a)the new option were an option granted under the Scheme at the same time as the old option;
(b)references to the Company in the rules were references to the new grantor provided that references to the Participating Company shall continue to be construed as if references to the Company within this definition were to Ferguson plc (company number 128484);
(c)references to the Board in the rules were references to the board of directors of the new grantor;
(d)references to Shares were references to shares in the new grantor;
(e)the Savings Arrangement entered into in connection with the old option had been made in connection with the new option; and
(f)the Maturity Date in relation to the new option was the same as that in relation to the old option.
11.Adjustment of Options
11.1In the event of any Capital Reorganisation (or the implementation by the Company of a demerger or payment of a super dividend which would otherwise materially affect the value of an Option), the Exercise Price, the description of Shares and the number of Shares comprised in an Option may be adjusted in such manner as the Board may determine: Provided that:
(a)no adjustment shall be made pursuant to this rule which would increase the aggregate Exercise Price of any Option; and
(b)no adjustment may have the effect of reducing the Exercise Price to less than the nominal value of a Share.
11.2Any adjustment to Options made pursuant to this rule 11 shall be notified to the relevant Option Holder.
12.Allotment or Transfer of Shares on Exercise of Options
Subject to any necessary consents, to payment being made for the Shares and to compliance by the Option Holder with the terms of the Scheme, not later than 30 days after receipt of any notice of exercise in accordance with rule 8, the Company shall either allot and issue or procure the transfer of Shares to the Option Holder (or to his nominee). The Company shall or, if applicable, shall procure that the Trustee shall, (unless the Shares are to be issued in uncertificated form) as soon as practicable deliver to the Option Holder (or such nominee) a definitive share certificate or other evidence of title in respect of such Shares. Where the Shares are issued or transferred to a nominee of the Option Holder, the Option Holder shall remain the beneficial owner of the Shares.
13.Rights Attaching to Shares Allotted or Transferred Pursuant to Options
13.1All Shares allotted or transferred upon the exercise of an Option shall rank pari passu in all respects with the Shares in issue at the date of exercise save as regards any rights attaching to such Shares by reference to a record date prior to the date of exercise.
13.2Any Shares acquired on the exercise of Options shall be subject to the articles of association of the Company from time to time in force.
14.Availability of Shares
14.1The Company shall at all times keep available for issue sufficient authorised but unissued Shares to permit the exercise of all unexercised Options under which Shares may
be allotted or shall otherwise procure that Shares are available for transfer in satisfaction of the exercise of Options.
14.2If and so long as the Shares are admitted to listing by the Financial Conduct Authority and admitted to trading on the London Stock Exchange, the Company will, at its expense, apply to the Financial Conduct Authority and to the London Stock Exchange for admission to the Official List (unless listing has already been granted) and for trading, respectively, of Shares allotted on the exercise of any Option.
15.Administration and Amendment
The decision of the Board shall be final and binding in all matters relating to the Scheme and it may at any time discontinue the grant of further Options or amend any of the provisions of the Scheme in any way it thinks fit: Provided that:
(a)except as herein provided, the Board shall not make any amendment that would materially prejudice the interests of existing Option Holders in any jurisdiction in which the Scheme operates except with the prior consent or sanction of the Option Holders in that jurisdiction who, if they exercised their Options in full, would thereby become entitled to a majority of all the Shares which would fall to be allotted or transferred upon exercise in full of all outstanding Options in that jurisdiction;
(b)no amendment to the advantage of Eligible Employees or Option Holders may be made to:
(i)the definition of Eligible Employee;
(ii)the limitations on the number of Shares subject to the Scheme;
(iii)the maximum entitlement for any Eligible Employee under the Scheme;
(iv)the basis for determining an Eligible Employee’s entitlement to Shares under the Scheme;
(v)the terms of Shares to be provided under the Scheme; and
(vi)the adjustments to Options, under rule 11, in the event of a Capital Reorganisation,
without the prior approval of the Company in general meeting except in the case of minor amendments to benefit the administration of the Scheme, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Eligible Employees and Option Holders or any member of the Group;
(c)without prejudice to any provision of the Scheme which provides for the lapse of an Option, the Board may not cancel an Option unless the Option Holder agrees in writing to such cancellation.
16.Tax
Any liability of an Option Holder to taxation or social security contributions shall be for the account of the relevant Option Holder and the issue or transfer of any Shares subject to an Option Holder’s Option shall be conditional upon the Option Holder having discharged the amount required to satisfy the taxation or social security contributions which arise in respect of the Option and the Shares subject to the Option to the satisfaction of the Company, or otherwise having complied with any arrangements specified by the Company to secure that such taxation or social security contributions are satisfied including irrevocably authorising the Company to sell or procure the sale of sufficient Shares on or following the exercise of his Option on his behalf to ensure that any relevant member of the Group or former member of the Group receives the amount required to discharge the taxation or social security contributions which arise and by participating in the Scheme an Option Holder is deemed to have given such authorisation.
17.General
17.1Any Participating Company may provide money to the Trustee or any other person to enable them or him to acquire Shares to be held for the purposes of the Scheme, or enter into any guarantee or indemnity for those purposes, to the extent not prohibited by applicable law.
17.2Notwithstanding any other provision of the Scheme:
(a)the Scheme shall not form part of any contract of employment between the Company or any Subsidiary and an Option Holder;
(b)no Eligible Employee has any right to be granted an Option and the fact that an Eligible Employee may have received invitations to participate in the Scheme and/or been granted Options under the Scheme shall not entitle any Eligible Employee to future invitations or grants;
(c)the benefit to an Option Holder of participation in the Scheme (including, in particular but not by way of limitation, any Options held by him) shall not form any part of his contractual remuneration or benefits or count as his contractual remuneration or benefits for any purpose;
(d)nothing in the Scheme shall in any way be construed as imposing upon any member of the Group a contractual obligation as between the member of the Group and an Option Holder to contribute to the Scheme; and
(e)if an Option Holder ceases to be employed within the Group, he shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit
under the Scheme (including, in particular but not by way of limitation, any Options held by him which lapse by reason of his ceasing to be employed within the Group whether lawfully or unlawfully) whether by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise (or by way of similar provisions of the law of the jurisdiction in which the Option Holder is resident).
By participating in the Scheme, an Option Holder is deemed to have agreed to the provisions of the Scheme and in particular, this rule 17.2.
17.3The existence of any Option shall not affect in any way the right or power of the Company or its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or other changes in the Company’s capital structure, or any merger or consolidation of the Company, or any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or convertible into, or otherwise affecting the Shares or the rights thereof, 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.
17.4Any notice or other document required to be given under or in connection with the Scheme may be delivered to an Option Holder or sent by post to him at his home address according to the records of his employing company or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document required to be given to the Company under or in connection with the Scheme may be delivered or sent by post to it at its corporate services office at 1020 Eskdale Road, Winnersh, Wokingham RG41 5TS (or such other place or places as the Board may from time to time determine and notify to Option Holders).
17.5The Company, or where the Board so directs any Subsidiary, shall pay the appropriate stamp duty on behalf of the Option Holders in respect of any transfer of Shares on the exercise of the Options.
17.6Benefits under this Scheme shall not be pensionable.
17.7By accepting the grant of an Option, a Participant acknowledges that the Company or any member of the Group may hold, process and transfer personal data relating to them to other members of the Group or to any third parties engaged by them (whether within or outside of the European Economic Area (EEA) and that personal data may also be processed outside the EEA by the Company or any member of the Group or by one or more held or of its or their service providers) for any and all purposes related to the operation and administration of the Plan and/or in order to meet any legal obligation, in each case in accordance with the Company’s Share Plan Data Protection Protocol and applicable law.
17.8These rules shall be governed by, and construed in accordance with, the laws of England. Unless specifically stated otherwise, each Option Holder, the Company and any other Participating Company or Associated Company submits to the exclusive jurisdiction
of the English courts in relation to all disputes arising out of or in connection with the Scheme.
APPENDIX A
THE UK SAYE
The provisions of this Appendix A should apply to any Eligible Employee of a UK Participating Company.
1.DEFINITIONS
1.1 In this Appendix A, unless the context otherwise requires, the following words and expressions shall have the following meanings, namely:
the Act means the UK Income Tax (Earnings and Pensions) Act 2003;
Adoption Date means 25 April 2019 or, if applicable, the date that approval for this Appendix A is renewed by the Company’s shareholders in general meeting;
Appendix A means this Appendix A of the Scheme as may be amended from time to time;
Associated Company means an associated company of the Company within the meaning given to those words by paragraph 47 of Schedule 3 to the Act;
the Board means the board of directors of the Company or a duly authorised committee thereof;
Bonus Date means, in relation to an Option:
(a) where the Option is linked to a three year Savings Contract, the earliest date on which the bonus is payable under that Savings Contract (that is, after making 36 Monthly Contributions); or
(b) where the Option is linked to a five year Savings Contract under which the Option Holder has elected to receive the five year bonus, the earliest date on which the five year bonus is payable under that Savings Contract (that is, after making 60 Monthly Contributions);
Capital Reorganisation means any capitalisation issue, rights issue, sub-division, consolidation or reduction of capital or any other variation of the share capital of the Company;
the Company means the company incorporated in Jersey as Ferguson plc, with registered number 128484;
Continuous Service has the same meaning as continuous employment in the Employment Rights Act 1996;
Control shall have the meaning given to that word by section 995 of the Income Tax Act 2007;
the Date of Grant means the date on which an Option is granted;
Dealing Day means any day on which the London Stock Exchange is open for the transaction of business;
DI means a depositary interest representing an ordinary share in the capital of the Company;
Eligible Employee means any employee (including an executive director) who is eligible to participate in this Appendix A under the provisions of rule 2.2;
Exercise Price means the price per Share payable on the exercise of an Option as determined under rule 2.4 (subject to adjustment under rule 11);
Grant Period means the period of 42 days commencing on:
(a) the day immediately following the day on which the Company makes an announcement of its results for the last preceding financial year, half year or other period;
(b) any day on which the Board resolves that exceptional circumstances exist which justify the grant of Options; or
(c) any day on which any change to the legislation affecting a Schedule 3 SAYE Option Scheme is proposed or made;
the Group means the Company and the Subsidiaries and member of the group shall be construed accordingly;
HMRC means Her Majesty’s Revenue & Customs;
the Invitation Date means the date on which an invitation to apply for an Option is issued;
London Stock Exchange means London Stock Exchange plc or any successor body thereto;
Market Value means in relation to a Share on any day:
(a) if and so long as the Shares are listed by the Financial Conduct Authority, its middle market quotation (as derived from the Daily Official List of the London Stock Exchange); or
(b) subject to (a) above, its market value as determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992 and agreed in advance with the Shares and Assets Valuation Division of HMRC;
in either case, determining if so required for the purposes of any relevant provision in Schedule 3, the market value of a Share that is subject to a Restriction, as if it were not subject to the Restriction;
Maximum Savings Contribution means £500 or such greater amount as is for the time being permitted under paragraph 25(3) of Schedule 3 and approved by the Board;
Minimum Savings Contribution means the amount of the monthly contribution to be paid under the Savings Contract being not less than £10 or such other minimum amount as may be permitted under paragraph 25 of Schedule 3 and approved by the Board from time to time;
Monthly Contribution means the monthly sum which shall not be less than the Minimum Savings Contribution nor more than the Maximum Savings Contribution which an Option Holder has elected to save under his Savings Contract;
Non-UK Company Reorganisation Arrangement has the meaning given to that term by paragraph 47A of Schedule 3;
Option means a right granted under this Appendix A to subscribe for or purchase Shares, which is for the time being subsisting;
Option Holder means any individual who holds a subsisting Option (including, where the context permits, the legal personal representatives of a deceased Option Holder);
Old Ferguson means Ferguson Holdings Limited, a company incorporated in Jersey with registered number 106605;
Old Ferguson Shares means fully paid ordinary shares in the capital of Old Ferguson;
Participating Company means the Company and each Subsidiary which has been nominated by the Board as a Participating Company for the purposes of this Appendix A;
Relevant Date means:
(a)if the Relevant Event falls within rule 9.1(a), the date on which Control is obtained and any conditions to which the offer is made subject are satisfied;
(b) if the Relevant Event falls within rule 9.1(b), the date on which the scheme of arrangement is sanctioned by the court;
(c) if the Relevant Event falls within rule 9.1(c), the date on which the person first becomes so bound or entitled; or
(d) if the Relevant Event falls within rule 9.1(d), the date on which notice of the resolution is given; or
(e) if the Relevant Event falls within rule 9.1(e), the date on which the Non-UK Reorganisation Arrangement becomes binding on the shareholders covered by it;
Relevant Event shall have the meaning given to that term in rule 9.1;
Restriction means a restriction within the meaning given to that term by paragraph 48(3) of Schedule 3;
Savings Contract means a contract under a certified contractual savings scheme, within the meaning of paragraph 24 of Schedule 3, the terms of which must be the same for each participant;
Schedule 3 means Schedule 3 to the Act;
Schedule 3 SAYE Option Scheme has the meaning given to that term by paragraph 49 of Schedule 3;
Scheme of Arrangement means the Scheme of Arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991, as amended, to introduce a new, Jersey-incorporated holding company to the Group;
Scheme of Arrangement Effective Date means 10 May 2019 being the date on which the Scheme of Arrangement became effective in accordance with its terms;
the Scheme means the Ferguson Group International Sharesave Plan 2019 as may be amended from time to time;
Shares means:
(a) fully paid and irredeemable ordinary shares in the capital of the Company, which comply with the conditions in paragraphs 17 to 20 and paragraph 22 of Part 4 of Schedule 3;
(b) where appropriate the DIs representing such shares; and/or
(c) shares, or DIs representing those shares following any Capital Reorganisation;
Sharesave Scheme means a sharesave scheme established by the Company or Old Ferguson;
Subsidiary means any subsidiary of the Company within the meaning of section 1159 of and Schedule 6 to the UK Companies Act 2006 over which the Company has Control;
Tax Year means the calendar year or, if it would result in a longer period for the exercise of an Option, the 12 month period in respect of which the Participant’s employing company is obliged to pay tax;
Trustee means the trustee or trustees of any employee benefit trust established by the Company;
US Tax means taxation under the rules of the United States of America; and
US Taxpayer means a person who is or becomes subject to US Tax.
1.2 Where the context permits the singular shall include the plural and vice versa and the masculine shall include the feminine.
1.3 References to any act or statutory instrument of UK Parliament shall include any modification, amendment or re-enactment thereof.
1.4 Notwithstanding any other provisions of this Appendix A, where an Eligible Employee and/or Option Holder is paid salary other than on a monthly basis:
(a)references to “months” and “monthly” in the rules shall be construed having regard to such other period by reference to which the Eligible Employee and/or Option Holder is paid; and
(b)the Board shall take all such steps as it considers necessary or desirable to ensure that an Eligible Employee and/or Option Holder who is paid salary other than monthly is no better or worse off under this Appendix A than an Eligible Employee and/or Option Holder who is paid salary monthly.
1.5 This Appendix A is intended to be a Schedule 3 SAYE Option Scheme for the purposes of the Act and Appendix A and any Option granted under it shall be interpreted, operated and administered in a manner that is consistent with that intention and in the case of any conflict between these Rules and the provisions of sections 516, 517 and 519 of and Schedule 3 to the Act (the legislation), the legislation shall prevail.
2.INVITATION FOR OPTIONS
2.1The Board may, during a Grant Period, invite all Eligible Employees to apply for Options at the Exercise Price.
2.2The following individuals are Eligible Employees:
(a)any individual who, at the Invitation Date:
(i)is an employee, including an executive director, of one or more Participating Companies who, in the case of a director, is required under the terms of his employment to devote at least 25 hours each week (excluding meal breaks) to his duties;
(ii)has earnings from the office or employment referred to in (i) above that meet (or would meet if there were any) the requirements set out in paragraphs 6(2)(c) of Schedule 3;
(iii)has been in Continuous Service with one or more Participating Companies for such period as the Board may determine (not exceeding five years) prior to the Date of Grant; and
(b)any other individual who, at the Invitation Date, is an employee or director of one or more Participating Companies and who is nominated by the Board (or falls within a category or individuals nominated by the Board) as eligible to participate in this Appendix A in respect of any one or more grants of Options.
2.3Subject to the specific provisions contained in these rules, the form, manner and timing of invitations to apply for Options, the number of Shares in respect of which invitations are made on any date and whether the Options will be three, five or seven year Options (or any of them, at the election of Eligible Employees), shall be at the absolute discretion of the Board. The invitation may either state the Exercise Price or (provided a mechanism exists by which the Exercise Price will be determined by the Date of Grant) invite applications by reference to amounts of monthly savings.
2.4The Exercise Price shall be determined by the Board but shall not be less than the higher of:
(a)in the case of an Option to subscribe for Shares, the nominal value of a Share on the Date of Grant; and
(b)80 per cent. of the Market Value of a Share on (i) the Dealing Day immediately before the Invitation Date, or (ii) if the Board so determines, the three Dealing Days immediately preceding the Invitation Date, or (iii) such other time or times as may be agreed with HMRC.
3.APPLICATION FOR OPTIONS
3.1If an Eligible Employee wishes to apply for an Option he must, within such period (which shall not be less than 14 days) after the Invitation Date as is stated in the invitation, deliver to the Company (or its appointed agent) a duly completed form of application as prescribed by the Board on which the Eligible Employee must have indicated the Bonus Date on which he intends to apply for repayment, together with a duly completed and signed application for a Savings Contract.
3.2The application for an Option shall be deemed to be for an Option over the largest whole number of Shares which can be acquired at the Exercise Price with the expected repayment, including any relevant bonus, under the related Savings Contract at the appropriate Bonus Date.
3.3The Board may treat all late applications as valid unless they are received fewer than three business days before the Date of Grant.
4.Scaling down
4.1If valid applications are received for Options over a number of Shares in excess of that which the Board has determined to make available on a particular occasion, the Board may scale down applications, in accordance with the following steps in this rule 4, in such order and combination as the Board may determine (acting fairly and reasonably):
(a)if the repayment under the Savings Contract would otherwise be taken as including the seven year bonus it shall be taken to include a bonus but not the seven year bonus;
(b)reducing the proposed Monthly Contributions pro rata to the excess over such amount as the Board shall determine for this purpose being not less than the Minimum Savings Contribution;
(c)if the repayment under the Savings Contract would otherwise be taken as including a bonus, it should be taken as not including a bonus; and
(d)selecting applications by lot, each based on a Monthly Contribution of the Minimum Savings Contribution and the inclusion of no bonus in the repayment under the Savings Contract.
4.2If the number of Shares available is insufficient to enable an Option based on Monthly Savings Contributions of the Minimum Savings Contribution and the inclusion of no bonus in the repayment under the Savings Contract to be granted to each Eligible Employee making a valid application, the Board may, as an alternative to selecting by lot, determine in its absolute discretion that no Options shall be granted.
4.3If, in applying the scaling down provisions contained in rule 4.1, Options cannot be granted within the 30 day period referred to in rule 5.2 below, the Board may extend that period by up to 12 days regardless of the expiry of the relevant Invitation Period.
5.GRANT OF OPTIONS
5.1No Option shall be granted to any person if at the Date of Grant that person shall have ceased to be an Eligible Employee.
5.2Following the receipt by the Company of valid applications the Board may, subject to rules 3.3 and 4, on a single date which shall not be later than the thirtieth day after the earliest date by reference to which the Exercise Price was calculated, grant all (but not some) of the Options for which valid application has been made on that occasion by Eligible Employees in consideration of such Eligible Employees agreeing to enter into the Savings Contracts. As soon as practicable thereafter, the Board shall procure the issue of an option certificate or letter of grant to each Eligible Employee who has been granted an Option. If the Shares which are the subject of an Option are subject to any Restriction, the Company shall as soon as practicable after the Date of Grant notify Option Holders of that fact and the details of any such Restriction. No cash payment shall be made for the grant of an Option.
5.3No Option shall be granted under this Appendix A more than 10 years after the Adoption Date.
6.SCHEME LIMITS
6.1No individual may be invited to apply for, or may be granted, an Option over such number of Shares that the granting of such Option and the entry into the related Savings Contract would result in the infringement of rules 6.2, 6.3 or 6.4.
6.2No Eligible Employee may be granted an Option if his Monthly Contributions under the related Savings Contract, when added to the sum of his monthly contributions under any other subsisting Sharesave Scheme, would exceed the Maximum Savings Contribution. Prior to any Invitation Date, the Board may determine that, for the purposes of calculating the limit in this rule 6.2, any monthly contributions under savings contracts entered into in connection with options granted under any other subsisting Sharesave Scheme that the Eligible Employee has cancelled (or which has lapsed pursuant to its terms) before the relevant Bonus Date of such option will be deemed to be monthly contributions being made by such Eligible Employee at the Invitation Date.
6.3No Option to subscribe for Shares shall be granted under this Appendix A if the result of that grant would be that the aggregate number of Shares that could be issued on the exercise of that Option and any other Options granted at the same time, when added to the number of Shares or Old Ferguson Shares that:
(a)could be issued on the exercise of any other subsisting share options granted during the preceding 10 years from the proposed Date of Grant under the Scheme or any other employee share option scheme operated by the Company or Old Ferguson; and
(b)have been issued on the exercise of any share option granted during the preceding 10 years from the proposed Date of Grant under the Scheme or any other employee share option scheme operated by the Company or Old Ferguson; and
(c)have been issued during the preceding 10 years from the proposed Date of Grant under any profit sharing or other employee share incentive scheme (not being a share option scheme) operated by the Company or Old Ferguson,
would exceed 10 per cent. of the ordinary share capital of the Company for the time being in issue. Reference in this rule 6.3 to the issue of Shares shall, for the avoidance of doubt, mean the issue and allotment (but not transfer) of Shares. Where Shares are allotted or issued to the Trustee for the purpose of satisfying Options by way of transfer of Shares by the Trustee, that should be treated as an issue of Shares. Where Shares are transferred or to be transferred from treasury under this Scheme or any other employee share scheme, such Shares shall (for so long as it remains a guideline of institutional shareholders) be treated as an issue of Shares.
6.4With respect to any Options to subscribe for Shares granted following 1 June 2023, the aggregate number of Shares with respect to which Options may be granted under this Appendix A shall not exceed 11,000.
6.5In determining the limits set out in rules 6.3 and 6.4, Shares subject to an Option under this Appendix A shall again be made available for issuance or delivery under this Appendix A if the right to acquire the Shares has been surrendered, has lapsed or is otherwise forfeit without issuance of the full number of Shares to which the Options related.
7.TERMS OF SAVINGS CONTRACTS
7.1The Monthly Contribution shall be deducted from the Eligible Employee’s net pay on a monthly basis or via such other method of collection to be determined in accordance with the terms of the Savings Contract and with the approval of HMRC.
7.2If an Option Holder misses more than 12 Monthly Contributions under the Savings Contract, the Option shall lapse. If an Option Holder withdraws monies from his Savings Contract other than with a view to the exercise of a related Option, that Option shall lapse.
7.3The Savings Contract shall be personal to the Eligible Employee and, regardless of the terms of the Option, any savings arising under it shall be the property of the Eligible Employee concerned.
8.EXERCISE AND LAPSE OF OPTIONS
8.1Save as otherwise permitted in these rules, an Option may only be exercised:
(a)during the six months following the Bonus Date relating to it; and
(b)by an Option Holder who is, at the date of exercise, a director or employee of a Participating Company,
and, if not exercised, shall lapse at the end of the six month period following the Bonus Date. The Option Holder may exercise an Option by written notice to the Company in such form as the Board may prescribe.
8.2Every Option granted under this Appendix A shall be personal to the Option Holder and, except to the extent necessary to enable a personal representative to exercise the Option following the death of an Option Holder, neither the Option nor the benefit thereof may be transferred, assigned, charged or otherwise alienated. Any transfer of an Option otherwise than as permitted in this rule 8.2 shall cause the Option to lapse.
8.3Where an Option Holder ceases to be a director or employee of a Participating Company before the expiry of six months after the Bonus Date:
(a)on retirement or by reason of redundancy (within the meaning of the Employment Rights Act 1996), injury or disability or a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, he may exercise any outstanding Options within six months of the date on which employment ceased, failing which exercise the Options shall lapse automatically: Provided that the Options may not be exercised more than six months following the relevant Bonus Date;
(b)on:
(i)the business (or part of a business) in which he is employed being transferred to a person who is neither an Associated Company nor a company over which the Company has Control where the transfer is not a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or
(ii)his employing company ceasing to be an associated company (as defined in paragraph 35 of Schedule 3) of the Company by reason of a change of
control of the Company (as determined in accordance with sections 450 and 451 of the Corporation Tax Act 2010),
he may exercise any outstanding Options within six months of the date on which employment ceased, failing which exercise the Options shall lapse automatically: Provided that the Options may not be exercised more than six months following the relevant Bonus Date; or
(c)for any other reason other than dismissal for gross misconduct, serious breach or non-observance of his contract of employment or failure or refusal to carry out the duties assigned to him thereunder, he may exercise any outstanding Options that have been held for at least 3 years at the date of such cessation within six months of the date on which employment ceased, failing which exercise the Options shall lapse automatically: Provided that the Options may not be exercised more than six months following the relevant Bonus Date.
8.4Subject to rule 8.5, if an Option Holder ceases to be a director or employee of a Participating Company before the expiry of six months after the Bonus Date of any outstanding Options by reason of dismissal for gross misconduct, serious breach or non-observance of his contract of employment or failure or refusal to carry out the duties assigned to him thereunder, his Options lapse automatically upon such cessation.
8.5If an Option Holder dies, such Options may be exercised by his personal representatives at any time within the 12 month period following:
(a)the date of death, if the date occurred before the relevant Bonus Date; and
(b)the Bonus Date, if the death occurred within six months following the relevant Bonus Date,
failing which exercise, the Options shall lapse automatically.
8.6For the purposes of rule 8.3, an Option Holder shall not be treated as ceasing to be a director or employee of a Participating Company until he ceases to hold an office or employment in the Company or any company over which the Company has Control or any Associated Company.
8.7Notwithstanding rule 8.1(b), if, at the Bonus Date, an Option Holder’s employing company has ceased to be a Participating Company but is an Associated Company or a company over which the Company has Control, Options may be exercised within (but no later than) six months following the Bonus Date.
8.8If, before the Option has become exercisable, the Option Holder:
(a)gives notice, or is deemed to have given notice, under the terms of the related Savings Contract that he intends to stop paying contributions to that Savings Contract; or
(b)makes an application for repayment of the related Savings Contract,
the Option shall automatically lapse.
8.9If an Option Holder is declared bankrupt or enters into any general composition with or for the benefit of his creditors including a voluntary arrangement under the Insolvency Act 1986, his Options shall automatically lapse.
8.10An Option may only be exercised with monies as nearly as possible equal to but not exceeding the amount repaid under the related Savings Contract, including any bonus or interest as at the date of repayment. No account shall be taken of any repayment of any contribution the due date of which arises after the date of repayment, or any bonus or interest in respect of that contribution.
8.11An Option Holder may exercise his Option on one occasion only, in whole or in part, by giving notice in writing to the Company or to such other person (including, for the avoidance of doubt, the Trustee), as the Company may direct in the prescribed form specifying the number of Shares in respect of which the Option is being exercised and enclosing payment in full of the aggregate Exercise Price of those Shares together with evidence of closure of the related Savings Contract. The date of exercise shall be the date of receipt by the Company (or such other person as the Company may direct) of the notice of exercise. If the Option is exercised in respect of some only of the Shares comprised in the Option, the Option in respect of the balance shall thereupon lapse automatically.
8.12This rule 8.12 shall apply to US Taxpayers. Notwithstanding anything to the contrary contained in the Scheme, an Option Holder who is a US Taxpayer may only exercise an Option within the shorter of any exercise period specified in the rules of this Scheme and the expiry of two and a half calendar months after the end of the Tax Year in which the Option is no longer subject to a substantial risk of forfeiture.
9.TAKE-OVER AND LIQUIDATION
9.1This rule 9 applies if:
(a)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied, the person making the offer will have Control of the Company; or
(ii)a general offer to acquire all of the Shares;
(b)any person (either alone or together with any person acting in concert with him) proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 (to the extent that it is equivalent to section 899 of the Companies Act 2006) applicable to or affecting:
(i)all the ordinary share capital of the Company or all the shares in the Company which are of the same class as the shares which may be acquired by exercise of Options; or
(ii)all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 3 SAYE Option Scheme;
(c)any person (either alone or together with any person acting in concert with him) becomes bound or entitled to acquire Shares in the Company under Part 18 of the Companies (Jersey) Law 1991 (to the extent that it is equivalent to sections 979 to 982 (inclusive) or sections 983 to 985 (inclusive) of the Companies Act 2006);
(d)notice is given of a resolution for the voluntary winding-up of the Company; or
(e)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of a Non-UK Company Reorganisation Arrangement which becomes binding on the shareholders covered by it,
(each a Relevant Event).
9.2Where this rule 9 applies and subject to rules 9.3 and 10 below, all outstanding Options may be exercised within six months of the Relevant Date (whether or not the Relevant Event occurs before or within six months of the Bonus Date) provided that an Option may not be exercised more than six months after the relevant Bonus Date. Where this rule 9 applies, any outstanding Options that are not exercised (including as a result of the application of rule 9.3) within six months of the Relevant Date shall lapse automatically and any savings under the relevant Savings Contract relating to such Options shall be returned to the Option Holder save that in the case of any Option which has become exercisable under rule 8.5, such Option shall not lapse under this rule 9.2 on the expiry of the six month period following any of the Relevant Events mentioned in rule 9.1(a), (b), (c) or (e) but shall lapse only on the expiry of the relevant 12 month period under rule 8.5. For the avoidance of doubt, any such Option may lapse on the expiry of the six month period arising under rule 9.1(d) even if this occurs before the expiry of the relevant 12 month period under rule 8.5 .
9.3Without prejudice to the operation of rule 10, Options shall not be exercisable under the foregoing provisions of this rule 9 if the purpose and effect of the Relevant Event, together with any associated transactions, is to create a new holding company for the Company, such company having substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the Relevant Event.
9.4For the purposes of rule 9.1(a):
(a)the reference to the issued ordinary share capital of the Company does not include any capital already held by the person making the offer or a person connected with that person;
(b)the reference to Shares in the Company does not include any Shares already held by the person making the offer or a person connected with that person; and
(c)the general offer referred to in that rule may be made to different shareholders by different means.
9.5 Notwithstanding any provision to the contrary, where this Rule 9 applies or is expected to apply, and in consequence of a Relevant Event mentioned in rule 9.1(a), (b), (c), or (e), the Shares that may be acquired on the exercise of an Option no longer meet, or are not expected to meet, the requirements of paragraphs 17 to 20 (inclusive) and 22 of Part 4 of Schedule 3 the Board may determine that Options may be exercised within a period of 20 days ending on the Relevant Event (conditional upon and with effect from that Relevant
Event occurring) or a period of 20 days after the Relevant Event. The Board shall act fairly and reasonably in exercising its discretion under this rule.
10.OPTION ROLLOVER
10.1If any company (the acquiring company):
(a)obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the acquiring company will have Control of the Company; or
(ii)a general offer to acquire all the Shares; or
(b)obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 (to the extent that it is equivalent to section 899 of the Companies Act 2006); or
(c)becomes bound or entitled to acquire shares in the Company under Part 18 of the Companies (Jersey) Law 1991 (to the extent that it is equivalent to sections 979 to 982 (inclusive) or sections 983 to 985 (inclusive) of the Companies Act 2006); or
(d)obtains Control of the Company as a result of a Non-UK Company Reorganisation Arrangement which has become binding on the shareholders covered by it,
and notice of a replacement option is given (with the consent of the acquiring company), then, within six months of the Relevant Date, each Option Holder may release any Option granted under this Appendix A which has not lapsed (the old option) in consideration of the grant to him of an option (the new option) which (for the purposes of paragraph 39 of Schedule 3) is equivalent to the old option but relates to shares (which comply with the conditions in paragraphs 18 to 20 (inclusive) and 22 of Schedule 3) in a different company (whether the acquiring company itself or another company falling within paragraph 18(b) or (c) of Schedule 3) (the new grantor).
10.2The new option shall not be regarded for the purposes of rule 10.1 as equivalent to the old option unless the conditions set out in paragraph 39(4) of Schedule 3 are satisfied and, in relation to the new option, the provisions of this Appendix A shall be construed as if:
(a)the new option were an option granted under this Appendix A at the same time as the old option;
(b)references to the Company in the rules were references to the new grantor provided that references to Participating Company shall continue to be construed as if references to the Company within this definition were to Ferguson plc (with company number 128484);
(c)references to the Board in the rules were references to the board of directors of the new grantor;
(d)references to Shares were references to shares in the new grantor;
(e)the Savings Contract entered into in connection with the old option had been made in connection with the new option; and
(f)the Bonus Date in relation to the new option was the same as that in relation to the old option.
10.3For the purposes of Rule 10.1(a):
(a)the reference to the issued ordinary share capital of the Company does not include any capital already held by the person making the offer or a person connected with that person;
(b)the reference to Shares in the Company does not include any Shares already held by the person making the offer or a person connected with that person; and
(c)the general offer referred to in that rule may be made to different shareholders by different means.
11.ADJUSTMENT OF OPTIONS
11.1In the event of any Capital Reorganisation, the Exercise Price, the description (but not the class) of Shares and the number of Shares comprised in an Option may be adjusted in such manner as the Board may determine: Provided that:
(a)no adjustment shall take effect unless the total Market Value of the Shares subject to any Option is immediately after the adjustment or adjustments substantially the same as what it was immediately before the adjustment or adjustments and the aggregate Exercise Price of such Option is immediately after the adjustment or adjustments substantially the same as what it was immediately before the adjustment or adjustments;
(b)no adjustment shall be made pursuant to this rule which would increase the aggregate Exercise Price of any Option; and
(c)no adjustment may have the effect of reducing the Exercise Price to less than the nominal value of a Share.
11.2Any adjustment to Options made pursuant to this rule 11 shall be notified to the relevant Option Holder.
12.Allotment or Transfer of Shares on Exercise of Options
Subject to any necessary consents, to payment being made for the Shares and to compliance by the Option Holder with the terms of this Appendix A, not later than 30 days after receipt of any notice of exercise in accordance with rule 8, the Company shall either allot and issue or procure the transfer of Shares to the Option Holder (or to his nominee). The Company shall or, if applicable, shall procure that the Trustee shall (unless the Shares are to be issued in uncertificated form), as soon as practicable, deliver to the Option Holder (or such nominee) a definitive share certificate or other evidence of title in respect of such Shares. Where the Shares are issued or transferred to a nominee of the Option Holder, the Option Holder shall remain the beneficial owner of the Shares.
13.Rights Attaching to Shares Allotted or Transferred Pursuant to Options
13.1All Shares allotted or transferred upon the exercise of an Option shall rank pari passu in all respects with the Shares in issue at the date of exercise save as regards any rights attaching to such Shares by reference to a record date prior to the date of exercise.
13.2Any Shares acquired on the exercise of Options shall be subject to the articles of association of the Company from time to time in force.
14.Availability of Shares
14.1The Company shall at all times keep available for issue sufficient authorised but unissued Shares to permit the exercise of all unexercised Options under which Shares may be allotted or shall otherwise procure that Shares are available for transfer in satisfaction of the exercise of Options.
14.2If and so long as the Shares are admitted to listing by the Financial Conduct Authority and admitted to trading on the London Stock Exchange, the Company will, at its expense, apply to the Financial Conduct Authority and to the London Stock Exchange for admission to the Official List (unless listing has already been granted) and for trading, respectively, of Shares allotted on the exercise of any Option.
15.Administration and Amendment
The decision of the Board shall be final and binding in all matters relating to this Appendix A and it may at any time discontinue the grant of further Options or amend any of the provisions of this Appendix A in any way it thinks fit: Provided that:
(a)if an alteration or addition is made to a key feature (within the meaning of paragraph 40B(8) of Schedule 3) of this Appendix A at a time when it is a Schedule 3 SAYE Option Scheme and if such status is to be maintained, it shall not have effect if it would result in the requirements of Parts 2 to 7 of Schedule 3 to the Act not being met in relation to the Scheme. If such status is not to be maintained, the first sentence of this rule 15(a) shall not apply. The Company shall provide such information and make such declarations in relation to any amendment to a key feature as is required for the purposes of Schedule 3;
(b)except as herein provided, the Board shall not make any amendment that would materially prejudice the interests of existing Option Holders except with the prior consent or sanction of the Option Holders who, if they exercised their Options in full, would thereby become entitled to a majority of all the Shares which would fall to be allotted or transferred upon exercise in full of all outstanding Options;
(c)no amendment to the advantage of Eligible Employees or Option Holders may be made to:
(i)the definition of Eligible Employee;
(ii)the limitations on the number of Shares subject to this Appendix A;
(iii)the maximum entitlement for any Eligible Employee under this Appendix A;
(iv)the basis for determining an Eligible Employee’s entitlement to Shares under this Appendix A;
(v)the terms of Shares to be provided under this Appendix A; and
(vi)the adjustments to Options, under rule 11, in the event of a Capital Reorganisation,
without the prior approval of the Company in general meeting except in the case of minor amendments to benefit the administration of this Appendix A, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Eligible Employees and Option Holders or any member of the Group;
(d)without prejudice to any provision of this Appendix A which provides for the lapse of an Option, the Board may not cancel an Option unless the Option Holder agrees in writing to such cancellation.
16.TAX
Any liability of an Option Holder to income tax shall be for the account of the relevant Option Holder.
17.GENERAL
17.1Any Participating Company may provide money to the Trustee or any other person to enable them or him to acquire Shares to be held for the purposes of this Appendix A, or enter into any guarantee or indemnity for those purposes, to the extent not prohibited by applicable law.
17.2Notwithstanding any other provision of this Appendix A:
(a)this Appendix A shall not form part of any contract of employment between the Company or any Subsidiary and an Option Holder;
(b)no Eligible Employee has any right to be granted an Option and the fact that an Eligible Employee may have received invitations to participate in this Appendix A and/or been granted Options under this Appendix A shall not entitle any Eligible Employee to future invitations or grants;
(c)the benefit to an Option Holder of participation in this Appendix A (including, in particular but not by way of limitation, any Options held by him) shall not form any part of his contractual remuneration or benefits or count as his contractual remuneration or benefits for any purpose;
(d)nothing in this Appendix A shall in any way be construed as imposing upon any member of the Group a contractual obligation as between the member of the Group and an Option Holder to contribute to this Appendix A; and
(e)if an Option Holder ceases to be employed within the Group, he shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit under this Appendix A (including, in particular but not by way of limitation, any Options held by him which lapse by reason of his ceasing to be employed within the Group whether lawfully or unlawfully) whether by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise (or by way of similar provisions of the law of the jurisdiction in which the Option Holder is resident).
By participating in this Appendix A, an Option Holder is deemed to have agreed to the provisions of this Appendix A and in particular, this rule 17.2.
17.3The existence of any Option shall not affect in any way the right or power of the Company or its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or other changes in the Company’s capital structure, or any merger or consolidation of the Company, or any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or convertible into, or otherwise affecting the Shares or the rights thereof, 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.
17.4Any notice or other document required to be given under or in connection with this Appendix A may be delivered to an Option Holder or sent by post to him at his home address according to the records of his employing company or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document required to be given to the Company under or in connection with this Appendix A may be delivered or sent by post to it at its corporate services office at 1020 Eskdale Road, Winnersh, Wokingham RG41 5TS (or such other place or places as the Board may from time to time determine and notify to Option Holders).
17.5The Company, or where the Board so directs any Subsidiary, shall pay the appropriate stamp duty on behalf of the Option Holders in respect of any transfer of Shares on the exercise of the Options.
17.6Benefits under this Scheme shall not be pensionable.
17.7By accepting the grant of an Option, a Participant acknowledges that the Company or any member of the Group may hold, process and transfer personal data relating to them to other members of the Group or to any third parties engaged by them (whether within or outside of the European Economic Area (EEA) and that personal data may also be processed outside the EEA by the Company or any member of the Group or by one or more held or of its or their service providers) for any and all purposes related to the operation and administration of the Plan and/or in order to meet any legal obligation, in each case in accordance with the Company’s Share Plan Data Protection Protocol and applicable law.
17.8These rules shall be governed by, and construed in accordance with, the laws of England. Unless specifically stated otherwise, each Option Holder, the Company and any other Participating Company or Associated Company submits to the exclusive jurisdiction of the English courts in relation to all disputes arising out of or in connection with this Appendix A.
| | |
THE FERGUSON GROUP LONG TERM INCENTIVE PLAN 2019 |
Approved by a resolution of the Board on 25 April 2019
As amended by an ordinary resolution of the shareholders of the Company in a general meeting held on 21 November 2019
Approved by an ordinary resolution of the shareholders of the Company on
25 April 2019 and amended by resolutions of the Board of the Company on 27 January 2021 and 12 July 2023
CONTENTS
CLAUSE PAGE
| | | | | |
1. Definitions | 1 |
2. Grant of Awards | 5 |
3. Performance Condition | 8 |
4. Awards which take the form of a Restricted Share Award | 8 |
5. Vesting of Awards and Holding Periods | 9 |
6. Leavers | 9 |
7. Malus and Clawback | 10 |
8. Take-over and Liquidation | 12 |
9. Rollover of Awards | 13 |
10. Consequences of Vesting | 14 |
11. Relationship of Plan to contract of employment | 16 |
12. Adjustment of Awards | 17 |
13. Administration and Amendment | 17 |
14. Data Protection | 18 |
15. General | 18 |
Appendix A Rules of the Ferguson Group Long Term Incentive Plan 2019 – Eligible US Employees | 20 |
1. Definitions | 20 |
2. Grant of Awards | 25 |
3. Performance Condition | 27 |
4. Awards which take the form of a Restricted Share Award | 28 |
5. Vesting of Awards and Holding Periods | 29 |
6. Leavers | 29 |
7. Malus and Clawback | 30 |
8. Take-over and Liquidation | 31 |
9. Rollover of Awards | 32 |
10. Consequences of Vesting | 33 |
11. Relationship of this Appendix A to contract of employment | 36 |
12. Adjustment of Awards | 37 |
13. Administration and Amendment | 37 |
14. Data Protection | 38 |
15. General | 38 |
Schedule 1 Performance Condition | 41 |
Schedule 2 Calculation of Total Shareholder Return | 45 |
RULES OF THE FERGUSON GROUP
LONG TERM INCENTIVE PLAN 2019
1.Definitions
1.1In this Plan, unless the context otherwise requires, the following words and expressions shall have the following meanings, namely:
Adoption Date means 25 April 2019;
Award means an award granted under rule 2 in the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award as the Committee may determine, which is for the time being subsisting;
Award Certificate means the certificate or any other document issued in respect of the grant of an Award under rule 2.9;
Board means the board of directors of the Company;
Capital Reorganisation means any capitalisation issue, rights issue, sub-division, consolidation or reduction of capital or any other variation of the share capital of the Company;
Committee means the Remuneration Committee of the Board or some other duly authorised committee of the Board;
the Company means the company incorporated in Jersey as Ferguson plc, with registered number 128484;
Control shall have the meaning given to that word by section 995 of the Income Tax Act 2007 (UK);
Conditional Award means an Award which takes the form of a contingent right to acquire or receive Shares at no or nominal cost;
the Date of Grant means the date on which the Committee grants an Award;
DI means a depositary interest representing an ordinary share in the capital of the Company;
Dividend Equivalents means the payment of a cash sum or delivery of Shares in accordance with rule 10.12;
DRS statement means the direct registration system statement of account representing certificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
DTC means the Depository Trust Company, being the system used to settle trades of uncertificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
Eligible Employee means any employee (including an executive director) of any member of the Group;
Employees’ Share Scheme has the meaning given by section 1166 of the Companies Act 2006 (UK);
Employer means the Company or any Subsidiary that, with the consent of the Company, participates under this Plan;
Final Value means, in the case of Vested Shares, their aggregate market value calculated by reference to the closing middle-market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the relevant Vesting Date;
Financial Year means a financial year of the Company within the meaning of section 390 of the Companies Act 2006 (UK);
Grant Period means the period of 42 days commencing on:
a)the Adoption Date;
b)the day immediately following the day on which the Company makes an announcement of its results for the last preceding Financial Year, half year or other period; or
c)any day on which the Committee resolves that exceptional circumstances exist which justify the grant of Awards;
the Group means the Company and its Subsidiaries from time to time and the expression member of the Group shall be construed accordingly;
Holding Period means the period specified in the Company’s share ownership guidelines from time to time during which the Participant must retain either the Shares which Vest under an Award (including any Shares delivered in satisfaction of Dividend Equivalents) or, in the case of a Vested but unexercised Option, the Option itself;
Legal Representative means a deceased Participant’s duly appointed legal personal representative, or equivalent representative in jurisdictions other than the UK, as evidenced by such representative to the satisfaction of the Committee;
Listing Rules means the UK Listing Rules published by the Financial Conduct Authority (as amended from time to time);
London Stock Exchange means the London Stock Exchange Plc or any successor body thereto;
Market Abuse Regulation means Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (or any equivalent or successor legislation);
Market Value means in relation to a Share or a Notional Share:
a)the closing middle-market quotation for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States) for the Dealing Day immediately preceding the Date of Grant or, if the Committee so determines the closing middle-market quotation for a Share (as derived from the Daily Official List of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the Date of Grant; or
b)the average of the closing middle-market quotations during such period as the Committee may determine but not exceeding 30 dealing days ending with the dealing day immediately preceding the Date of Grant provided that such dealing day(s) fall within a Grant Period;
NASDAQ means Nasdaq, Inc. or any successor body thereto;
New York Stock Exchange means New York Stock Exchange, Inc. or any successor body thereto;
Notional Share means a share equal in value to a Share, but having no legal rights attributable to a Share;
Old Ferguson means Ferguson Holdings Limited, a company incorporated in Jersey with registered number 106605;
Option means an Award which takes the form of an option to acquire Shares at either no or nominal cost or at Market Value, to be determined at the discretion of the Committee;
Option Exercise Value means, in relation to an Option, the aggregate market value of the Vested Shares subject to such Option calculated by reference to the closing middle market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the last date of the relevant exercise period less any exercise price payable per Share on the exercise of
such Option, provided that if the calculation produces a negative number, the Option Exercise Value shall be nil;
Participant means an Eligible Employee who has been granted an Award (including, where the context permits, the Legal Representative) which has not lapsed or been surrendered or forfeited;
Performance Condition means the performance condition or conditions imposed as a condition of the Vesting of an Award under rule 3.1;
Phantom Award means an Award which takes the form of a right to call for a cash payment calculated by reference to the Final Value of a Notional Share on the Vesting Date;
the Plan means this Ferguson Group Long Term Incentive Plan 2019 as amended from time to time;
Relevant Date means:
a)if the Relevant Event falls within rule 8.1(a), the date on which Control is obtained and any conditions to which the offer is made subject are satisfied;
b)if the Relevant Event falls within rule 8.1(b), either the date on which the scheme of arrangement is approved at the shareholders’ meeting or is sanctioned by the Court (as determined by the Committee in its absolute discretion);
c)if the Relevant Event falls within rule 8.1(c), the date on which the person first becomes so bound or entitled; or
d)if the Relevant Event falls within rule 8.1(d), the date on which notice of the resolution for winding up is given;
Relevant Event shall have the meaning given to that term in rule 8.1;
Restricted Shares means Shares subject to a Restricted Share Award which are subject to restrictions in accordance with rule 4;
Restricted Share Award means an award comprising Restricted Shares;
Salary means an Eligible Employee’s annual gross basic salary in respect of his employment with the Group on the Date of Grant of an Award excluding any other benefits or amounts (or if it is expressed in a currency other than sterling, its sterling equivalent calculated on such basis as the Committee may in its discretion determine);
Scheme of Arrangement means the scheme of arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991, as amended, to introduce the Company as a new, Jersey-incorporated holding company to the Group;
Scheme of Arrangement Effective Date means 10 May 2019 being the date on which the Scheme of Arrangement became effective in accordance with its terms;
Shares means:
a)fully paid ordinary shares in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC;
b)where appropriate the DIs representing such shares; and/or
c)shares, or DIs representing those shares or DIs following any reorganisation of the share capital of the Company;
Subsidiary means any subsidiary of the Company within the meaning of section 1159 of, and Schedule 6 to, the UK Companies Act 2006 (or its equivalent under applicable law) over which the Company has Control;
Tax Liability means any amount of tax or social security contributions for which a Participant would or may be liable and for which a member of the Group or former member of the Group would or may be obliged to (or would or may suffer a disadvantage if it were not to) account to any relevant tax authority;
Termination Date means the date on which a Participant ceases to be an employee of a member of the Group and, for the avoidance of doubt, where the employee dies, shall be taken to mean the date of death;
Trustee means the trustee or trustees of any employee benefit trust established by the Company or any member of the Group;
United States Stock Exchange means the New York Stock Exchange, NASDAQ or such other recognised stock exchange in the United States, on which the Shares are listed;
Vest means (i) in the case of an Award granted in the form of an Option, when the Option becomes exercisable, or (ii) in the case of an Award granted in the form of a Restricted Share Award, when the Restricted Shares cease to be subject to forfeiture, or (iii) in the case of an Award granted in the form of a Conditional Award, when the Participant becomes entitled to have the Shares which are the subject of the Conditional Award transferred to him, or (iv) in the case of an Award granted in the form of a Phantom Award, a Participant becoming entitled to call for a cash sum in accordance with rule 10.10, and Vesting and Vested shall be construed accordingly;
Vesting Date means the date on which an Award (or part thereof) Vests which, save as provided for in these rules, shall not be earlier than the third anniversary of the Date of Grant;
Vesting Period means the period from the Date of Grant to the Vesting Date; and
Vested Shares means those Shares, Notional Shares or Restricted Shares in respect of which an Award has Vested.
1.2Where the context permits the singular shall include the plural and vice versa and the masculine shall include the feminine.
1.3References to any act or statutory instrument of UK Parliament or the legislative bodies of Jersey, the United States of America or the European Union (the EU) shall include any modification, amendment or re-enactment thereof (and shall, in respect of any EU legislation, include any UK legislation enacted in replacement thereof following the UK’s departure from the EU).
2.Grant of Awards
2.1Subject to the provisions contained in these rules, the Committee may, during a Grant Period, grant Awards to Eligible Employees selected for participation by the Committee in its discretion on such terms as it shall in its absolute discretion determine. No consideration shall be payable for the grant of an Award. When the Committee grants an Award, it shall decide whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award. An Eligible Employee may be granted any form of Award or any combination of Awards.
2.2Individual Limit. The maximum total Market Value of Shares over which Awards may be granted to any Eligible Employee in respect of any Financial Year of the Company is 350 per cent. of his Salary.
2.3Method of satisfying Awards. An Award, other than a Phantom Award, may be satisfied by the issue of Shares, the transfer of Shares from treasury, or by the transfer of Shares purchased on the market including from an employee benefit trust.
2.4Scheme Limit. Subject to rule 2.7, no Award shall be granted under the Plan to the extent that the result of that grant would be that the aggregate number of Shares that could be issued on the Vesting or, in the case of Options, exercise of that Award and any other Award granted at the same time, when added to the number of Shares that:
(i)could be issued on the vesting of any subsisting share awards or the exercise of any options granted during the preceding ten years under (a) the Plan and (b) any other Employees’ Share Scheme established by the Company or Old Ferguson; and
(ii)have been issued on the vesting of any share awards or the exercise of any options granted during the preceding ten years under (a) the Plan and (b) any other Employees’ Share Scheme established by the Company or Old Ferguson,
would exceed 10 per cent. of the ordinary share capital of the Company for the time being in issue.
2.5Subject to rule 2.7, no Award shall be granted under the Plan to the extent that the result of that grant would be that the aggregate number of Shares that could be issued on the Vesting or, in the case of Options, exercise of that Award and any other Award granted at the same time, when added to the number of Shares that:
(i)could be issued on the vesting of any subsisting share awards or the exercise of any options granted during the preceding ten years under
(a) the Plan and (b) any other discretionary share scheme established by the Company or Old Ferguson; and
(ii)have been issued on the vesting of any share awards or the exercise of any options granted during the preceding ten years under (a) the Plan and (b) any other discretionary share scheme established by the Company or Old Ferguson,
would exceed 5 per cent. of the ordinary share capital of the Company for the time being in issue.
2.6References in rules 2.4 and 2.5 to the issue of Shares shall, for the avoidance of doubt, mean the issue and allotment (but not transfer) of Shares. The delivery of Shares from treasury shall also count towards the percentage limits set out in rules 2.4 and 2.5 above for so long as institutional shareholder guidelines recommend this.
2.7With respect to any Awards granted following 1 June 2023, the aggregate number of Shares with respect to which Awards may be granted under this Plan (including Appendix A) shall not exceed 200,000. Any Award under this Plan settled in cash shall not be counted against the foregoing maximum share limit.
2.8In determining the above limits Shares subject to an Award under the Plan shall again be made available for issuance or delivery under the Plan if such Shares are attributable to an Award which was released, lapsed or otherwise became incapable of Vesting without issuance of the full number of Shares to which the Award related.
2.9Award Certificate. The Committee may, in its absolute discretion, enter into a deed poll recording its intention to grant Awards and agreeing to be bound by the Award Certificates issued pursuant to this rule 2.9. As soon as reasonably practicable following the Date of Grant, the Committee shall procure the issue of an Award Certificate in respect of the Award and send it to the Participant. If the Committee has not entered into a deed poll prior to the granting of the Awards, the Committee shall procure that the Award Certificates are issued under the seal of the Company or otherwise to take effect as a deed. An Award Certificate shall state:
2.9.1whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award;
2.9.2if the Award is granted subject to the terms of Appendix A – the U.S. Rules;
2.9.3the name of the Eligible Employee receiving the Award;
2.9.4the Date of Grant of the Award;
2.9.5whether an Award will be granted in respect of ordinary shares or DIs;
2.9.6the number of Shares or Restricted Shares (or, in the case of an Award granted in the form of a Phantom Award, Notional Shares) comprised in the Award;
2.9.7the exercise price payable by the Participant on exercise of the Award (if any);
2.9.8the Vesting Date or Dates which shall not be later than the tenth anniversary of the Date of Grant;
2.9.9if more than one Vesting Date is specified, the number or proportion of the Shares comprised in an Award which will ordinarily Vest on each of the specified Vesting Dates;
2.9.10the Performance Condition applicable to the Award;
2.9.11whether Dividend Equivalents should be paid in respect of an Award;
2.9.12whether the Participant has an obligation to enter into an agreement, election or arrangement including, without limitation, pursuant to rule 10.14;
2.9.13details of the Holding Period that shall apply to the Award; and
2.9.14details of the clawback and malus terms that apply to an Award.
The Committee may require a Participant to sign and return within a specified period a copy of the Award Certificate or other document acknowledging his agreement to be bound by the terms of the Plan and may determine that a Participant’s failure to do so within the specified period shall cause the Award to lapse and shall be treated as if it had never been granted.
Subject thereto, an Award Certificate shall be in such form as the Committee may determine from time to time.
2.10Duration of Plan. An Award may not be granted:
2.10.1earlier than the Adoption Date; nor
2.10.2later than the tenth anniversary of the Adoption Date.
2.11Non-transferability and bankruptcy. An Award shall be personal to a Participant and shall not (except to the extent necessary to enable a Legal Representative to realise the Award following the death of a Participant) be capable of being transferred, charged or otherwise alienated and shall lapse immediately if the Participant purports to transfer, charge or otherwise alienate the Award or if he is declared bankrupt.
2.12Right to Renounce Awards. A Participant may, by notice in writing to the Company within thirty days after the Date of Grant, renounce (in whole but not in part) his rights under the Award. In such a case, the Award shall to that extent be treated, for the purpose of the Plan, as never having been granted. No consideration shall be due for any such renunciation.
2.13Approvals and consents. The grant of an Award shall be subject to obtaining any approval or consent required under the Listing Rules, the Market Abuse Regulation or any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other UK or overseas regulation or enactment related to the grant of Awards to Eligible Employees in the jurisdictions in which they are resident.
2.14Overseas Countries. The Committee may adopt Appendices setting out specific requirements or terms in relation to Awards granted to Eligible Employees in particular countries if that is necessary or desirable to take account of local tax, exchange control or securities laws in such countries.
3.Performance Condition
3.1The Committee shall impose Performance Conditions which must be satisfied in order for an Award to Vest. Unless the Committee determines otherwise, the Performance Conditions set out in Schedule 1 to this Plan shall apply.
3.2The Committee can set different Performance Conditions for Awards granted in different years (in terms of the type of condition, the weighting given to that
condition and the targets applicable to each condition) provided that, in the reasonable opinion of the Committee, the Performance Conditions for Awards granted in one year is not materially less challenging than the Performance Conditions for Awards granted in any other year.
3.3The Committee may vary the Performance Conditions applying to existing Awards if an event occurs or there are circumstances (for example, an acquisition or disposal of a business or a significant part of a business) such that the condition is no longer a fair measure of performance provided that, in the reasonable opinion of the Committee, the new condition is not materially less challenging than the original condition would have been but for the event or circumstances in question.
3.4The Committee shall, as soon as reasonably practicable, notify a Participant of any substitution or variation of the Performance Conditions.
4.Awards which take the form of a Restricted Share Award
4.1If an Award takes the form of a Restricted Share Award, the Restricted Shares subject to the Award shall, except to the extent that the Award has Vested, be subject to such restrictions on the transfer, assignment, sale, pledge, charge or other disposal of the Restricted Shares during the Vesting Period as the Committee may prescribe and an Eligible Employee may be required to enter into an irrevocable agreement with the Company and, if necessary, the Eligible Employee’s Employer, in such form as the Committee may prescribe which may include an agreement by the Eligible Employee:
(a)not to transfer, assign, sell, pledge, charge or otherwise dispose of any Restricted Shares subject to the Award except to the extent that the Award has Vested; and
(b)to transfer (or procure the transfer) to or to the order of the Company, for a total of one penny (or the equivalent in a Participant’s local currency), all the Restricted Shares in respect of which the Award does not Vest.
4.2If the Eligible Employee does not enter into any required agreement either before the Date of Grant or within such period after the Date of Grant as the Committee may specify, the Award shall not be granted or if it has been granted, such grant shall be ineffective.
4.3On or before the Date of Grant for an Award which takes the form of a Restricted Share Award, the Company shall transfer or procure the transfer to the Participant or his nominee or such other person as the Committee may determine the number of Restricted Shares which are subject to the Award.
4.4To the extent that an Award which takes the form of a Restricted Share Award Vests, any restrictions referred to in rule 4.1 shall cease to have effect in relation to the Shares subject to that Award.
4.5Notwithstanding that the Award has not Vested, a Participant shall be entitled to receive any dividends paid on Restricted Shares in the period between the Date of Grant and the Vesting Date.
5.Vesting of Awards and Holding Periods
5.1Timing of Vesting. Subject to rules 6, 7, 8 and the satisfaction of the Performance Condition, an Award (or part thereof) shall Vest on the Vesting Date.
5.2Holding Period. A Participant shall take such steps as the Committee may reasonably require to satisfy the Committee as to the Participant’s observance of the Holding Period. For the avoidance of doubt, in circumstances where Participants are offered and accept a replacement Award in accordance with Rule 9, the new award (as defined in rule 9.1) shall be subject to the Holding Period at such time as it Vests.
6.Leavers
6.1Death. If a Participant dies, Awards granted to him will Vest on the Termination Date in accordance with rule 6.4.
6.2Other Leavers. Where a Participant ceases to be an Eligible Employee at any time before the Vesting Date applicable to his Award by reason of:
(a)redundancy;
(b)injury, disability or ill-health (evidenced to the satisfaction of the Committee);
(c)his employing company ceasing to be under the Control of the Company;
(d)the business (or part of a business) in which he is employed being transferred to a person who is not a member of the Group, or
(e)any other reason at the discretion of the Committee,
his Award shall continue, and will Vest on the original Vesting Date in accordance with rule 6.3, save that the Committee may determine that an Award shall instead Vest on the Termination Date in accordance with rule 6.4. Where an Award is subject to more than one Performance Condition, the Committee may treat each discrete part of the Award that is subject to a particular Performance Condition as a separate Award with the result that the Committee may determine that part of an Award shall continue and Vest on the original Vesting Date in accordance with rule 6.3 and that part of an Award shall Vest on the Termination Date.
6.3Delayed Vesting. Where, by reason of rule 6.2, an Award Vests in accordance with this rule 6.3, the number of Vested Shares shall be determined by the Committee by reference to:
(a)the application of the Performance Condition at the original Vesting Date; and
(b)multiplying the resulting number of Shares, Notional Shares or Restricted Shares by the fraction A/B (where A is the number of complete months from the Date of Grant to the Termination Date and which shall not be greater than the total number of months in the Vesting Period and B is 36 or such other number as is equal to the number of months in the Vesting Period), save that the Committee may, in its absolute discretion, disapply in whole or in part the application of the time pro-rating fraction.
6.4Immediate Vesting. Where, by reason of rule 6.1 or rule 6.2, an Award Vests in accordance with this rule 6.4 the number of Vested Shares shall be determined by the Committee by reference to:
(a)the application of the Performance Condition at the Termination Date, or at such other date (whether later or earlier) within a period of one month of the Termination Date on which data is available in the ordinary course to allow the testing of Performance Conditions; and
(b)multiplying the resulting number of Shares, Notional Shares or Restricted Shares by the fraction A/B (where A is the number of complete months from
the Date of Grant until the Termination Date and which shall not be greater than the total number of months in the Vesting Period and B is 36 or equal to such other number of months in the original Vesting Period), save that in any particular case, the Committee may, in its absolute discretion, disapply in whole or in part the application of the time pro-rating fraction.
6.5If a Participant ceases employment in any circumstances other than those described at rules 6.1 or 6.2, his unvested Awards shall lapse automatically on the Termination Date.
6.6Meaning of ceasing employment. For the purposes of this rule 6, a Participant shall not be treated as ceasing to be an Eligible Employee until he ceases to be employed by or hold office with the Company or any member of the Group. The reason for the termination of employment of a Participant shall be determined by reference to rule 6.1 and 6.2 regardless of whether such termination was lawful or unlawful (and howsoever caused).
7.Malus and Clawback
7.1Notwithstanding any other rule of the Plan, if one or more of the circumstances set out in rule 7.2 occur, the Committee may: (a) at any time, (where the circumstances fall within rule 7.2.4 below); or (b) prior to the fifth anniversary of the Date of Grant in all other circumstances, determine (acting fairly and reasonably having taken into account the scale of loss or damage to the Company or the extent of the risk taken by the Company) to take one or more of the following actions in relation to any one or more Participants:
7.1.1reduce (including to nil) the number of Shares, Notional Shares or Restricted Shares in respect of which any future Award is granted to a Participant; or
7.1.2reduce (including to nil) the cash amount payable under an unvested Award held by a Participant or the number of Shares, Notional Shares or Restricted Shares under an unvested Award and/or the number of Shares and/or Dividend Equivalents under a Vested but unexercised Option held by a Participant, by such amount and/or such number as the Committee considers appropriate in the circumstances; or
7.1.3in relation to a Vested Award, require a Participant to pay to the Company or such other person as the Company may direct within 30 days of a written demand from the Company such number of Shares or such monetary amount with a value to be determined in the Committee’s absolute discretion provided such value on the date of demand is no greater than the value of the Vested Shares and Dividend Equivalents under Award at the Vesting Date, less any amount paid by or in respect of the Participant in respect of a Tax Liability incurred as a result of the Vesting of the relevant Award (except to the extent the Participant is able to recover amounts paid in respect of such Tax Liability).
7.2The circumstances in which the Committee may consider that it is appropriate to exercise its discretion under rule 7.1 are the following:
7.2.1a material financial misstatement of the Company’s audited financial accounts (other than as a result of a change in accounting practice);
7.2.2conduct by a Participant which results in or is reasonably likely to result in significant reputational damage to the Company;
7.2.3the negligence or gross misconduct of a Participant; or
7.2.4fraud effected by or with the knowledge of a Participant.
7.3If the Committee decides to exercise its discretion under this rule 7, it shall confirm this in writing to each affected Participant.
7.4For the purposes of these rules, if the Committee decides to exercise its discretion under Rule 7.1.2 before an Award Vests:
7.4.1the Award shall be deemed to have been granted over the reduced number of Shares, Notional Shares or Restricted Shares (as the case may be); and
7.4.2any subsequent Vesting of the Award shall be determined by reference to this reduced number of Shares, Notional Shares or Restricted Shares,
save that if the number of Shares, Notional Shares or Restricted Shares is reduced to nil, the Award shall be treated as if it had never been granted and such Participant (including a Participant who has left employment before the Vesting Date) shall have no rights to any cash amount, Dividend Equivalents, Shares, Notional Shares or Restricted Shares.
8.Take-over and Liquidation
8.1This rule 8 applies if:
(a)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied, the person making the offer will have Control of the Company; or
(ii)a general offer to acquire all of the Shares;
(b)any person proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law;
(c)any person becomes bound or entitled to acquire Shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(d)notice is given of a resolution for the voluntary or compulsory winding-up of the Company,
(each a Relevant Event).
8.2Where this rule 8 applies and subject to rules 8.3, 8.4 and 9 below, all outstanding Awards will automatically Vest and, in the case of an Award granted in the form of an Option shall be automatically exercised on the Relevant Date provided that any exercise price payable by the Participant on exercise is equal to or less than the relevant offer price or consideration (as determined by the Committee). Where this rule 8 applies, and subject to rules 8.3, 8.4 and 9 below, any outstanding Awards granted in the form of Options that are not exercised on the Relevant Date shall lapse automatically.
8.3Proportion of Award that Vests. The number of Shares in respect of which the Award Vests shall be determined by the Committee by reference to:
(a)the application of the Performance Condition at the Relevant Date; and
(b)multiplying the resulting number of Shares, Notional Shares or Restricted Shares by the fraction A/B (where A is the number of complete months from the Date of Grant until the Relevant Event and which shall not be greater than the total number of months in the Vesting Period and B is 36 or equal to such other number of months in the original Vesting Period), save that in any particular case, the Committee may, in its absolute discretion, disapply, in whole or in part, the application of the time pro-rating fraction.
8.4Without prejudice to the operation of rule 9, Awards shall not Vest or be exercised without the consent of the Committee under the foregoing provisions of this rule 8 if the purpose and effect of the Relevant Event, together with any associated transactions, is to create a new holding company for the Company, such company having substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the Relevant Event. Unless the Committee determines otherwise in its absolute discretion, an Award will in such circumstances be exchanged for an equivalent award in accordance with rule 9 below and notice of a replacement award shall be issued to each affected Participant accordingly.
9.Rollover of Awards
9.1If any other business entity (the acquiring company):
(a)obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the acquiring company will have Control of the Company; or
(ii)a general offer to acquire all the Shares; or
(b)proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(c)becomes bound or entitled to acquire shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or their equivalent under applicable law,
and the acquiring company notifies Participants of an offer of a replacement Award, then, on the Relevant Date, for any Award which has not lapsed (the old award) a Participant may elect to release and accept in consideration of that release an award (the new award) which (in the opinion of the Committee) is equivalent to the old award but relates to shares in a different company (whether the acquiring company itself or another company) (the new grantor).
9.2The provisions of the Plan shall be construed as if:
(a)the new award were an award granted under the Plan at the same time as the old award;
(b)references to the Company in the rules were references to the new grantor;
(c)references to the Committee in the rules were references to the board of directors of the new grantor or any duly authorised committee thereof;
(d)references to Shares were references to shares in the new grantor; and
(e)the Vesting Date in relation to the new award was the same as that in relation to the old award.
9.3The Committee may make such adjustments to the Performance Condition applicable to the new award as it, in its absolute discretion, considers appropriate.
9.4Subject to rule 8.4, if notice is given by an acquiring company under rule 9.1 and a Participant does not elect to release an old award and accept in consideration for that release a new award, the old award will vest and be exercised in accordance with rule 8.2.
10.Consequences of Vesting
10.1Options. On the Vesting of an Award which takes the form of an Option the Participant may, subject to any shorter period imposed pursuant to the Plan or the Award Certificate, exercise the Option over some or all of the Vested Shares during the period to the tenth anniversary of the Date of Grant.
10.2If the Award has Vested due to a Participant’s death or if the Participant dies during the exercise period specified in rule 10.1 above, the Award may be exercised by the Legal Representative during the period of 12 months following the date of death.
10.3If the Award has Vested in accordance with rules 6.2 or 8.2, the Award may be exercised during the period of 6 months following the Vesting Date.
10.4If a Participant ceases employment in any circumstances other than those described at rules 6.1 or 6.2, his Awards may be exercised in respect of Vested Shares during the period of three months following the Termination Date.
10.5If, during the period in which an Option may otherwise be exercised under these rules, the Participant is subject to any dealing restrictions under the Listing Rules, the Market Abuse Regulation or any relevant share dealing code of the Company, the applicable period shall be suspended until such later date as those dealing restrictions lift provided that no Option may be exercised more than 10 years after its Date of Grant. Subject to rules 10.11, 10.12, 10.15 and any arrangements to give effect to the Holding Period in accordance with rule 5.2, the Company shall procure the issue or transfer of the Vested Shares to the Participant (or his nominee) as soon as reasonably practicable after the exercise date and in any event not later than 30 days thereafter.
10.6If a Participant has not exercised his Option before the end of the relevant period mentioned in rules 10.1 to 10.4, the following provisions shall apply:
(a)if the exercise price payable by the Participant is nil, the Option shall be deemed to have been exercised on the last day of the relevant period; or
(b)subject to (a) above, the Option shall be settled by the Committee making a payment of (or procuring the payment of) a cash sum to the Participant equal to any Option Exercise Value, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
10.7The Participant may exercise a Vested Option by written notice to the Company in such form as the Committee may prescribe.
10.8Conditional Awards. On the Vesting of an Award which takes the form of a Conditional Award a Participant need take no action and the Company shall, subject to rules 10.11, 10.12, 10.15 and any arrangements to give effect to the Holding Period
in accordance with rule 5.2, procure the issue or transfer of the Vested Shares to the Participant (or his nominee) as soon as reasonably practicable after the Vesting Date and in any event no later than 30 days thereafter. If the Award has Vested due to a Participant’s death or if the Participant dies during the 30 day period the Shares shall be issued or transferred to the Legal Representative as soon as reasonably practicable after the date of death.
10.9Restricted Share Awards. On the Vesting of an Award which takes the form of a Restricted Share Award the Shares shall cease to be subject to all restrictions and any agreement applying to the Restricted Shares shall cease to have effect. For the avoidance of doubt, the Participant shall be required to comply with arrangements in respect of such Shares to give effect to the Holding Period in accordance with rule 5.2.
10.10Phantom Awards. On the Vesting of an Award which takes the form of a Phantom Award, the Committee shall pay, or procure the payment of, a cash sum to the Participant equal to the Final Value of the Vested Notional Shares to which the Phantom Award relates subject to such deductions for any Tax Liability as are required by applicable law. The Committee may in its discretion pay or procure payment of the cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine). The cash sum will be paid as soon as reasonably practicable following the Vesting Date.
10.11Restrictions on Vesting. An Award shall not Vest unless and until the issue or transfer of Shares (if relevant) after such Vesting would be lawful in all relevant jurisdictions and in compliance with the Listing Rules, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other relevant UK or overseas regulation or enactment related to the Vesting of an Award in the jurisdictions in which the relevant Participant is resident for tax purposes.
10.12Dividend Equivalents. Where the Committee has at the Date of Grant determined that Dividend Equivalents shall be paid, within the period of 30 days following the Vesting Date, the Company shall either:
(a)pay the Participant a cash sum, or
(b)issue or transfer Shares to the Participant,
in either case having a value equal to the sum of the dividends that the Participant would have received had the Participant held Vested Shares throughout the period between the Date of Grant and the Vesting Date. An amount equivalent to the Tax Liability may be deducted from such payment or delivery of Shares. This rule shall not apply in respect of any super dividend, dividend in specie or other distribution paid by the Company (each being a Distribution) which would otherwise materially affect the value of an Award and for which an Award is adjusted pursuant to rule 12. For the purpose of this rule 10.12 and rule 12, a Distribution shall not materially affect the value of an Award or attract dividend equivalents if the Company undertakes a share consolidation in conjunction with the Distribution that has the effect that the Market Value of a Share before and after the Distribution is substantially equivalent.
10.13Payment of Tax Liability. Any liability of a Participant to taxation or social security contributions shall be for the account of the relevant Participant and the issue or transfer of Vested Shares subject to a Participant’s Vested Award shall be conditional upon the Participant having discharged the amount required to satisfy the Tax Liability which arises on Vesting or exercise to the satisfaction of the Company, or otherwise having complied with any arrangements specified by the Company to
secure that such Tax Liability is satisfied including irrevocably authorising the Company to sell or procure the sale of sufficient Vested Shares on or following the Vesting or exercise (as applicable) of his Award on his behalf to ensure that any relevant member of the Group or former member of the Group receives the amount required to discharge the Tax Liability which arises as a result of the Vesting or exercise of his Award and by participating in the Plan a Participant is deemed to have given such authorisation.
10.14Elections. A Participant shall enter into any agreement, election or arrangement which the Committee may consider appropriate within such period as may be specified by the Committee, in relation to or in connection with any liability to income tax or social security contributions (including, if permitted under local law, any employer’s social security contributions) in respect of the Participant’s Award or the Shares subject to his Award. For example, but without limitation, the Committee may require Participants who are resident in the UK for tax purposes to enter into an agreement or election pursuant to paragraphs 3A or 3B of Schedule 1 to the UK Social Security Contributions and Benefits Act 1992 or a joint election under Section 431 of the UK Income Tax (Earnings and Pensions) Act 2003 by the fourteenth day following the acquisition of any Shares by the Participant.
10.15Cash settlement. If for any reason the Committee considers that it is impractical or legally onerous to deliver Shares in satisfaction of a Vested Award, it may instead pay or procure the payment to the Participant of a cash sum equal to the Final Value of the Vested Shares, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
11.Relationship of Plan to contract of employment
11.1The rights and obligations of a Participant under the terms and conditions of employment shall not be affected by his participation in the Plan or any right he may have to participate in the Plan. An individual who participates in the Plan waives all and any rights to compensation or damages in consequence of the termination of his employment with any member of the Group (or former member of the Group if applicable) for any reason whatsoever (whether lawfully or unlawfully) insofar as those rights arise, or may arise from his ceasing to have rights under or be entitled to exercise any Award under the Plan, as a result of such termination or from the loss or diminution in value of such rights or entitlements. In the event of any conflict between the terms of this rule 11 and the Participant’s terms of employment, this rule shall take precedence.
11.2Notwithstanding any other provision of the Plan:
11.2.1the Plan shall not form part of any contract of employment between the Company or any Subsidiary and a Participant;
11.2.2no Eligible Employee has any right to be granted an Award and the fact that an Eligible Employee may have participated in the Plan and/or been granted an Award under the Plan shall not entitle any Eligible Employee to future participation or grants;
11.2.3the benefit to a Participant of participation in the Plan (including, in particular but not by way of limitation, any Awards held by him) shall not form any part of his contractual remuneration or benefits or count as his contractual remuneration or benefits for any purpose and shall not be pensionable;
11.2.4nothing in the Plan shall in any way be construed as imposing upon any member of the Group a contractual obligation as between the member of the Group and a Participant to contribute to the Plan; and
11.2.5by accepting the grant of an Award and not renouncing it a Participant is deemed to have agreed to the provisions of the Plan and in particular, this rule 11.2.
12.Adjustment of Awards
12.1In the event of any Capital Reorganisation (or the implementation by the Company of a demerger or payment of a super dividend, dividend in specie or other distribution paid by the Company which would otherwise materially affect the value of an Award), the price payable by a Participant on Vesting (or exercise of an Option) (if any), the description of Shares, Notional Shares or Restricted Shares and the number of Shares, Notional Shares or Restricted Shares comprised in an Award may be adjusted in such manner as the Committee may determine. Any adjustment to Awards made pursuant to this rule 12 shall be notified to the relevant Participant.
13.Administration and Amendment
13.1Committee responsible for administration. The decision of the Committee shall be final and binding in all matters relating to the Plan and it may at any time discontinue the grant of further Awards or amend any of the provisions of the Plan in any way it thinks fit, provided that:
(a)except as herein provided, the Committee shall not make any amendment that would materially prejudice the interests of existing Participants in any jurisdiction in which the Plan operates except with the prior consent or sanction of Participants in that jurisdiction who, if their Awards Vested in full, would thereby become entitled to a majority of all the Shares which would fall to be transferred upon satisfaction of all outstanding Awards in that jurisdiction;
(b)without prejudice to any provision of the Plan which provides for the lapse of an Award, the Committee may not cancel an Award unless the Participant agrees in writing to such cancellation; and
(c)no amendment to the advantage of Eligible Employees or Participants may be made to:
(i)the definition of Eligible Employee in rule 1.1;
(ii)the limitations on the numbers of Shares subject to the Plan;
(iii)the maximum entitlement of an Eligible Employee under the Plan;
(iv)the basis for determining an Eligible Employee’s entitlement to Shares under the Plan;
(v)the terms of Shares to be provided under the Plan;
(vi)the adjustment provisions of rule 12 of the Plan;
without the prior approval of the Company in general meeting except in the case of minor amendments to benefit the administration of the Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Eligible Employees and/or Participants or any member of the Group.
14.Data Protection
14.1By accepting the grant of an Award, a Participant acknowledges that the Company or any member of the Group may hold, process and transfer personal data relating to them to other members of the Group or to any third parties engaged by them (whether within or outside of the European Economic Area (EEA) and that personal data may also be processed outside the EEA by the Company or any member of the Group or by one or more held or of its or their service providers) for any and all purposes related to the operation and administration of the Plan and/or in order to meet any legal obligation, in each case in accordance with the Company’s Share Plan Data Protection Protocol and applicable law.
15.General
15.1Any member of the Group may provide money to the Trustee or any other person to enable them or him to acquire (and to subscribe for) Shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent not prohibited by applicable law.
15.2The existence of any Award shall not affect in any way the right or power of the Company or its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or other changes in the Company’s capital structure, or any merger or consolidation of the Company, or any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or convertible into, or otherwise affecting the Shares or the rights thereof, 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.
15.3Any notice or other document required to be given under or in connection with the Plan may be delivered to a Participant or sent by post to him at his home address according to the records of his Employer or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document require to be given to the Company under or in connection with the Plan may be delivered or sent by post to it at its corporate services office at 1020 Eskdale Road, Winnersh, Wokingham RG41 5TS (or such other place or places as the Committee may from time to time determine and notify to Participants).
15.4The Company, or where the Committee so directs any Subsidiary, shall pay the appropriate stamp duty on behalf of the Participants in respect of any issue or transfer of Shares on the Vesting or exercise of the Awards.
15.5Benefits under this Plan shall not be pensionable.
15.6These rules and any contractual and non-contractual obligations arising from them shall be governed by, and construed in accordance with, the laws of England. Neither the Plan nor any Award Certificate shall be construed or interpreted with any presumption against the Company by reason of the Company causing the Plan or Award Certificate to be drafted.
15.7Unless specifically stated otherwise, each Participant, the Company and any other member of the Group submits to the exclusive jurisdiction of the English courts in relation to all disputes arising out of or in connection with the Plan. By accepting the grant of an Award and not renouncing it, Participants are deemed to have agreed to submit to such jurisdiction.
APPENDIX A
Rules of the Ferguson Group Long Term Incentive Plan 2019 – Eligible US Employees
Pursuant to a resolution of the Board (as defined below) on 22 March 2019 and an ordinary resolution on 25 April 2019 of the shareholders of the Company (as defined below), the Rules of the Ferguson Group Long Term Incentive Plan 2019 (the Plan) and this Appendix A were approved. This Appendix A sets forth the modifications of the Plan as applicable to Eligible US Employees (as defined below). The terms of this Appendix A shall apply automatically to an Eligible US Employee to the extent he is granted an Award under the Plan. If an Eligible Employee becomes an Eligible US Employee following the Date of Grant, his Award shall be governed by this Appendix A. If there is a conflict between the terms of the Plan, the terms of the Award Certificate and the terms of this Appendix A as applied to an Eligible US Employee, the provisions of this Appendix A shall govern.
1.Definitions
1.1In this Appendix A, unless the context otherwise requires, the following words and expressions shall have the following meanings, namely:
Adoption Date means 25 April 2019;
Award means an award granted under rule 2 in the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award as the Committee may determine, which is for the time being subsisting;
Award Certificate means the certificate or any other document issued in respect of the grant of an Award under rule 2.9;
Board means the board of directors of the Company;
Capital Reorganisation means any capitalisation issue, rights issue, sub-division, consolidation or reduction of capital or any other variation of the share capital of the Company;
Code means the U.S. Internal Revenue Code of 1986, as amended from time to time, and regulations thereunder. References to any section of the Code shall be to that section as it may be renumbered, amended, supplemented or re-enacted from time to time. For this purpose, “regulation” means a regulation, ruling or other interpretation or guidance, validly promulgated by the U.S. Department of Treasury and in effect at the time in question. Reference to a regulation or section thereof includes that regulation or section and any comparable regulation or section that amends, supplements or supersedes that regulation or section.
Committee means the Remuneration Committee of the Board or some other duly authorised committee of the Board;
the Company means the company incorporated in Jersey as Ferguson plc, with registered number 128484;
Control shall have the meaning given to that word by section 995 of the Income Taxes Act 2007 (UK);
Conditional Award means an Award which takes the form of a contingent right to acquire or receive Shares at no or nominal cost;
the Date of Grant means the date on which the Committee grants an Award;
DI means a depositary interest representing an ordinary share in the capital of the Company;
Dividend Equivalents means the payment of a cash sum or delivery of Shares in accordance with rule 10.12;
DRS statement means the direct registration system statement of account representing certificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
DTC means the Depository Trust Company, being the system used to settle trades of uncertificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
Eligible US Employee means any employee (or director) of a U.S. Subsidiary or any employee (or executive director) of any other member of the Group who is subject to U.S. federal income tax with respect to an Award;
Employees’ Share Scheme has the meaning given by section 1166 of the Companies Act 2006 (UK);
Employer means the Company or any Subsidiary that, with the consent of the Company, participates under this Appendix A;
Final Value means, in the case of Vested Shares, their aggregate market value calculated by reference to the closing middle-market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the relevant Vesting Date;
Financial Year means a financial year of the Company within the meaning of section 390 of the Companies Act 2006 (UK);
Grant Period means the period of 42 days commencing on:
a)the Adoption Date;
b)the day immediately following the day on which the Company makes an announcement of its results for the last preceding Financial Year, half year or other period; or
c)any day on which the Committee resolves that exceptional circumstances exist which justify the grant of Awards;
the Group means the Company and its Subsidiaries from time to time and the expression member of the Group shall be construed accordingly;
Holding Period means the period specified in the Company’s share ownership guidelines from time to time during which the Participant must retain either the Shares which Vest under an Award (including any Shares delivered in satisfaction of Dividend Equivalents) or, in the case of a Vested but unexercised Option, the Option itself;
Legal Representative means the executor or administrator of the estate of a deceased Participant or a duly appointed guardian of a Participant, as evidenced by such legal documentation as determined to be satisfactory by the Committee;
Listing Rules means the UK Listing Rules published by the Financial Conduct Authority (as amended from time to time);
London Stock Exchange means the London Stock Exchange Plc or any successor body thereto;
Market Value means in relation to a Share or a Notional Share:
a) the closing middle-market quotation for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange the case of an ordinary share in the capital of the Company priced in US Dollars) for the dealing day immediately preceding the Date of Grant or, if the Committee so determines, the closing middle-market quotation for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the Date of Grant; or
b)the average of the closing middle-market quotations during such period as the Committee may determine but not exceeding 30 dealing days ending with the dealing day immediately preceding the Date of Grant provided that such dealing day(s) fall within a Grant Period;
NASDAQ means Nasdaq, Inc. or any successor body thereto;
New York Stock Exchange means New York Stock Exchange, Inc. or any successor body thereto;
Notional Share means a share equal in value to a Share, but having no legal rights attributable to a Share;
Old Ferguson means Ferguson Holdings Limited, a company incorporated in Jersey with registered number 106605;
Option means an Award which takes the form of an option to acquire Shares at either no or nominal cost or at Market Value, to be determined at the discretion of the Committee;
Option Exercise Value means, in relation to an Option, the aggregate market value of the Vested Shares subject to such Option calculated by reference to the closing middle market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the last date of the relevant exercise period less any exercise price payable per Share on the exercise of such Option, provided that if the calculation produces a negative number, the Option Exercise Value shall be nil;
Participant means an Eligible Employee who has been granted an Award (including, where the context permits, the Legal Representative) which has not lapsed or been surrendered or forfeited;
Performance Condition means the performance condition or conditions imposed as a condition of the Vesting of an Award under rule 3.1;
Phantom Award means an Award which takes the form of a right to call for a cash payment calculated by reference to the Final Value of a Notional Share on the Vesting Date;
the Plan means this Ferguson Group Long Term Incentive Plan 2019 as amended from time to time;
Relevant Date means:
a)if the Relevant Event falls within rule 8.1(a), the date on which Control is obtained and any conditions to which the offer is made subject are satisfied;
b)if the Relevant Event falls within rule 8.1(b), either the date on which the scheme of arrangement is approved at the shareholders’ meeting or is sanctioned by the Court (as determined by the Committee in its absolute discretion);
c)if the Relevant Event falls within rule 8.1(c), the date on which the person first becomes so bound or entitled; or
d)if the Relevant Event falls within rule 8.1(d), the date on which notice of the resolution for winding up is given;
Relevant Event shall have the meaning given to that term in rule 8.1;
Restricted Shares means Shares subject to a Restricted Share Award which are subject to restrictions in accordance with rule 4;
Restricted Share Award means an award comprising Restricted Shares;
Salary means the sterling equivalent (calculated on such basis as the Committee may in its discretion determine) of an Eligible Employee’s annual gross basic salary expressed in U.S. dollars in respect of his employment with the Group on the Date of Grant of an Award excluding any other benefits or amounts (or if it is expressed in a currency other than U.S. dollars, its sterling equivalent calculated on such basis as the Committee may in its discretion determine);
Scheme of Arrangement means the scheme of arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991, as amended, to introduce the Company as a new, Jersey-incorporated holding company to the Group;
Scheme of Arrangement Effective Date means 10 May 2019 being the date on which the Scheme of Arrangement became effective in accordance with its terms;
Shares means:
a)fully paid ordinary shares in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC; and/or
b)shares representing those shares following any reorganisation of the share capital of the Company;
Subsidiary means any subsidiary of the Company within the meaning of section 1159 of, and Schedule 6 to, the United Kingdom Companies Act 2006 (or its equivalent under applicable law) over which the Company has Control;
Tax Liability means any amount of income or employment taxes for which a Participant would or may be liable and for which a member of the Group or former member of the Group would or may be obliged to (or would or may suffer a disadvantage if it were not to) account to any relevant tax authority;
Termination Date means the date on which a Participant ceases to be an employee of a member of the Group and, for the avoidance of doubt, where the employee dies, shall be taken to mean the date of death;
Trustee means the trustee or trustees of any employee benefit trust established by the Company or any member of the Group;
United States Stock Exchange means the New York Stock Exchange, NASDAQ or such other recognised stock exchange in the United States, on which the Shares are listed;
U.S. means the United States of America;
U.S. Subsidiary means a Subsidiary of the Company located in the US;
Vest means (i) in the case of an Award granted in the form of an Option, when the Option becomes exercisable, or (ii) in the case of an Award granted in the form of a Restricted Share Award, when the Restricted Shares cease to be subject to a substantial risk of forfeiture (within the meaning of Section 83 of the Code), or (iii) in the case of an Award granted in the form of a Conditional Award, when the Participant becomes entitled to have the Shares which are the subject of the Conditional Award transferred to him, or (iv) in the case of an Award granted in the form of a Phantom Award, a Participant becoming entitled to call for a cash sum in accordance with rule 10.10, and Vesting and Vested shall be construed accordingly;
Vesting Date means the date on which an Award (or part thereof) Vests which, save as provided for in these rules, shall not be earlier than the third anniversary of the Date of Grant;
Vesting Period means the period from the Date of Grant to the Vesting Date; and
Vested Shares means those Shares, Notional Shares or Restricted Shares in respect of which an Award has Vested.
1.1Where the context permits the singular shall include the plural and vice versa and the masculine shall include the feminine.
1.2References to any act or statutory instrument of UK Parliament or the legislative bodies of Jersey, the United States of America or the European Union (the EU) shall include any modification, amendment or re-enactment thereof (and shall, in respect of any EU legislation, include any UK legislation enacted in replacement thereof following the UK’s departure from the EU).
2.Grant of Awards
2.1Subject to the provisions contained in these rules, the Committee may, during a Grant Period, grant Awards to Eligible Employees selected for participation by the Committee in its discretion on such terms as it shall in its absolute discretion determine. No consideration shall be payable for the grant of an Award. When the Committee grants an Award, it shall decide whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award. An Eligible Employee may be granted any form of Award or any combination of Awards.
2.2Individual Limit. The maximum total Market Value of Shares over which Awards may be granted to any Eligible Employee in respect of any Financial Year of the Company is 500 per cent. of his Salary.
2.3Method of satisfying Awards. An Award, other than a Phantom Award, may be satisfied by the issue of Shares, the transfer of Shares from treasury, or by the transfer of Shares purchased on the market including from an employee benefit trust.
2.4Scheme Limit. Subject to rule 2.7, no Award shall be granted under this Appendix A to the extent that the result of that grant would be that the aggregate number of Shares that could be issued on the Vesting or, in the case of Options, exercise of that Award and any other Award granted at the same time, when added to the number of Shares that:
(a)could be issued on the vesting of any subsisting share awards or exercise of any options granted during the preceding ten years under (a) the Plan, (b) this Appendix A and (c) any other Employees’ Share Scheme established by the Company or Old Ferguson; and
(b)have been issued on the vesting of any share awards or exercise of any options granted during the preceding ten years under (a) the Plan, (b) this Appendix A and (c) any other Employees’ Share Scheme established by the Company or Old Ferguson,
would exceed 10 per cent. of the ordinary share capital of the Company for the time being in issue.
2.5Subject to rule 2.7, no Award shall be granted under this Appendix A to the extent that the result of that grant would be that the aggregate number of Shares that could be issued on the Vesting or, in the case of Options, exercise of that Award and any other Award granted at the same time, when added to the number of Shares that:
(a)could be issued on the vesting of any subsisting share awards or exercise of any options granted during the preceding ten years under (a) the Plan, (b) this Appendix A and (c) any other discretionary share scheme established by the Company or Old Ferguson; and
(b)have been issued on the vesting of any share awards or exercise of any options granted during the preceding ten years under (a) the Plan, (b) this Appendix A and (c) any other discretionary share scheme established by the Company or Old Ferguson,
would exceed 5 per cent. of the ordinary share capital of the Company for the time being in issue.
2.6References in rules 2.4 and 2.5 to the issue of Shares shall, for the avoidance of doubt, mean the issue and allotment (but not transfer) of Shares. The delivery of Shares from treasury shall also count towards the percentage limits set out in rules 2.4 and 2.5 above for so long as institutional shareholder guidelines recommend this.
2.7With respect to any Awards granted following 1 June 2023, the aggregate number of Shares with respect to which Awards may be granted under this Appendix A shall not exceed 200,000. Any Award under this Appendix A settled in cash shall not be counted against the foregoing maximum share limit.
2.8In determining the above limits Shares subject to an Award under this Appendix A shall again be made available for issuance or delivery under this Appendix A if such Shares are attributable to an Award which was released, lapsed or
otherwise became incapable of Vesting without issuance of the full number of Shares to which the Award related.
2.9Award Certificate. The Committee may, in its absolute discretion, enter into a deed poll recording its intention to grant Awards and agreeing to be bound by the Award Certificates issued pursuant to this rule 2.9. As soon as reasonably practicable following the Date of Grant, the Committee shall procure the issue of an Award Certificate in respect of the Award and send it to the Participant. If the Committee has not entered into a deed poll prior to the granting of the Awards, the Committee shall procure that the Award Certificates are issued under the seal of the Company or otherwise to take effect as a deed. An Award Certificate shall state:
2.9.1whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award;
2.9.2if the Award is granted subject to the terms of the Plan or this Appendix A;
2.9.3the name of the Eligible Employee receiving the Award;
2.9.4the Date of Grant of the Award;
2.9.5whether an Award will be granted in respect of ordinary shares;
2.9.6the number of Shares or Restricted Shares (or, in the case of an Award granted in the form of a Phantom Award, Notional Shares) comprised in the Award;
2.9.7the exercise price payable by the Participant on exercise of the Award (if any);
2.9.8the Vesting Date or Dates which shall not be later than the tenth anniversary of the Date of Grant;
2.9.9if more than one Vesting Date is specified, the number or proportion of the Shares comprised in an Award which will ordinarily Vest on each of the specified Vesting Dates;
2.9.10the Performance Condition applicable to the Award;
2.9.11whether Dividend Equivalents should be paid in respect of an Award;
2.9.12whether the Participant has an obligation to enter into an agreement, election or arrangement including, without limitation, pursuant to rule 10.14;
2.9.13details of the Holding Period that shall apply to the Award; and
2.9.14details of the clawback and malus terms that apply to an Award.
The Committee may require a Participant to sign and return within a specified period a copy of the Award Certificate or other document acknowledging his agreement to be bound by the terms of the Plan and may determine that a Participant’s failure to do so within the specified period shall cause the Award to lapse and shall be treated as if it had never been granted.
Subject thereto, an Award Certificate shall be in such form as the Committee may determine from time to time.
2.10Duration of this Appendix A. An Award may not be granted:
2.10.1earlier than the Adoption Date; nor
2.10.2later than the tenth anniversary of the Adoption Date.
2.11Non-transferability and bankruptcy. An Award shall be personal to a Participant and shall not (except to the extent necessary to enable a Legal Representative to realise the Award following the death of a Participant) be capable of being transferred, charged or otherwise alienated and shall lapse immediately if the Participant purports to transfer, charge or otherwise alienate the Award or if he is declared bankrupt.
2.12Right to Renounce Awards. A Participant may, by notice in writing to the Company within thirty days after the Date of Grant, renounce (in whole but not in part) his rights under the Award. In such a case, the Award shall to that extent be treated, for the purpose of this Appendix A, as never having been granted. No consideration shall be due for any such renunciation.
2.13Approvals and consents. The grant of an Award shall be subject to obtaining any approval or consent required under the Listing Rules, the Market Abuse Regulation and any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other UK or overseas regulation or enactment related to the grant of Awards to Eligible Employees in the jurisdictions in which they are resident.
3.Performance Condition
3.1The Committee shall impose Performance Conditions which must be satisfied in order for an Award to Vest. Unless the Committee determines otherwise, the Performance Conditions set out in Schedule 1 to the Plan shall apply.
3.2The Committee can set different Performance Conditions for Awards granted in different years (in terms of the type of condition, the weighting given to that condition and the targets applicable to each condition) provided that, in the reasonable opinion of the Committee, the Performance Conditions for Awards granted in one year is not materially less challenging than the Performance Conditions for Awards granted in any other year.
3.3The Committee may vary the Performance Conditions applying to existing Awards if an event occurs or there are circumstances (for example, an acquisition or disposal of a business or a significant part of a business) such that the condition is no longer a fair measure of performance provided that, in the reasonable opinion of the Committee, the new condition is not materially less challenging than the original condition would have been but for the event or circumstances in question.
3.4The Committee shall, as soon as reasonably practicable, notify a Participant of any substitution or variation of the Performance Conditions.
4.Awards which take the form of a Restricted Share Award
4.1If an Award takes the form of a Restricted Share Award, the Restricted Shares subject to the Award shall, except to the extent that the Award has Vested, be subject to such restrictions on the transfer, assignment, sale, pledge, charge or other disposal of the Restricted Shares during the Vesting Period as the Committee may prescribe and an Eligible Employee may be required to enter into an irrevocable agreement with the Company and, if necessary, the Eligible Employee’s Employer, in such form as the Committee may prescribe which may include an agreement by the Eligible Employee:
(a)not to transfer, assign, sell, pledge, charge or otherwise dispose of any Restricted Shares subject to the Award except to the extent that the Award has Vested; and
(b)to transfer (or procure the transfer) to or to the order of the Company, for a total of one penny (or the equivalent in a Participant’s local currency), all the Restricted Shares in respect of which the Award does not Vest.
4.2If the Eligible Employee does not enter into any required agreement either before the Date of Grant or within such period after the Date of Grant as the Committee may specify, the Award shall not be granted or if it has been granted, such grant shall be ineffective.
4.3On or before the Date of Grant for an Award which takes the form of a Restricted Share Award, the Company shall transfer or procure the transfer to the Participant or his nominee or such other person as the Committee may determine the number of Restricted Shares which are subject to the Award.
4.4To the extent that an Award which takes the form of a Restricted Share Award Vests, any restrictions referred to in rule 4.1 shall cease to have effect in relation to the Shares subject to that Awards.
4.5Notwithstanding that the Award has not Vested, a Participant shall be entitled to receive the cash equivalent of any dividends paid on Restricted Shares in the period between the Date of Grant and the Vesting Date. Such “dividend equivalents” on unvested Restricted Shares will be paid at the same times as ordinary dividends are paid to ordinary shareholders of the Company.
4.6A Participant who receives an Award of Restricted Shares may file with the U.S. Internal Revenue Service, within 30 days of the Date of Grant of such Award, an election, pursuant to Section 83(b) of the Code, to be taxed currently on the fair market value of all or any portion of the unvested Shares in such award. It is the Participant’s sole responsibility, and not that of the Company or of any other member of the Group, to make any such decision and to file timely and in accordance with applicable regulations any election that may be so available.
5.Vesting of Awards and Holding Periods
5.1Timing of Vesting. Subject to rules 6, 7, 8, and the satisfaction of the Performance Condition, an Award (or part thereof) shall Vest on the Vesting Date.
5.2Holding Period. A Participant shall take such steps as the Committee may reasonably require to satisfy the Committee as to the Participant’s observance of the Holding Period. For the avoidance of doubt, in circumstances where Participants are offered and accept a replacement Award in accordance with rule 9, the new award (as defined in rule 9.1) shall be subject to the Holding Period at such time as it Vests.
6.Leavers
6.1Death. If a Participant dies, Awards granted to him will Vest on the Termination Date in accordance with rule 6.4.
6.2Other Leavers. Where a Participant ceases to be an Eligible Employee at any time before the Vesting Date applicable to his Award by reason of:
(a)redundancy;
(b)injury, disability or ill-health (evidenced to the satisfaction of the Committee);
(c)his employing company ceasing to be under the Control of the Company;
(d)the business (or part of a business) in which he is employed being transferred to a person who is not a member of the Group, or
(e)any other reason at the discretion of the Committee,
his Award shall continue, and will Vest on the original Vesting Date in accordance with rule 6.3, save that the Committee may determine that an Award shall instead Vest on the Termination Date in accordance with rule 6.4. Where an Award is subject to more than one Performance Condition, the Committee may treat each discrete part of the Award that is subject to a particular Performance Condition as a separate Award with the result that the Committee may determine that part of an Award shall continue and Vest on the original Vesting Date in accordance with rule 6.3 and that part of an Award shall Vest on the Termination Date.
6.3Delayed Vesting. Where an Award Vests in accordance with this rule 6.3, the number of Vested Shares shall be determined by the Committee by reference to:
(a)the application of the Performance Condition at the original Vesting Date; and
(b)multiplying the resulting number of Shares, Notional Shares or Restricted Shares by the fraction A/B (where A is the number of complete months from the Date of Grant to the Termination Date and which shall not be greater than the total number of months in the Vesting Period and B is 36 or such other number as is equal to the number of months in the Vesting Period), save that the Committee may, in its absolute discretion, disapply in whole or in part the application of the time pro-rating fraction.
6.4Immediate Vesting. Where an Award Vests in accordance with this rule 6.4 the number of Vested Shares shall be determined by the Committee by reference to:
(a)the application of the Performance Condition at the Termination Date, or at such other date (whether later or earlier) within a period of one month of the Termination Date on which data is available in the ordinary course to allow the testing of Performance Conditions; and
(b)multiplying the resulting number of Shares, Notional Shares or Restricted Shares by the fraction A/B (where A is the number of complete months from the Date of Grant until the Termination Date and which shall not be greater than the total number of months in the Vesting Period and B is 36 or equal to such other number of months in the original Vesting Period), save that in any particular case, the Committee may, in its absolute discretion, disapply in whole or in part the application of the time pro-rating fraction.
6.5If a Participant ceases employment in any circumstances other than those described at rules 6.1 or 6.2, his unvested Awards shall lapse automatically on the Termination Date.
6.6Meaning of ceasing employment. For the purposes of this rule 6, a Participant shall not be treated as ceasing to be an Eligible Employee until he ceases to be employed by or hold office with the Company or any member of the Group. The reason for the termination of employment of a Participant shall be determined by reference to rule 6.1 and 6.2 regardless of whether such termination was lawful or unlawful (and howsoever caused).
7.Malus and Clawback
7.1Notwithstanding any other rule of this Appendix A, if one or more of the circumstances set out in rule 7.2 occur the Committee may (a) at any time where the circumstances fall within rule 7.2.4 below; or (b) prior to the fifth anniversary of the Date of Grant in all other circumstances determine (acting fairly and reasonably having taken into account the scale of loss or damage to the Company or the extent of
the risk taken by the Company) to take one or more of the following actions in relation to any one or more Participants:
7.1.1reduce (including to nil) the number of Shares, Notional Shares or Restricted Shares in respect of which any future Award is granted to a Participant;
7.1.2reduce (including to nil) the cash amount payable under an unvested Award held by a Participant or the number of Shares, Notional Shares or Restricted Shares under an unvested Award and/or the number of Shares and/or Dividend Equivalents under a Vested but unexercised Option held by a Participant, by such amount and/or such number as the Committee considers appropriate in the circumstances; or
7.1.3in relation to a Vested Award, require a Participant to pay to the Company or such other person as the Company may direct within 30 days of a written demand from the Company such number of Shares or such monetary amount with a value to be determined in the Committee’s absolute discretion provided such value on the date of demand is no greater than the value of the Vested Shares and Dividend Equivalents under Award at the Vesting Date, less any amount paid by or in respect of the Participant in respect of a Tax Liability incurred as a result of the Vesting of the relevant Award (except to the extent the Participant is able to recover amounts paid in respect of such Tax Liability).
7.2The circumstances in which the Committee may consider that it is appropriate to exercise its discretion under rule 7.1 are the following:
7.2.1a material financial misstatement of the Company’s audited financial accounts (other than as a result of a change in accounting practice);
7.2.2conduct by a Participant which results in or is reasonably likely to result in significant reputational damage to the Company;
7.2.3the negligence or gross misconduct of a Participant; or
7.2.4fraud effected by or with the knowledge of a Participant.
7.3If the Committee decides to exercise its discretion under this rule 7, it shall confirm this in writing to each affected Participant.
7.4For the purposes of these rules, if the Committee decides to exercise its discretion under rule 7.1.2 before an Award Vests:
7.4.1the Award shall be deemed to have been granted over the reduced number of Shares, Notional Shares or Restricted Shares (as the case may be); and
7.4.2any subsequent Vesting of the Award shall be determined by reference to this reduced number of Shares, Notional Shares or Restricted Shares,
save that if the number of Shares, Notional Shares or Restricted Shares is reduced to nil, the Award shall be treated as if it had never been granted and such Participant (including a Participant who has left employment before the Vesting Date) shall have no rights to any cash amount, Dividend Equivalents, Shares, Notional Shares or Restricted Shares.
8.Take-over and Liquidation
8.1This rule 8 applies if:
(a)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied, the person making the offer will have Control of the Company; or
(ii)a general offer to acquire all of Shares;
(b)any person proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law;
(c)any person becomes bound or entitled to acquire Shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(d)notice is given of a resolution for the voluntary or compulsory winding-up of the Company,
(each a Relevant Event).
8.2Where this rule 8 applies and subject to rules 8.3, 8.4 and 9 below, all outstanding Awards will automatically Vest and, in the case of an Award granted in the form of an Option shall be automatically exercised on the Relevant Date provided that any exercise price payable by the Participant on exercise is equal to or less than the relevant offer price or consideration (as determined by the Committee). Where this rule 8 applies, and subject to rules 8.3, 8.4 and 9 below, any outstanding Awards granted in the form of Options that are not exercised on the Relevant Date shall lapse automatically.
8.3Proportion of Award that Vests. The number of Shares in respect of which the Award Vests shall be determined by the Committee by reference to:
(a)the application of the Performance Condition at the Relevant Date; and
(b)multiplying the resulting number of Shares, Notional Shares or Restricted Shares by the fraction A/B (where A is the number of complete months from the Date of Grant until the Relevant Event and which shall not be greater than the total number of months in the Vesting Period and B is 36 or equal to such other number of months in the original Vesting Period), save that in any particular case, the Committee may, in its absolute discretion, disapply, in whole or in part, the application of the time pro-rating fraction.
8.4Without prejudice to the operation of rule 9, Awards shall not Vest or be exercised without the consent of the Committee under the foregoing provisions of this rule 8 if the purpose and effect of the Relevant Event, together with any associated transactions, is to create a new holding company for the Company, such company having substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the Relevant Event. Unless the Committee determines otherwise in its absolute discretion, an Award will in such circumstances be exchanged for an equivalent award in accordance with rule 9 below and notice of a replacement award shall be issued to each affected Participant accordingly.
9.Rollover of Awards
9.1If any other business entity (the acquiring company):
(a)obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the acquiring company will have Control of the Company; or
(ii)a general offer to acquire all the Shares; or
(b)proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(c)becomes bound or entitled to acquire shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or their equivalent under applicable law, and the acquiring company notifies Participants of an offer of a replacement Award, then, on the Relevant Date, for any Award which has not lapsed (the old award) a Participant may elect to release and accept in consideration of that release an award (the new award) which (in the opinion of the Committee) is equivalent to the old award but relates to shares in a different company (whether the acquiring company itself or another company) (the new grantor).
9.2The provisions of this Appendix A shall be construed as if:
(a)the new award were an award granted under this Appendix A at the same time as the old award;
(b)references to the Company in the rules were references to the new grantor;
(c)references to the Committee in the rules were references to the board of directors of the new grantor or any duly authorised committee thereof;
(d)references to Shares were references to shares in the new grantor; and
(e)the Vesting Date in relation to the new award was the same as that in relation to the old award.
9.3The Committee may make such adjustments to the Performance Condition applicable to the new award as it, in its absolute discretion, considers appropriate.
9.4Subject to rule 8.4, if notice is given by an acquiring company under rule 9.1 and a Participant does not elect to release an old award and accept in consideration for that release a new award, the old award will vest and be exercised in accordance with rule 8.2.
10.Consequences of Vesting
10.1Options. On the Vesting of an Award which takes the form of an Option the Participant may, subject to any shorter period imposed pursuant to this Appendix A or the Award Certificate, exercise the Option over some or all of the Vested Shares during the period to the tenth anniversary of the Date of Grant, but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs.
10.2If the Award has Vested due to a Participant’s death or if the Participant dies during the exercise period specified in rule 10.1 above, the Award may be exercised by the Legal Representative during the period of 12 months following the date of
death, but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs.
10.3If the Award has Vested in accordance with rules 6.2 or 8.2, the Award may be exercised during the period of 6 months following the Vesting Date, but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs.
10.4If a Participant ceases employment in any circumstances other than those described at rules 6.1 or 6.2, his Awards may be exercised in respect of Vested Shares during the period of one month following the Termination Date, but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs.
10.5If, during the period in which an Option may otherwise be exercised under these rules, the Participant is subject to any dealing restrictions under the Listing Rules, the Market Abuse Regulation or any relevant share dealing code of the Company, the applicable period shall be suspended until such later date as those dealing restrictions lift provided that no Option may be exercised more than 10 years after its Date of Grant and in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs. Subject to rules 10.11, 10.12 and 10.15 and any arrangements to give effect to the Holding Period in accordance with rule 5.2, the Company shall procure the issue or transfer of the Vested Shares to the Participant (or his nominee) as soon as reasonably practicable after the exercise date and in any event not later than 30 days thereafter, but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs.
10.6If a Participant has not exercised his Option before March 15 of the calendar year following the calendar year in which the Vesting Date occurs (the Relevant Period), the following provisions shall apply:
(a)if the exercise price payable by the Participant does not exceed the closing middle market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the last day of the Relevant Period, the Option shall be deemed to have been exercised on the last day of the Relevant Period; or
(b)subject to (a) above, the Option shall be settled by the Committee making a payment of (or procuring the payment of) a cash sum to the Participant equal to any Option Exercise Value, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in U.S. dollars or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
10.7The Participant may exercise a Vested Option by written notice to the Company in such form as the Committee may prescribe.
10.8Conditional Awards. On the Vesting of an Award which takes the form of a Conditional Award a Participant need take no action and the Company shall, subject to rules 10.11, 10.12 and 10.15 and any arrangements to give effect to the Holding Period in accordance with rule 5.2 procure the issue or transfer of the Vested Shares to the Participant (or his nominee) as soon as reasonably practicable after the Vesting Date but in no event later than March 15 of the calendar year following the calendar
year in which the Vesting Date occurs. If the Award has Vested due to a Participant’s death or if the Participant dies after Vesting and prior to issuance or transfer of the Vested Shares, such Shares shall be issued or transferred to the Legal Representative as soon as reasonably practicable after the date of death, but in no event later than March 15 of the calendar year following the calendar year in which the date of death occurred.
10.9Restricted Share Awards. On the Vesting of an Award which takes the form of a Restricted Share Award the Shares shall cease to be subject to all restrictions and any agreement applying to the Restricted Shares shall cease to have effect. For the avoidance of doubt, the Participant shall be required to comply with arrangements in respect of such Shares to give effect to the Holding Period in accordance with rule 5.2.
10.10Phantom Awards. On the Vesting of an Award which takes the form of a Phantom Award, the Committee shall pay, or procure the payment of, a cash sum to the Participant equal to the Final Value of the Vested Notional Shares to which the Phantom Award relates, subject to such deductions for any Tax Liability as are required by applicable law. The Committee may in its discretion pay or procure payment of the cash sum in U.S. dollars or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine). The cash sum will be paid as soon as reasonably practicable following the Vesting Date, but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs.
10.11Restrictions on Vesting. An Award shall not Vest unless and until the issue or transfer of Shares (if relevant) after such Vesting would be lawful in all relevant jurisdictions and in compliance with the Listing Rules, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other relevant UK or overseas regulation or enactment related to the Vesting of an Award in the jurisdictions in which the relevant Participant is resident for tax purposes, but in no event shall the Award Vest later than 31 December of the calendar year in which the Award would otherwise have Vested, but for the operation of this rule 10.11.
10.12Dividend Equivalents. Where the Committee has at the Date of Grant determined that Dividend Equivalents shall be paid, within the period of 30 days following the Vesting Date (but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs), the Company shall either:
(a)pay the Participant a cash sum, or
(b)issue or transfer Shares to the Participant,
in either case having a value equal to the sum of the dividends that the Participant would have received had the Participant held Vested Shares throughout the period between the Date of Grant and the Vesting Date. An amount equivalent to the Tax Liability may be deducted from such payment or delivery of Shares. This rule shall not apply in respect of any super dividend, dividend in specie or other distribution paid by the Company (each being a Distribution) which would otherwise materially affect the value of an Award and for which an Award is adjusted pursuant to rule 12. For the purpose of this rule 10.12 and rule 12, a Distribution shall not materially affect the value of an Award if the Company undertakes a share consolidation in conjunction with the Distribution that has the effect that the Market Value of a Share before and after the Distribution is substantially equivalent.
10.13Payment of Tax Liability. Any liability of a Participant to taxation or social security contributions shall be for the account of the relevant Participant and the issue or transfer of Vested Shares subject to a Participant’s Vested Award shall be conditional upon the Participant having discharged the amount required to satisfy the Tax Liability which arises on Vesting or exercise to the satisfaction of the Company, or otherwise having complied with any arrangements specified by the Company to secure that such Tax Liability is satisfied including irrevocably authorising the Company to sell or procure the sale of sufficient Vested Shares on or following the Vesting or exercise (as applicable) of his Award on his behalf to ensure that any relevant member of the Group or former member of the Group receives the amount required to discharge the Tax Liability which arises as a result of the Vesting or exercise of his Award and by participating in this Appendix A a Participant is deemed to have given such authorisation.
10.14Elections. A Participant shall enter into any agreement, election or arrangement which the Committee may consider appropriate within such period as may be specified by the Committee, in relation to or in connection with any liability to income tax or social security contributions (including, if permitted under local law, any employer’s social security contributions) in respect of the Participant’s Award or the Shares subject to his Award. For example, but without limitation, the Committee may require Participants who are resident in the UK for tax purposes to enter into an agreement or election pursuant to paragraphs 3A or 3B of Schedule 1 to the UK Social Security Contributions and Benefits Act 1992 or a joint election under Section 431 of the UK Income Tax (Earnings and Pensions) Act 2003 by the fourteenth day following the acquisition of any Shares by the Participant.
10.15Cash settlement. If for any reason the Committee considers that it is impractical or legally onerous to deliver Shares in satisfaction of a Vested Award, it may instead pay or procure the payment to the Participant of a cash sum equal to the Final Value of the Vested Shares, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in U.S. dollars or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
11.Relationship of this Appendix A to contract of employment
11.1The rights and obligations of a Participant under the terms and conditions of employment shall not be affected by his participation in this Appendix A or any right he may have to participate in this Appendix A. An individual who participates in this Appendix A waives all and any rights to compensation or damages in consequence of the termination of his employment with any member of the Group (or former member of the Group if applicable) for any reason whatsoever (whether lawfully or unlawfully) insofar as those rights arise, or may arise from his ceasing to have rights under or be entitled to exercise any Award under this Appendix A, as a result of such termination or from the loss or diminution in value of such rights or entitlements. In the event of any conflict between the terms of this rule 11 and the Participant’s terms of employment, this rule shall take precedence.
11.2Notwithstanding any other provision of this Appendix A:
11.2.1this Appendix A shall not form part of any contract of employment between the Company or any Subsidiary and a Participant;
11.2.2no Eligible Employee has any right to be granted an Award and the fact that an Eligible Employee may have participated in this Appendix A and/or been
granted an Award under this Appendix A shall not entitle any Eligible Employee to future participation or grants;
11.2.3the benefit to a Participant of participation in this Appendix A (including, in particular but not by way of limitation, any Awards held by him) shall not form any part of his contractual remuneration or benefits or count as his contractual remuneration or benefits for any purpose and shall not be pensionable;
11.2.4nothing in this Appendix A shall in any way be construed as imposing upon any member of the Group a contractual obligation as between the member of the Group and a Participant to contribute to this Appendix A; and
11.2.5by accepting the grant of an Award and not renouncing it a Participant is deemed to have agreed to the provisions of this Appendix A and in particular, this rule 11.2.
12.Adjustment of Awards
12.1In the event of any Capital Reorganisation (or the implementation by the Company of a demerger or payment of a super dividend, dividend in specie or other distribution paid by the Company which would otherwise materially affect the value of an Award), the price payable by a Participant on Vesting (or exercise of an Option) (if any), the description of Shares, Notional Shares or Restricted Shares and the number of Shares, Notional Shares or Restricted Shares comprised in an Award may be adjusted in such manner as the Committee may determine. Any adjustment to Awards made pursuant to this rule 12 shall be notified to the relevant Participant.
13.Administration and Amendment
13.1Committee responsible for administration. The decision of the Committee shall be final and binding in all matters relating to this Appendix A and it may at any time discontinue the grant of further Awards or amend any of the provisions of this Appendix A in any way it thinks fit, provided that:
(a)except as herein provided, the Committee shall not make any amendment that would materially prejudice the interests of existing Participants in any jurisdiction in which this Appendix A operates except with the prior consent or sanction of Participants in that jurisdiction who, if their Awards Vested in full, would thereby become entitled to a majority of all the Shares which would fall to be transferred upon satisfaction of all outstanding Awards in that jurisdiction;
(b)without prejudice to any provision of this Appendix A which provides for the lapse of an Award, the Committee may not cancel an Award unless the Participant agrees in writing to such cancellation; and
(c)no amendment to the advantage of Eligible Employees or Participants may be made to:
(i)the definition of Eligible Employee in rule 1.1;
(ii)the limitations on the numbers of Shares subject to this Appendix A;
(iii)the maximum entitlement of an Eligible Employee under this Appendix A;
(iv)the basis for determining an Eligible Employee’s entitlement to Shares under this Appendix A;
(v)the terms of Shares to be provided under this Appendix A;
(vi)the adjustment provisions of rule 12 of this Appendix A;
without the prior approval of the Company in a general meeting, except in the case of minor amendments to benefit the administration of this Appendix A, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Eligible Employees and/or Participants or any member of the Group.
14.Data Protection
14.1By accepting the grant of an Award, a Participant acknowledges that the Company or any member of the Group may hold, process and transfer personal data relating to them to other members of the Group or to any third parties engaged by them (whether within or outside of the European Economic Area (EEA) and that personal data may also be processed outside the EEA by the Company or any member of the Group or by one or more held or of its or their service providers) for any and all purposes related to the operation and administration of the Plan and/or in order to meet any legal obligation, in each case in accordance with the Company’s Share Plan Data Protection Protocol and applicable law.
15.General
15.1Any member of the Group may provide money to the Trustee or any other person to enable them or him to acquire (and to subscribe for) Shares to be held for the purposes of this Appendix A, or enter into any guarantee or indemnity for those purposes, to the extent not prohibited by applicable law.
15.2The existence of any Award shall not affect in any way the right or power of the Company or its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or other changes in the Company’s capital structure, or any merger or consolidation of the Company, or any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or convertible into, or otherwise affecting the Shares or the rights thereof, 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.
15.3Awards constitute unsecured promises by the Employers to pay benefits in the future. Participants holding such Awards shall have the status of general unsecured creditors of the Company or the Employer, as applicable. Each Employer shall be solely responsible for payment of the benefits of its employees and their beneficiaries. This Appendix A is unfunded for U.S. federal tax purposes. Any amounts set aside to defray the liabilities assumed by the Company or an Employer will remain the general assets of the Company or the Employer, as applicable, and shall remain subject to the claims of the Company’s or the Employer’s creditors until such amounts are distributed to Participants.
15.4This Appendix A is intended to be exempt from, and to the extent not so exempt to comply with, the requirements of Section 409A of the Code (“Section 409A”) and shall be interpreted and administered accordingly. Notwithstanding anything to the contrary in this Appendix A, if a Participant is a “specified employee” as defined in Section 409A as of the date the Participant separates from service
(within the meaning of Section 409A), then, to the extent required by Section 409A, payments due under this Appendix A resulting from the Participant’s separation from service may not be made until the earlier of: (i) the first day following the sixth month anniversary of the date of the Participant’s separation from service for a reason other than death; and (ii) the Participant’s date of death; provided, however, that any payments delayed during this period shall be paid in the aggregate in a lump sum as soon as reasonably practicable following the earlier of the sixth month and one day anniversary of the Participant’s separation from service or the Participant’s date of death, as the case may be. Notwithstanding the foregoing, the Employers do not guarantee the tax treatment of any payments or benefits under this Appendix A including, without limitation, under the Code, federal, state, municipal, local or foreign laws.
15.5Any notice or other document required to be given under or in connection with this Appendix A may be delivered to a Participant or sent by post to him at his home address according to the records of his Employer or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document require to be given to the Company under or in connection with this Appendix A may be delivered or sent by post to it at its corporate services office at 1020 Eskdale Road, Winnersh, Wokingham RG41 5TS (or such other place or places as the Committee may from time to time determine and notify to Participants).
15.6The Company, or where the Committee so directs any Subsidiary, shall pay the appropriate stamp duty on behalf of the Participants in respect of any issue or transfer of Shares on the Vesting or exercise of the Awards.
15.7Benefits under this Appendix A shall not be pensionable.
15.8These rules and any contractual and non-contractual obligations arising from them shall be governed by, and construed in accordance with, the laws of England. Neither the Plan, this Appendix A nor any Award Certificate shall be construed or interpreted with any presumption against the Company by reason of the Company causing the Plan, this Appendix A or Award Certificate to be drafted. Any ambiguity or interpretation of this Appendix A to the extent possible, as determined by the Committee in its sole discretion, shall be determined in accordance with any corresponding interpretation or decision with respect to the Plan.
15.9Unless specifically stated otherwise, each Participant, the Company and any other member of the Group submits to the exclusive jurisdiction of the English courts in relation to all disputes arising out of or in connection with this Appendix A. By accepting the grant of an Award and not renouncing it, Participants are deemed to have agreed to submit to such jurisdiction.
SCHEDULE 1
PERFORMANCE CONDITION
The Award shall be subject to, and tested against, the following conditions in the following proportions:
| | | | | |
| Performance Measure | Percentage of Award tested against relevant Performance Measure |
A. Total Shareholder Return (TSR) | 33.3% (or such other percentage not exceeding 40% determined by the Committee at the Date of Grant) |
B. Earnings per Share (EPS) | 33.3% (or such other percentage not exceeding 40% determined by the Committee at the Date of Grant) |
C. Cash Flow from Operating Activities (OpCF) | 33.3% (or such other percentage not exceeding 40% determined by the Committee at the Date of Grant) |
The aggregate percentage for the Performance Measures applicable to an Award shall be 100%.
The amount of an Award that Vests shall be determined by applying the applicable Performance Percentage in respect of a Performance Measure to the relevant Percentage of an Award. Total amount Vesting shall be the aggregate of all the percentages.
A. TOTAL SHAREHOLDER RETURN
Within 45 days of the end of the Performance Period applicable to the Award:
(a)the TSR shall be calculated over the Performance Period;
(b)the CSR of each Comparator Company shall be calculated;
(c)the TSR shall be ranked within the List so as to determine where within the List TSR falls;
(d)if the TSR, when so ranked against the CSR, falls:
(i)in the first quartile, the Performance Percentage shall be 100%;
(ii)at the fiftieth percentile, the Performance Percentage shall be 25%;
(iii)below the fiftieth percentile, the Performance Percentage shall be zero; and
(e)in between these points, the Performance Percentage shall be calculated on a straight line basis.
Shortened Performance Period Notwithstanding the above, where the Performance Condition is to be measured over a shortened Performance Period for any reason (including pursuant to rules 6.4 and 8.2) the Committee may make such adjustments to the Performance Condition as it, in its absolute discretion, considers appropriate so
that the outcome fairly reflects the underlying financial performance of the Company over that shortened Performance Period.
B. EARNINGS PER SHARE
(a)If the EPS Growth achieved over the Performance Period is equal to:
(i)30% plus RPI, the Performance Percentage shall be 100%;
(ii)9% plus RPI, the Performance Percentage shall be 25%;
(iii)below 9% plus RPI, the Performance Percentage shall be zero; and
(b)for EPS Growth that falls in between 9% plus RPI and 30% plus RPI, the Performance Percentage shall be calculated on a straight line basis between 25% and 100%.
Shortened Performance Period Notwithstanding the above, where the Performance Condition is to be measured over a shortened Performance Period for any reason (including pursuant to rules 6.4 and 8.2) the Committee may make such adjustments to the Performance Condition as it, in its absolute discretion, considers appropriate so that the outcome fairly reflects the underlying financial performance of the Company over that shortened Performance Period.
C. CASH FLOW FROM OPERATING ACTIVITIES
(a)If the aggregate OpCF achieved over the Performance Period is equal to:
(i)US$4.983 billion, the Performance Percentage shall be 100%;
(ii)US$4.423 billion, the Performance Percentage shall be 25%;
(iii)below US$4.423 billion, the Performance Percentage shall be zero; and
(b)for aggregate OpCF that falls in between US$4.423 billion and US$4.983 billion the Performance Percentage shall be calculated on a straight line basis between 25% and 100% respectively.
Shortened Performance Period Notwithstanding the above, where the Performance Condition is to be measured over a shortened Performance Period for any reason (including pursuant to rules 6.4 and 8.2) the Committee may make such adjustments to the Performance Condition as it, in its absolute discretion, considers appropriate so that the outcome fairly reflects the underlying financial performance of the Company over that shortened Performance Period.
The following expressions apply for the purposes of determining whether the above conditions are satisfied.
| | | | | |
| |
| Basis Year | in relation to the Company, the Financial Year ending immediately before that in which the Date of Grant of the Award occurs; |
| Comparator Company | each of the companies in the Comparator Group that are quoted on the London Stock Exchange at the end of the Performance Period; |
| Comparator Group | means those companies comprising the FTSE 100 Index at the beginning of the Performance Period; |
| | | | | |
| CSR | the total shareholder return of each Comparator Company calculated over the Performance Period in the manner specified in Schedule 2; |
| EPS | for any Financial Year, the Company’s earnings per Share calculated in such manner as the Committee shall specify at the Date of Grant provided that the Committee may: (a) adjust the figure for earnings per share as calculated in accordance with the relevant accounting standard to arrive at a figure which reflects the underlying business performance of the Company (and may, without limitation, adjust by excluding any or all extraordinary or exceptional items from the earnings per share calculation); and (b) ensure that the relevant accounting standard is applied on a consistent basis in respect of years falling within any Performance Period and the Basis Year; |
| EPS Growth | The percentage growth in EPS from the Basis Year to the last Financial year of the Performance Period; |
| List | a list of the CSR ranked in descending order such that the Comparator Company with the greatest CSR is ranked first in such list and the Comparator Company with the lowest CSR is ranked last in such list; |
| OpCF | the Company’s total net cashflow from operating activities for each of the Financial Years of the Performance Period calculated in such manner as the Committee shall specify at the Date of Grant provided that the Committee may adjust the figure for net cashflow from operating activities as it deems appropriate to ensure that it reflects the underlying business performance of the Company; |
| Performance Measures | TSR, EPS and OpCF, and Performance Measure means any one of them; |
| Performance Percentage | with respect to an Award, means, in respect of each Performance Measure, the percentage derived from the relevant performance schedule appended to the Award Certificate in respect of that Performance Measure for the Performance Period in respect of that Award (which may be set by the Committee at different levels for different Awards); |
| Performance Period | means, unless foreshortened pursuant to the rules of the Plan and unless the Committee determines otherwise, the period of three consecutive Financial Years beginning with the Financial Year in which the Date of Grant falls; |
| RPI | the Index of Retail Prices (All Items) published by HM Government adjusted, if necessary, in the event that retail price inflation in the UK during any prescribed period is materially different from that in the countries in which the Company mainly carries on its business; |
| | | | | |
| TSR | the total shareholder return of the Company calculated over the Performance Period, in the manner specified in Schedule 2; |
| TSR ranking | the Company’s ranking within the Comparator Group by reference to TSR and CSR over the Performance Period; |
SCHEDULE 2
CALCULATION OF TOTAL SHAREHOLDER RETURN
For the purposes of determining whether and to what extent the TSR Performance Measure has been satisfied, this Schedule sets out the method of calculating TSR and CSR over the Performance Period. Unless otherwise expressly provided, all words defined in the Plan and Schedule 1 shall bear the same meanings in this Schedule 2 and the following expressions shall have the following meanings respectively.
| | | | | |
| TSR Provider | means any reputable independent firm or qualified consultant who is capable of calculating TSR as may be appointed by the Committee from time to time. |
| Day | any working day upon which an RI is calculated. |
| Return Index | the index that reflects movements in share price over a period and dividends reinvested on a net basis (without any associated tax credit) in shares on the ex-dividend date. |
| RI | the Return Index in respect of the Company or a Comparator Company as the context may require but in the event of RI as so defined ceasing to be available in respect of a Comparator Company, that company shall thenceforth cease to be a Comparator Company unless the Committee determines at its discretion that a substitute measure for RI may be used. |
Calculation of TSR and CSR
In respect of this Award
TSR = (A divided by B) - 1
Where
A = Z multiplied by the sum of (the RI in respect of the Day on which the Performance Period expires and the RI calculated in respect of each Day intervening between the day on which the Performance Period expires and the day three calendar months prior to the expiry of the Performance Period);
B = Y multiplied by the sum of (the RI in respect of the Day on which the Performance Period commences and the RI calculated in respect of each Day intervening between the day on which the Performance Period commences and the day three calendar months prior to the commencement of the Performance Period);
Y= the mathematical reciprocal of the number of Days intervening between the commencement of the Performance Period and the Day three calendar months prior to the commencement of the Performance Period including the Day on which the Performance Period commences; and
Z = the mathematical reciprocal of the number of Days intervening between the expiry of the Performance Period and the Day three calendar months prior to the expiry of the Performance Period including the Day on which the Performance Period expires.
Each RI referred to above shall be the RI in respect of the Company.
CSR of each Comparator Company is calculated using the formula for TSR as specified above save that any reference therein to RI shall be the RI calculated in respect of the Comparator Company concerned.
The Company may at its absolute discretion change or substitute an alternative formula for or otherwise alter any one or more of the formulae specified herein.
RI shall be calculated and provided by and shall continue to be calculated and provided by the TSR Provider unless and until:
(a)it becomes insolvent within the meaning of the Insolvency Act 1986;
(b)it ceases to produce RI or ceases to produce RI which is in a form acceptable to the Committee; or
(c)the Committee in its absolute discretion determines that it shall cease to obtain RI from a TSR Provider.
In the event that any of paragraphs (a) to (c) above is applicable, the Committee shall obtain subsequent RI or similar measure from any source which it in its absolute discretion deems appropriate and may make any consequential alterations as it in its absolute discretion deems appropriate to any previous calculations of TSR or otherwise.
| | |
FERGUSON GROUP ORDINARY SHARE PLAN 2019 |
Approved by resolution of the Board
on 22 March 2019 and amended by resolutions of the Board of the Company on 27 January 2021 and 12 July 2023
CONTENTS
| | | | | |
CLAUSE | PAGE |
1. DEFINITIONS | |
2. GRANT OF AWARDS | |
3. AWARDS WHICH TAKE THE FORM OF A RESTRICTED SHARE AWARD | |
4. VESTING OF AWARDS | |
5. LEAVERS | |
6. TAKE-OVER AND LIQUIDATION | |
7. ROLLOVER OF AWARDS | |
8. CONSEQUENCES OF VESTING | |
9. RELATIONSHIP OF PLAN TO CONTRACT OF EMPLOYMENT | |
10. ADJUSTMENT OF AWARDS | |
| |
| |
13. GENERAL | |
RULES OF THE FERGUSON GROUP ORDINARY SHARE PLAN 2019
1.Definitions
1.1In this Plan, unless the context otherwise requires, the following words and expressions shall have the following meanings, namely:
Adoption Date means 22 March 2019;
Award means an award (or where the context permits, part of an award) granted under rule 2 in the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award as the Committee may determine, which is for the time being subsisting;
Award Certificate means the certificate or any other document issued in respect of the grant of an Award under rule 2.6;
Capital Reorganisation means any capitalisation issue, rights issue, sub-division, consolidation or reduction of capital or any other variation of the share capital of the Company;
Committee means the Remuneration Committee of the Company or some other duly authorised committee of the board of directors of the Company;
the Company means the company incorporated in Jersey as Ferguson plc, with registered number 128484;
Control shall have the meaning given to that word by section 995 of the Income Tax Act 2007;
Conditional Award means an Award which takes the form of a contingent right to acquire or receive Shares at no or nominal cost;
the Date of Grant means the date on which the Committee grants an Award;
DI means a depositary interest representing an ordinary share in the capital of the Company;
DRS statement means the direct registration system statement of account representing certificated ordinary shares listed and traded on the relevant United States Stock Exchange on the Company’s share register maintained in the United States;
DTC means the Depository Trust Company, being the system used to settle trades of uncertificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States; Eligible Employee means any employee (excluding an executive director) of any member of the Group;
Employer means the Company or any Subsidiary that, with the consent of the Company, participates under this Plan;
Final Value means, in the case of Vested Shares, their aggregate market value calculated by reference to the closing middle-market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the relevant Vesting Date;
Grant Period means the period of 42 days commencing on:
(a)the Adoption Date;
(b)the day immediately following the day on which the Company makes an announcement of its results for the last preceding financial year, half year or other period; or
(c)any day on which the Committee resolves that exceptional circumstances exist which justify the grant of Awards;
the Group means the Company and its Subsidiaries from time to time and the expression member of the Group shall be construed accordingly;
Listing Rules means the UK Listing Rules published by the Financial Conduct Authority;
Market Abuse Regulation means Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (or any equivalent or successor legislation);
Market Value means in relation to a Share or a Notional Share the middle-market quotation for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the dealing day before the Date of Grant or, if the Committee so determines, the average of the middle-market quotations for a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) during such period as the Committee may determine but not exceeding 30 dealing days ending with the dealing day before the Date of Grant provided that such dealing day(s) fall within a Grant Period;
NASDAQ means Nasdaq, Inc. or any successor body thereto;
New York Stock Exchange means New York Stock Exchange, Inc. or any successor body thereto;
Notional Share means a share equal in value to a Share, but having no legal rights attributable to a Share;
Option means an Award which takes the form of an option to acquire Shares at either no or nominal cost or at Market Value, to be determined at the discretion of the Committee;
Option Exercise Value means, in relation to an Option, the aggregate market value of the Vested Shares subject to such Option calculated by reference to the closing middle market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the last date of the relevant exercise period less any exercise price payable per Share on the exercise of such Option, provided that if the calculation produces a negative number, the Option Exercise Value shall be nil;
Participant means an Eligible Employee who has been granted an Award (including, where the context permits, the legal representative of a deceased Participant) which has not lapsed or been surrendered or forfeited;
Phantom Award means an Award which takes the form of a right to call for a cash payment calculated by reference to the Final Value of a Notional Share on the Vesting Date;
the Plan means this Ferguson Group Ordinary Share Plan 2019 as amended from time to time;
Relevant Date means:
(a)if the Relevant Event falls within rule 6.1(a), the date on which Control is obtained and any conditions to which the offer is made subject are satisfied;
(b)if the Relevant Event falls within rule 6.1(b), either the date on which the scheme of arrangement is approved at the shareholders’ meeting or is sanctioned by the Court (as determined by the Committee in its absolute discretion);
(c)if the Relevant Event falls within rule 6.1(c), the date on which the person first becomes so bound or entitled; or
(d)if the Relevant Event falls within rule 6.1(d), the date on which notice of the resolution for winding up is given;
Relevant Event shall have the meaning given to that term in rule 6.1;
Restricted Shares means Shares subject to a Restricted Share Award which are subject to restrictions in accordance with rule 3;
Restricted Shares Award means an award comprising Restricted Shares;
Salary means an Eligible Employee’s annual gross basic salary in respect of his employment with the Group on the Date of Grant of an Award excluding any other
benefits or amounts (or if it is expressed in a currency other than sterling, its sterling equivalent calculated on such basis as the Committee may in its discretion determine);
Scheme of Arrangement means the scheme of arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991, as amended, to introduce the Company as a new, Jersey-incorporated holding company to the Group;
Scheme of Arrangement Effective Date means 10 May 2019 being the date on which the Scheme of Arrangement became effective in accordance with its terms;
Shares means:
(a)fully paid ordinary shares in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC;
(b)where appropriate the DIs representing such shares; and/or
(c)shares, or DIs representing those shares or DIs following any reorganisation of the share capital of the Company;
Subsidiary means any subsidiary of the Company within the meaning of section 1159 of, and Schedule 6 to, the UK Companies Act 2006 (or its equivalent under applicable law) over which the Company has Control;
Tax Liability means any amount of tax or social security contributions for which a Participant would or may be liable and for which a member of the Group or former member of the Group would or may be obliged to (or would or may suffer a disadvantage if it were not to) account to any relevant tax authority;
Trustee means the trustee or trustees of any employee benefit trust established by the Company or any member of the Group;
United States Stock Exchange means the New York Stock Exchange, NASDAQ or such other recognised stock exchange in the United States, on which the Shares are listed;
Vest means (i) in the case of an Award granted in the form of an Option, when the Option becomes exercisable, or (ii) in the case of an Award granted in the form of a Restricted Share Award, when the Restricted Shares cease to be subject to forfeiture, or (iii) in the case of an Award granted in the form of a Conditional Share Award, when the Participant becomes entitled to have the Shares which are the subject of the Conditional Share Award transferred to him, or (iv) in the case of an Award granted in the form of a Phantom Award, a Participant becoming entitled to call for a cash sum in accordance with rule 8.6, and Vesting and Vested shall be construed accordingly;
Vesting Date means the date (or dates) determined by the Committee under rules 2.4 or 2.5 on which an Award (or part thereof) shall ordinarily Vest;
Vesting Period means the period (or periods) from the Date of Grant to the Vesting Date (or Dates); and
Vested Shares means those Shares, Notional Shares or Restricted Shares in respect of which an Award has Vested.
1.2Where the context permits the singular shall include the plural and vice versa and the masculine shall include the feminine.
1.3References to any act or statutory instrument of UK Parliament or the legislative bodies of Jersey, the United States of America or the European Union (the EU) shall include any modification, amendment or re-enactment thereof (and shall, in respect of any EU legislation, include any UK legislation enacted in replacement thereof following the UK’s departure from the EU).
2.Grant of Awards
2.1Subject to the provisions contained in these rules, the Committee may, during a Grant Period, grant Awards to Eligible Employees selected for participation by the Committee in its discretion on such terms as it shall in its absolute discretion determine. No consideration shall be payable for the grant of an Award. When the Committee grants an Award, it shall decide whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award. An Eligible Employee may be granted any form of Award or any combination of Awards and may be granted more than one Award on any Date of Grant.
2.2Individual Limit. Subject to rule 2.3, the maximum total Market Value of Shares over which an Award (or Awards) may be granted to any Eligible Employee in respect of any financial year of the Company is 100 per cent. of his Salary.
2.3The Committee may in the case of any particular Eligible Employee, determine that the individual limit in rule 2.2 should not apply to that Eligible Employee, in which case the total number or total Market Value of Shares over which an Award or Awards may be granted to that Eligible Employee in respect of a financial year of the Company shall be such number or amount as the Committee, in its absolute discretion, determines is appropriate in the circumstances.
2.4The Committee shall in its discretion, at or prior to the Date of Grant, determine the Vesting Date or, if relevant, the Vesting Dates that shall apply to an Award, which shall not be later than the tenth anniversary of the Date of Grant and, subject to rule 2.5, shall not be earlier than the third anniversary of the Date of Grant.
2.5The Committee may in the case of any particular Eligible Employee, determine that the Vesting Date (or Dates) applicable to that Eligible Employee’s Award (or Awards) shall be any date or dates after the Date of Grant which the Committee, in its absolute discretion, determines is appropriate in the circumstances.
2.6Award Certificate. The Committee may in its absolute discretion, enter into a deed poll recording its intention to grant Awards and agreeing to be bound by the Award Certificates issued pursuant to this rule 2.6. As soon as reasonably practicable following the Date of Grant, the Committee shall procure the issue of an Award Certificate in respect of the Award and send it to the Participant. If the Committee has not entered into a deed poll prior to the granting of the Awards, the Committee shall
procure that the Award Certificates are issued under the seal of the Company or otherwise to take effect as a deed. An Award Certificate shall state:
2.6.1whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award;
2.6.2if the Award is granted subject to the terms of Appendix A – the U.S. Rules;
2.6.3the name of the Eligible Employee receiving the Award;
2.6.4the Date of Grant of the Award;
2.6.5whether an Award will be granted in respect of ordinary shares or DIs;
2.6.6the number of Shares or Restricted Shares (or, in the case of an Award granted in the form of a Phantom Award, Notional Shares) comprised in the Award;
2.6.7the exercise price payable by the Participant on exercise of the Award (if any);
2.6.8the date or dates on which the Award will ordinarily Vest;
2.6.9if more than one Vesting Date is specified, the number or proportion of the Shares comprised in an Award which will ordinarily Vest on each of the specified Vesting Dates; and
2.6.10whether the Participant has an obligation to enter into an agreement, election or arrangement including, without limitation, pursuant to rule 8.8.
Subject thereto, an Award Certificate shall be in such form as the Committee may determine from time to time.
2.7Duration of Plan. An Award may not be granted:
2.7.1earlier than the Adoption Date; nor
2.7.2later than the tenth anniversary of the Adoption Date.
2.8Non-transferability and bankruptcy. An Award shall be personal to a
Participant and shall not (except to the extent necessary to enable a personal representative to realise the Award following the death of a Participant) be capable of being transferred, charged or otherwise alienated and shall lapse immediately if the Participant purports to transfer, charge or otherwise alienate the Award or if he is declared bankrupt.
2.9Approvals and consents. The grant of an Award shall be subject to obtaining any approval or consent required under the Listing Rules, the Market Abuse Regulation, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other UK or overseas regulation or enactment related to the grant of Awards to Eligible Employees in the jurisdictions in which they are resident.
2.10Method of satisfying Awards. Subject to rules 8.2(b), 8.6 and 8.10, an Award may be satisfied by the issue of Shares, the transfer of Shares from treasury, or by the transfer of Shares purchased on the market including from an employee benefit trust.
2.11Scheme Limit. With respect to any Awards granted following 1 June 2023, the aggregate number of Shares with respect to which Awards may be granted under this Plan shall not exceed 300,000. Any Award under this Plan settled in cash shall not be counted against the foregoing maximum share limit. Any Shares subject to an Award that is released, lapsed or expired, or is otherwise cancelled, forfeited terminated or becomes incapable of Vesting without issuance of the full number of Shares to which the Award related will again be available for issuance under this Plan.
2.12Overseas Countries. The Committee may adopt Appendices setting out specific requirements or terms in relation to Awards granted to Eligible Employees in particular countries if that is necessary or desirable to take account of local tax, exchange control or securities laws in such countries.
3.Awards which take the form of a Restricted Share Award
3.1If an Award takes the form of a Restricted Share Award, the Restricted Shares subject to the Award shall be subject to such restrictions on the transfer, assignment, sale, pledge, charge or other disposal of the Restricted Shares during the Vesting Period and except to the extent that the Award has Vested as the Committee may prescribe and an Eligible Employee may be required to enter into an irrevocable agreement with the Company and, if necessary, the Eligible Employee’s Employer, in such form as the Committee may prescribe which may include an agreement by the Eligible Employee:
(a)not to transfer, assign, sell, pledge, charge or otherwise dispose of any Restricted Shares subject to the Award except to the extent that the Award has Vested; and
(b)to transfer (or procure the transfer) to or to the order of the Company, for a total of one penny (or the equivalent in a Participant’s local currency), all the Restricted Shares in respect of which the Award does not Vest.
3.2If the Eligible Employee does not enter into any required agreement either before the Date of Grant or within such period after the Date of Grant as the Committee may specify, the Award shall not be granted or if it has been granted, such grant shall be ineffective.
3.3On or before the Date of Grant for an Award which takes the form of a Restricted Share Award, the Company shall transfer or procure the transfer to the Participant or his nominee or such other person as the Committee may determine the number of Restricted Shares which are subject to the Award.
3.4To the extent that an Award which takes the form of a Restricted Share Award Vests, any restrictions referred to in rule 3.1 shall cease to have effect in relation to the Shares subject to it.
4.Vesting of Awards
4.1Timing of Vesting. Subject to rules 5 and 6, an Award (or parts thereof) shall Vest on such Vesting Date or Dates in respect of all or such proportions of the Shares comprised in the Award as may be specified in the Award Certificate in accordance with rules 2.6.8 and 2.6.9.
5.Leavers
5.1Where a Participant ceases to be an Eligible Employee at any time before the Vesting Date applicable to his Award by reason of:
(a)redundancy (as determined by the Committee),
(b)injury or disability (evidenced to the satisfaction of the Committee),
(c)retirement,
(d)his Employer ceasing to be under the Control of the Company;
(e)the business (or part of a business) in which he is employed being transferred to a person who is not a member of the Group, or
(f)for any other reason at the discretion of the Committee,
his Award shall Vest on the date on which his employment ceased in respect of the number of Shares, Notional Shares or Restricted Shares which is determined under rule 5.4.
5.2If a Participant ceases employment in any other circumstances (other than death), an Award (whether Vested or unvested) shall lapse automatically.
5.3If a Participant dies, Awards granted to him will Vest on the date of death in respect of the number of Shares, Notional Shares or Restricted Shares as determined under rule 5.4.
5.4Reduction of Award. Where the Award Vests on a Participant ceasing to be an Eligible Employee under rule 5.1 or rule 5.3 above, unless the Committee decides in its absolute discretion that a pro rata reduction is inappropriate in any particular case, the number of Shares comprised in an Award that shall be treated as Vested Shares shall be such number as is calculated by multiplying the number of Shares (or Notional Shares) comprised in the Award by the fraction A/B (where A is that part of the Vesting Period (measured in complete months) that has elapsed from the Date of Grant to the date of cessation of employment (or death, as the case may be) and B is the number of complete months in the Vesting Period. Where parts of the Award vest on different Vesting Dates, the Committee shall calculate any pro-rata reduction under this rule 5.4 by reference to the Vesting Period applicable to each separate part of the Award.
For the avoidance of doubt, this rule 5.4 shall not apply where Awards Vest under rules 6.1 to 6.3 (inclusive).
5.5Meaning of ceasing employment. For the purposes of rule 5.1, a Participant shall not be treated as ceasing to be an Eligible Employee until he ceases to be employed by the Company or any member of the Group. The reason for the termination of office or employment of a Participant shall be determined by reference
to rules 5.1, 5.2 and 5.3 regardless of whether such termination was lawful or unlawful (and howsoever caused).
6.Take-over and Liquidation
6.1This rule 6 applies if:
(a)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied, the person making the offer will have Control of the Company; or
(ii)a general offer to acquire all of the Shares;
(b)any person proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law;
(c)any person becomes bound or entitled to acquire Shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(d)notice is given of a resolution for the voluntary or compulsory winding-up of the Company,
(each a Relevant Event).
6.2Where this rule 6 applies and subject to rules 6.3 and 7 below all outstanding Awards will automatically Vest and, in the case of an Award granted in the form of an Option shall be automatically exercised on the Relevant Date provided that any exercise price payable by the Participant on exercise is equal to or less than the relevant offer price or consideration (as determined by the Committee). Where this rule 6 applies, and subject to rule 6.3 below any outstanding Awards granted in the form of Options that are not exercised on the Relevant Date shall lapse automatically.
6.3Without prejudice to the operation of rule 6, Awards shall not Vest or be exercised without the consent of the Committee under the foregoing provisions of this rule 6 if the purpose and effect of the Relevant Event, together with any associated transactions, is to create a new holding company for the Company, such company having substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the Relevant Event. Unless the Committee determines otherwise in its absolute discretion, an Award will in such circumstances be exchanged for an equivalent award in accordance with rule 7 below.
7.Rollover of Awards
7.1If any other business entity (the acquiring company):
(a)obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the acquiring company will have Control of the Company; or
(ii)a general offer to acquire all the Shares; or
(b)proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(c)becomes bound or entitled to acquire shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or their equivalent under applicable law, and notice of a replacement Award is given pursuant to rule 6.3 (with the consent of the acquiring company), then, on the Relevant Date,
any Award which has not lapsed (the old award) shall automatically be released and shall be replaced by an award (the new award) which (in the opinion of the Committee) is equivalent to the old award but relates to shares in a different company (whether the acquiring company itself or another company) (the new grantor).
7.2The provisions of the Plan shall be construed as if:
(a)the new award were an award granted under the Plan at the same time as the old award;
(b)references to the Company in the rules were references to the new grantor;
(c)references to the Committee in the rules were references to the board of directors of the new grantor or any duly authorised committee thereof;
(d)references to Shares were references to shares in the new grantor; and
(e)the Vesting Date in relation to the new award was the same as that in relation to the old award.
8.Consequences of Vesting
8.1On the Vesting of an Award which takes the form of an Option the Participant may, subject to rules 8.7 and 8.8, exercise the Option over some or all of the Vested Shares during the period of 30 days following the Vesting Date. If the Award has Vested due to a Participant’s death or if the Participant dies during the 30 days’ period, the Award may be exercised during the period of 12 months following the date of death. If, during the 30 days or 12 months’ exercise period (as the case may be), the Participant is subject to any dealing restrictions under the Listing Rules or any relevant share dealing code of the Company, the applicable exercise period shall be suspended until such later date as those dealing restrictions lift provided that no Option may be exercised more than 10 years after its Date of Grant. Subject to rules 8.7, 8.8 and 8.10, the Company shall procure the transfer of the Vested Shares as soon
as reasonably practicable after the exercise date and in any event not later than 30 days thereafter.
8.2If a Participant has not exercised his Option before the end of the relevant exercise period mentioned in rule 8.1, the following provisions shall apply:
(a)if the exercise price payable by the Participant is nil, the Option shall be deemed to have been exercised on the last day of the relevant period; or
(b)subject to (a) above, the Option shall be settled by the Committee making a payment of (or procuring the payment of) a cash sum to the Participant equal to any Option Exercise Value, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
8.3The Participant may exercise a Vested Option by written notice to the Company in such form as the Committee may prescribe.
8.4On the Vesting of an Award which takes the form of a Conditional Award a Participant need take no action and the Company shall, subject to rules 8.7, 8.8 and 8.10 procure the transfer of the Vested Shares to the Participant (or his nominee) as soon as reasonably practicable after the Vesting Date and in any event no later than 30 days thereafter. If the Award has Vested due to a Participant’s death or if the Participant dies during the 30 days’ period the Shares shall be transferred to the Participant’s legal representatives as soon as reasonably practicable after the date of death.
8.5On the Vesting of an Award which takes the form of a Restricted Share Award the Shares shall cease to be subject to all restrictions and any agreement applying to the Restricted Shares shall cease to have effect.
8.6On the Vesting of an Award which takes the form of a Phantom Award, the Committee shall pay, or procure the payment of, a cash sum to the Participant equal to the Final Value of the Vested Notional Shares to which the Phantom Award relates subject to such deductions for any Tax Liability as are required by applicable law. The Committee may in its discretion pay or procure payment of the cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine). The cash sum will be paid as soon as reasonably practicable following the Vesting Date.
8.7Restrictions on Vesting. An Award shall not Vest unless and until the transfer of Shares (if relevant) after such Vesting would be lawful in all relevant jurisdictions and in compliance with the Listing Rules, the Market Abuse Regulation, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other relevant UK or overseas regulation or enactment related to the Vesting of an Award in the jurisdictions in which the relevant Participant is resident for tax purposes.
8.8Payment of Tax Liability. Any liability of a Participant to taxation or social security contributions shall be for the account of the relevant Participant and the transfer of Vested Shares subject to a Participant’s Vested Award shall be conditional
upon the Participant having discharged the amount required to satisfy the Tax Liability which arises on Vesting or exercise to the satisfaction of the Company, or otherwise having complied with any arrangements specified by the Company to secure that such Tax Liability is satisfied including irrevocably authorising the Company to sell or procure the sale of sufficient Vested Shares on or following the Vesting or exercise (as applicable) of his Award on his behalf to ensure that any relevant member of the Group or former member of the Group receives the amount required to discharge the Tax Liability which arises as a result of the Vesting or exercise of his Award and by participating in the Plan a Participant is deemed to have given such authorisation.
8.9Elections. A Participant shall enter into any agreement, election or arrangement which the Committee may consider appropriate within such period as may be specified by the Committee, in relation to or in connection with any liability to income tax or social security contributions (including, if permitted under local law, any employer’s social security contributions) in respect of the Participant’s Award or the Shares subject to his Award. For example, but without limitation, the Committee may require Participants who are resident in the UK for tax purposes to enter into an agreement or election pursuant to paragraphs 3A or 3B of Schedule 1 to the UK Social Security Contributions and Benefits Act 1992 or a joint election under Section 431 of the Income Tax (Earnings and Pensions) Act 2003 by the fourteenth day following the acquisition of any Shares by the Participant.
8.10Cash settlement. If for any reason the Committee considers that it is impractical or legally onerous to deliver Shares in satisfaction of a Vested Award, it may instead pay or procure the payment to the Participant of a cash sum equal to the Final Value of the Vested Shares, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
9.Relationship of Plan to contract of employment
9.1The rights and obligations of a Participant under the terms and conditions of employment shall not be affected by his participation in the Plan or any right he may have to participate in the Plan. An individual who participates in the Plan waives all and any rights to compensation or damages in consequence of the termination of his employment with any member of the Group (or former member of the Group if applicable) for any reason whatsoever (whether lawfully or unlawfully) insofar as those rights arise, or may arise from his ceasing to have rights under or be entitled to exercise any Award under the Plan, as a result of such termination or from the loss or diminution in value of such rights or entitlements. In the event of any conflict between the terms of this rule 9 and the Participant’s terms of employment, this rule shall take precedence.
9.2Notwithstanding any other provision of the Plan:
9.2.1the Plan shall not form part of any contract of employment between the Company or any Subsidiary and a Participant;
9.2.2no Eligible Employee has any right to be granted an Award and the fact that an Eligible Employee may have participated in the Plan and/or been granted an Awards under the Plan shall not entitle any Eligible Employee to future participation or grants;
9.2.3the benefit to a Participant of participation in the Plan (including, in particular but not by way of limitation, any Awards held by him) shall not form any part of his contractual remuneration or benefits or count as his contractual remuneration or benefits for any purpose;
9.2.4nothing in the Plan shall in any way be construed as imposing upon any member of the Group a contractual obligation as between the member of the Group and a Participant to contribute to the Plan;
9.2.5if a Participant ceases to be employed within the Group, he shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit under the Plan (including, in particular but not by way of limitation, any Awards held by him which lapse by reason of his ceasing to be employed within the Group, whether lawfully or unlawfully) by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise (or by way of similar provisions of the law of the jurisdiction in which the Participant is resident); and
9.2.6by accepting the grant of an Award and not renouncing it a Participant is deemed to have agreed to the provisions of the Plan and in particular, this rule 9.2.
10.Adjustment of Awards
In the event of any Capital Reorganisation (or the implementation by the Company of a demerger or payment of a super dividend which would otherwise materially affect the value of an Award), the price payable by a Participant on Vesting (or exercise of an Option) (if any), the description of Shares, and the number of Shares comprised in an Award may be adjusted in such manner as the Committee may determine. Any adjustment to Awards made pursuant to this rule 10 shall be notified to the relevant Participant. The Committee may make such adjustments as it considers appropriate to the number of Shares comprised in an Award.
11.Administration and Amendment
11.1Committee responsible for administration. The decision of the Committee shall be final and binding in all matters relating to the Plan and it may at any time discontinue the grant of further Awards or amend any of the provisions of the Plan in any way it thinks fit: Provided that:
(a)except as herein provided, the Committee shall not make any amendment that would materially prejudice the interests of existing Participants in any jurisdiction in which the Plan operates except with the prior consent or sanction of Participants in that jurisdiction who, if their Awards Vested in full, would thereby become entitled to a majority of all the Shares which would fall
to be transferred upon satisfaction of all outstanding Awards in that jurisdiction; and
(b)without prejudice to any provision of the Plan which provides for the lapse of an Award, the Committee may not cancel an Award unless the Participant agrees in writing to such cancellation.
12.Data Protection
12.1By accepting the grant of an Award, a Participant acknowledges that the Company or any member of the Group may hold, process and transfer personal data relating to them to other members of the Group or to any third parties engaged by them (whether within or outside of the European Economic Area (EEA) and that personal data may also be processed outside the EEA by the Company or any member of the Group or by one or more held or of its or their service providers) for any and all purposes related to the operation and administration of the Plan and/or in order to meet any legal obligation, in each case in accordance with the Company’s Share Plan Data Protection Protocol and applicable law.
13.General
13.1Any member of the Group may provide money to the Trustee or any other person to enable them or him to acquire (but not to subscribe for) Shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent not prohibited by applicable law.
13.2The existence of any Award shall not affect in any way the right or power of the Company or its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or other changes in the Company’s capital structure, or any merger or consolidation of the Company, or any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or convertible into, or otherwise affecting the Shares or the rights thereof, 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.
13.3Any notice or other document required to be given under or in connection with the Plan may be delivered to a Participant or sent by post to him at his home address according to the records of his Employer or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document require to be given to the Company under or in connection with the Plan may be delivered or sent by post to it at its corporate services office at 1020 Eskdale Road, Winnersh, Wokingham RG41 5TS (or such other place or places as the Committee may from time to time determine and notify to Participants).
13.4The Company, or where the Committee so directs any Subsidiary, shall pay the appropriate stamp duty on behalf of the Participants in respect of any transfer of Shares on the Vesting or exercise of the Awards.
13.5Benefits under this Plan shall not be pensionable.
13.6These rules shall be governed by, and construed in accordance with, the laws of England. Neither the Plan nor any Award agreement shall be construed or
interpreted with any presumption against the Company by reason of the Company causing the Plan or Award agreement to be drafted.
Unless specifically stated otherwise, each Participant, the Company and any other member of the Group submits to the exclusive jurisdiction of the English courts in relation to all disputes arising out of or in connection with the Plan. By accepting the grant of an Award and not renouncing it, Participants are deemed to have agreed to submit to such jurisdiction.
APPENDIX A -- U.S. RULES
The U.S. Rules in this Appendix A are intended to conform the Plan, in its documentation and in its operation, so as to be exempt from, and to the extent not so exempt, to meet such requirements of Section 409A of the Code and the regulations thereunder (collectively, Section 409A) as are applicable to the Plan with respect to Awards that take the form of an Option, a Conditional Award or a Phantom Award. The provisions of rules 1 to 13 of the Plan shall, save where otherwise specified below, apply in relation to Awards subject to the U.S. Rules, and references to the “Plan” shall include the U.S. Rules. If there is a conflict between any provisions of the U.S. Rules and the provisions of the main text of the Plan, the provisions of the U.S. Rules shall govern with respect to any Participant who is subject to U.S. federal income tax with respect to an Award.
1. Definitions
For purposes of the U.S. Rules, in addition to the definitions in rule 1 the following definitions shall be applicable. If there is a conflict between any definitions in the U.S. Rules and those in rule 1, the definitions in the U.S. Rules shall govern with respect to any Participant who is subject to U.S. income tax with respect to an Award.
Change in Control means, with respect to an entity that is organized as a corporation (a “Corporation”), any of the following events:
(a) a change in the ownership of the Corporation;
(b) a change in the effective control of the Corporation; or
(c) a change in the ownership of a substantial portion of the assets of the Corporation.
For purposes of this definition:
(i) a “change in the ownership of the Corporation” occurs on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Corporation that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Corporation;
(ii) a “change in the effective control of the Corporation” occurs on the date on which either: (1) a person, or more than one person acting as a group, acquires ownership of stock of the Corporation possessing 50% or more of the total voting power of the stock of the Corporation, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, or (2) a majority of the members of the Corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such board of directors prior to the date of the
appointment or election, but only if no other corporation is a majority shareholder of the Corporation; and
(iii) a “change in the ownership of a substantial portion of the assets of the Corporation” occurs on the date on which any one person, or more than one person acting as a group, other than a person or group of persons that is related to the Corporation, acquires assets from the Corporation that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition.
An event constitutes a Change in Control with respect to a Participant only if the Participant performs services for the Corporation that has experienced the Change in Control, or the Participant’s relationship to the affected Corporation otherwise satisfies the requirements of Regulation §1.409A-3(i)(5)(ii).
Notwithstanding anything to the contrary herein, with respect to an entity that is a partnership, Change in Control means only a change in the ownership of the partnership or a change in the ownership of a substantial portion of the assets of the partnership, and the provisions set forth above respecting such changes relative to a corporation shall be applied by analogy.
The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Section 409A.
Code means the U.S. Internal Revenue Code of 1986, as amended from time to time, and regulations thereunder. References to any section of the Code shall be to that section as it may be renumbered, amended, supplemented or re-enacted from time to time. For this purpose, “regulation” means a regulation, ruling or other interpretation or guidance, validly promulgated by the U.S. Department of Treasury and in effect at the time in question. Reference to a regulation or section thereof includes that regulation or section and any comparable regulation or section that amends, supplements or supersedes that regulation or section.
For purposes of the U.S. Rules, a Participant will be considered Disabled if he is:
(a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or
(b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement
benefits for a period of not less than three (3) months under an Employer-sponsored accident and health plan in which he participates.
Separation from Service (and variations of such term) have the meaning ascribed to such term under Section 409A, and generally refers to a cessation of employment described in rule 5.5(a), a reduction in hours to be worked (e.g. by at least 80%) or another event described in the regulations under Section 409A.
Shares means:
(a)fully paid ordinary shares in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC; and
(b)shares representing those shares following any reorganisation of the share capital of the Company.
Substantial risk of forfeiture shall have the meaning ascribed to such term under Section 409A. Generally, an Award is subject to a substantial risk of forfeiture only if the Award would lapse and be forfeited with no payment to the Participant if the Participant were to resign voluntarily, in the absence of an exercise of discretion by the Committee to vest the Award. A Participant’s Awards shall cease to be subject to a substantial risk of forfeiture when the Participant becomes eligible to retire regardless of whether he continues to be employed. In addition, the addition of any risk of forfeiture after an Award is granted or any extension of a period during which an Award is subject to a risk of forfeiture, is disregarded for purposes of determining whether the Award is subject to a substantial risk of forfeiture.
2. Grant of Awards
For the purposes of the U.S. Rules and rule 2.3, Awards granted under the U.S. Rules may be granted in respect of Shares.
5. Leavers
Rule 5 of the Plan shall govern the extent to which an Award becomes Vested and payable upon termination of employment prior to the Vesting Date, except that if an Award ceased to be subject to a substantial risk of forfeiture prior to the Vesting Date for any reason, including eligibility for retirement, then the following shall apply:
(a) Payment with respect to the Award shall be made only if the termination of employment constitutes a Separation from Service, and if the termination of employment does not constitute a Separation from Service the Award shall Vest to the extent provided in rule 5 but payment shall be deferred until the earlier of the Vesting Date described in rule 5.1 or a Separation from Service occurs; and
(b) If the Participant is a “specified employee” as defined in Section 409A at the time of the Separation from Service, then payment shall be subject to rule 8.11 of the U.S. Rules.
6. Take-over and Liquidation
For purposes of the U.S. Rules, if a Relevant Event occurs that is not a Change in Control, and if a Participant’s Award ceased to be subject to a substantial risk of forfeiture prior to the Relevant Date for any reason, then the Participant’s Award shall Vest to the extent provided in rule 6, but payment shall be deferred until the earliest of the Vesting Date described in rule 5.1, a Change in Control or the Participant’s Separation from Service (subject to rule 8.11 of the U.S. Rules).
7. Rollover of Awards
For purposes of the U.S. Rules, a new paragraph is added at the end of rule 7.1 to provide as follows:
“Notwithstanding the foregoing, if at any time prior to the occurrence of the event described in rule 7.1, an Award ceased to be subject to a substantial risk of forfeiture, then a replacement Award shall be issued with respect to such Award only if the event does not constitute a Change in Control, and the provisions of rule 6 shall apply. Notwithstanding the foregoing, if the event does not constitute a Change in Control, but the Participant would otherwise incur a Separation from Service by reason of being transferred to the employment of an employer outside of the Group, then a replacement Award shall not be issued (and rule 5 shall apply) unless the terms of the agreement governing such transaction provide that the transfer of employment shall not be treated as a Separation from Service in accordance with Regs. §1.409A-1(b)(h)(4).”
8. Consequences of Vesting
For purposes of the U.S. Rules, rules 8.1, 8.4 and 8.7 are amended, and a new rule 8.11 is added, to provide as follows:
8.1 On the Vesting of an Award which takes the form of an Option the Participant (or, if the Vesting occurs by reason of the Participant’s death, the Participant’s legal representative) may, subject to rules 8.7, 8.8 and 8.11, elect to exercise the Option over some or all of the Vested Shares during the period of 30 days following the Vesting Date. Subject to rules 8.7, 8.8, 8.10 and 8.11, the Company shall procure that the transfer of the Vested Shares for which such election is made will be effected on or before the 60th day following the Vesting Date. Any Option for which such an election is not made within the 30 day period will be treated as if it were a Phantom Award which will be settled in accordance with rule 8.6 of the Plan save that the cash payment will be paid not later than the 60th day following the Vesting Date.
8.4 On the Vesting of an Award which takes the form of a Conditional Award a Participant need take no action and the Company shall, subject to rules 8.7, 8.8, 8.10 and 8.11, procure the transfer of the Vested Shares to the Participant (or his nominee
or legal representative) as soon as reasonably practicable after the Vesting Date and in any event not later than 30 days thereafter.
8.7 Restrictions on Transfer. A transfer of Shares pursuant to an Award shall not be made unless and until the transfer of Shares would be lawful in all relevant jurisdictions and in compliance with the Listing Rules, the Market Abuse Regulation, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other relevant UK or overseas regulation or enactment in the jurisdictions in which the relevant Participant is resident for tax purposes. If within ten (10) business days following the Vesting of an Award the Committee is unsure whether such transfer of Shares will be permitted or will be feasible (e.g., in the event of the Participant’s death), the Award will be settled in cash on the 60th day following the Vesting Date in accordance with the provisions of rule 8.10 of the Plan.
8.11 If the Vesting of an Award that ceased to be subject to a substantial risk of forfeiture prior to the Vesting Date (or Relevant Date under rule 6 or 7) is on account of a Participant’s Separation from Service (other than by reason of his death), payment of the Award will be delayed if so required pursuant to rule 15 of the U.S. Rules.
14. Unfunded Status
Awards subject to the U.S. Rules constitute unsecured promises by the Employers to pay benefits in the future. Participants holding such Awards shall have the status of general unsecured creditors of the Company or the Employer, as applicable. Each Employer shall be solely responsible for payment of the benefits of its employees and their beneficiaries. The Plan is unfunded for U.S. federal tax purposes. Any amounts set aside to defray the liabilities assumed by the Company or an Employer will remain the general assets of the Company or the Employer, as applicable, and shall remain subject to the claims of the Company’s or the Employer's creditors until such amounts are distributed to the Participants.
Notwithstanding the preceding, an Employer may, in its sole discretion, establish a trust as a vehicle for accumulating assets, including Shares, to pay benefits under the Plan, with the intent that such trust shall be considered unfunded for U.S. federal tax purposes. Payments under the Plan may be paid from the general assets of the Employer or from the assets of any such trust. Payment from any such trust shall reduce the obligation owed to the Participant under the Plan. Any references in the main text of the Plan to a trust or a trustee shall be construed to be a reference to such an unfunded trust or the trustee of such a trust.
15. Section 409A
This Plan is intended to be exempt from, and to the extent not so exempt to comply with, the requirements of Section 409A and shall be interpreted and administered accordingly. Notwithstanding anything to the contrary in this Plan, if a Participant is a
“specified employee” as defined in Section 409A as of the Participant’s Separation from Service, then, to the extent required by Section 409A, no payments due under this Plan resulting from the Participant’s Separation from Service may be made until the earlier of: (i) the first day following the sixth month anniversary of the Participant’s Separation from Service; and (ii) the Participant’s date of death; provided, however, that any payments delayed during this period shall be paid in the aggregate in a lump sum as soon as reasonably practicable following the sixth month anniversary of the Participant’s Separation from Service or the Participant’s date of death, as the case may be. Notwithstanding the foregoing, the Employers do not guarantee the tax treatment of any payments or benefits under this Plan including, without limitation, under the Code, federal, state, municipal, local or foreign laws.
| | |
FERGUSON GROUP
PERFORMANCE ORDINARY SHARE
PLAN 2019 |
Approved by resolution of the Board
on 22 March 2019 and amended by resolutions of the Board of the Company on 27 January 2021 and 12 July 2023
CONTENTS
| | | | | |
CLAUSE | PAGE |
1. DEFINITIONS | 1 |
2. GRANT OF AWARDS | 5 |
3. PERFORMANCE CONDITION | 7 |
4. AWARDS WHICH TAKE THE FORM OF A RESTRICTED SHARE AWARD | 7 |
5. VESTING OF AWARDS | 8 |
6. LEAVERS | 8 |
7. TAKE-OVER AND LIQUIDATION | 10 |
8. ROLLOVER OF AWARDS | 11 |
9. CONSEQUENCES OF VESTING | 12 |
10. MALUS AND CLAWBACK | 14 |
11. RELATIONSHIP OF PLAN TO CONTRACT OF EMPLOYMENT | 15 |
12. ADJUSTMENT OF AWARDS | 16 |
13. ADMINISTRATION AND AMENDMENT | 16 |
14. DATA PROTECTION | 17 |
15. GENERAL | 17 |
Appendix A U.S. Rules | 19 |
RULES OF THE FERGUSON GROUP PERFORMANCE ORDINARY SHARE PLAN 2019
1.Definitions
1.1In this Plan, unless the context otherwise requires, the following words and expressions shall have the following meanings, namely:
Adoption Date means 22 March 2019;
Award means an award (or where the context permits, part of an award) granted under rule 2 in the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award, as the Committee may determine, which is for the time being subsisting;
Award Certificate means the certificate or any other document issued in respect of the grant of an Award under rule 2.4;
Board means the board of the directors of the Company;
Capital Reorganisation means any capitalisation issue, rights issue, sub-division, consolidation or reduction of capital or any other variation of the share capital of the Company;
Committee means the Remuneration Committee of the Company or some other duly authorised committee of the Board;
the Company means the company incorporated in Jersey as Ferguson plc, with registered number 128484;
Control shall have the meaning given to that word by section 995 of the Income Tax Act 2007;
Conditional Award means an Award which takes the form of a contingent right to acquire or receive Shares at no or nominal cost;
the Date of Grant means the date on which the Committee grants an Award;
DI means a depositary interest representing an ordinary share in the capital of the Company;
DRS statement means the direct registration system statement of account representing certificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
DTC means the Depository Trust Company, being the system used to settle trades of uncertificated ordinary shares listed and traded on the relevant United States Stock Exchange held on the Company’s share register maintained in the United States;
Eligible Employee means any employee (excluding an executive director of the Company) of any member of the Group;
Employer means the Company or any Subsidiary that, with the consent of the Company, participates under this Plan;
Final Value means, in the case of Vested Shares, their aggregate market value calculated by reference to the closing middle-market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the relevant Vesting Date;
Financial Year has the meaning given to it by section 390 of the Companies Act 2006;
Grant Period means the period of 42 days commencing on:
(a)the Adoption Date;
(b)the day immediately following the day on which the Company makes an announcement of its results for the last preceding financial year, half year or other period; or
(c)any day on which the Committee resolves that exceptional circumstances exist which justify the grant of Awards;
the Group means the Company and its Subsidiaries from time to time and the expression member of the Group shall be construed accordingly;
Listing Rules means the UK Listing Rules published by the Financial Conduct Authority;
Market Abuse Regulation means Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (or any equivalent or successor legislation);
NASDAQ means Nasdaq, Inc. or any successor body thereto;
New York Stock Exchange means New York Stock Exchange, Inc. or any successor body thereto;
Notional Share means a share equal in value to a Share, but having no legal rights attributable to a Share;
Option means an Award which takes the form of an option to acquire Shares at either no or nominal cost or at market value, to be determined at the discretion of the Committee;
Option Exercise Value means, in relation to an Option, the aggregate market value of the Vested Shares subject to such Option calculated by reference to the closing middle market quotation of a Share (as derived from the Daily Official List of the London Stock Exchange in the case of a DI priced in Pounds Sterling or from the equivalent such records of the relevant United States Stock Exchange in the case of an ordinary share in the capital of the Company priced in US Dollars) on the last date of the relevant exercise period less any exercise price payable per Share on the exercise of such Option, provided that if the calculation produces a negative number, the Option Exercise Value shall be nil;
Participant means an Eligible Employee who has been granted an Award (including, where the context permits, the legal representative of a deceased Participant) which has not lapsed or been surrendered or forfeited;
Performance Condition means, in respect of an Award, the condition determined by the Committee at the Date of Grant;
Performance Period means the three year period commencing on the first day of the Financial Year in which the Date of Grant occurs unless determined by the Committee otherwise;
Phantom Award means an Award which takes the form of a right to call for a cash payment calculated by reference to the Final Value of a Notional Share on the Vesting Date;
the Plan means this Ferguson Group Performance Ordinary Share Plan 2019 as amended from time to time;
Relevant Date means:
(a)if the Relevant Event falls within rule 7.1(a), the date on which Control is obtained and any conditions to which the offer is made subject are satisfied;
(b)if the Relevant Event falls within rule 7.1(b), either the date on which the scheme of arrangement is approved at the shareholders’ meeting or is sanctioned by the Court (as determined by the Committee in its absolute discretion);
(c)if the Relevant Event falls within rule 7.1(c), the date on which the person first becomes so bound or entitled; or
(d)if the Relevant Event falls within rule 7.1(d), the date on which notice of the resolution for winding up is given;
Relevant Event shall have the meaning given to that term in rule 7.1;
Restricted Shares means Shares subject to a Restricted Share Award which are subject to restrictions in accordance with rule 3;
Restricted Shares Award means an award comprising Restricted Shares;
Salary means an Eligible Employee’s annual gross basic salary in respect of his employment with the Group on the Date of Grant of an Award excluding any other benefits or amounts (or if it is expressed in a currency other than sterling, its sterling equivalent calculated on such basis as the Committee may in its discretion determine);
Scheme of Arrangement means the scheme of arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991, as amended, to introduce the Company as a new, Jersey-incorporated holding company to the Group;
Scheme of Arrangement Effective Date means 10 May 2019 being the date on which the Scheme of Arrangement became effective in accordance with its terms;
Shares means:
(a)fully paid ordinary shares in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC;
(b)where appropriate the DIs representing such shares; and/or
(c)Shares, or DIs representing those shares or DIs following any reorganisation of the share capital of the Company;
Subsidiary means any subsidiary of the Company within the meaning of section 1159 of, and Schedule 6 to, the UK Companies Act 2006 (or its equivalent under applicable law) over which the Company has Control;
Tax Liability means any amount of tax or social security contributions for which a Participant would or may be liable and for which a member of the Group or former member of the Group would or may be obliged to (or would or may suffer a disadvantage if it were not to) account to any relevant tax authority;
Termination Date means the date on which a Participant ceases to be an employee of a member of the Group and, for the avoidance of doubt, where the employee dies, shall be taken to mean the date of death;
Trustee means the trustee or trustees of any employee benefit trust established by the Company or any member of the Group;
United States Stock Exchange means the New York Stock Exchange, NASDAQ or such other recognised stock exchange in the United States, on which the Shares are listed;
Vest means (i) in the case of an Award granted in the form of an Option, when the Option becomes exercisable, or (ii) in the case of an Award granted in the form of a Restricted Share Award, when the Restricted Shares cease to be subject to forfeiture, or (iii) in the case of an Award granted in the form of a Conditional Share Award, when the Participant becomes entitled to have the Shares which are the subject of the Conditional Share Award transferred to him, or (iv) in the case of an Award granted in the form of a Phantom Award, a Participant becoming entitled to call for a cash sum in accordance with rule 9.6, and Vesting and Vested shall be construed accordingly;
Vesting Date means the date (or dates) determined by the Committee under rules 2.2 or 2.3 on which an Award (or part thereof) shall ordinarily Vest;
Vesting Period means the period (or periods) from the Date of Grant to the Vesting Date (or Dates); and
Vested Shares means such number of Shares or Notional Shares or Restricted Shares as the Committee determines to be Vested Shares by reference to the Performance Condition applicable to an Award at a particular Vesting Date.
1.2Where the context permits the singular shall include the plural and vice versa and the masculine shall include the feminine.
1.3References to any act or statutory instrument of UK Parliament or the legislative bodies of Jersey, the United States of America or the European Union (the EU) shall include any modification, amendment or re-enactment thereof (and shall, in respect of any EU legislation, include any UK legislation enacted in replacement thereof following the UK’s departure from the EU).
2.Grant of Awards
2.1Subject to the provisions contained in these rules, the Committee may, during a Grant Period, grant Awards to Eligible Employees selected for participation by the Committee in its discretion on such terms as it shall in its absolute discretion determine. No consideration shall be payable for the grant of an Award. When the Committee grants an Award, it shall decide whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award. An Eligible Employee may be granted any form of Award or any combination of Awards and may be granted more than one Award on any Date of Grant.
2.2The Committee shall in its discretion, at or prior to the Date of Grant, determine the Vesting Date or, if relevant, the Vesting Dates that shall apply to an Award, which shall not be later than the tenth anniversary of the Date of Grant and, subject to rule 2.3, shall not be earlier than the third anniversary of the Date of Grant.
2.3The Committee may in the case of any particular Eligible Employee, determine that the Vesting Date (or Dates) applicable to that Eligible Employee’s Award (or Awards) shall be any date or dates after the Date of Grant which the Committee, in its absolute discretion, determines is appropriate in the circumstances.
2.4Award Certificate. The Committee may in its absolute discretion, enter into a deed poll recording its intention to grant Awards and agreeing to be bound by the Award Certificates issued pursuant to this rule 2.4. As soon as reasonably practicable following the Date of Grant, the Committee shall procure the issue of an Award Certificate in respect of the Award and send it to the Participant. If the Committee has not entered into a deed poll prior to the granting of the Awards, the Committee shall procure that the Award Certificates are issued under the seal of the Company or otherwise to take effect as a deed. An Award Certificate shall state:
2.4.1whether the Award will take the form of an Option, a Restricted Share Award, a Conditional Award or a Phantom Award;
2.4.2if the Award is granted subject to the terms of Appendix A – the U.S. Rules;
2.4.3the name of the Eligible Employee receiving the Award;
2.4.4the Date of Grant of the Award;
2.4.5whether an Award will be granted in respect of ordinary shares or DIs (which, for the avoidance of doubt, shall be collectively referred to in these rules as Shares);
2.4.6the number of Shares or Restricted Shares (or, in the case of an Award granted in the form of a Phantom Award, Notional Shares) to which the Participant shall be entitled upon achievement of the Performance Condition and reaching the Vesting Date(s), which, for the avoidance of doubt, may be expressed as a number of Shares, Notional Shares or Restricted Shares (as appropriate) per percentage point achievement of the Performance Condition, or such other formula, so that the maximum number of Shares, Notional Shares or Restricted Shares under the Award is capped or uncapped, as the Committee may in its discretion determine;
2.4.7the details of the Performance Condition imposed in accordance with rule 3;
2.4.8the exercise price payable by the Participant on exercise of the Award (if any);
2.4.9the date or dates on which the Award will ordinarily Vest;
2.4.10if more than one Vesting Date is specified, the number or proportion of the Shares comprised in an Award which will ordinarily Vest on each of the specified Vesting Dates; and
2.4.11whether the Participant has an obligation to enter into an agreement, election or arrangement including, without limitation, pursuant to rule 9.8.
Subject thereto, an Award Certificate shall be in such form as the Committee may determine from time to time.
2.5Duration of Plan. An Award may not be granted:
2.5.1earlier than the Adoption Date; nor
2.5.2later than the tenth anniversary of the Adoption Date.
2.6Non-transferability and bankruptcy. An Award shall be personal to a Participant and shall not (except to the extent necessary to enable a personal representative to realise the Award following the death of a Participant) be capable of being transferred, charged or otherwise alienated and shall lapse immediately if the Participant purports to transfer, charge or otherwise alienate the Award or if he is declared bankrupt.
2.7Approvals and consents. The grant of an Award shall be subject to obtaining any approval or consent required under the Listing Rules, the Market Abuse Regulation, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other UK or overseas regulation or enactment related to the grant of Awards to Eligible Employees in the jurisdictions in which they are resident.
2.8Method of satisfying Awards. Subject to rules 9.2(b), 9.6 and 9.10, an Award may be satisfied by the issue of Shares, the transfer of Shares from treasury, or by the transfer of Shares purchased on the market including from an employee benefit trust.
2.9Scheme Limit. With respect to any Awards granted following 1 June 2023, the aggregate number of Shares with respect to which Awards may be granted under this Plan shall not exceed 1,200,000. Any Award under this Plan settled in cash shall not be counted against the foregoing maximum share limit. Any Shares subject to an Award that is released, lapsed or expired, or is otherwise cancelled, forfeited terminated or becomes incapable of Vesting without issuance of the full number of Shares to which the Award related will again be available for issuance under this Plan.
2.10Overseas Countries. The Committee may adopt Appendices setting out specific requirements or terms in relation to Awards granted to Eligible Employees in particular countries if that is necessary or desirable to take account of local tax, exchange control or securities laws in such countries.
3.Performance Condition
3.1The Committee shall impose a Performance Condition which must be satisfied in order for Awards to Vest. The Committee can set different Performance Conditions for Awards granted in the same or different Financial Years (in terms of the type of condition, the weighting given to that condition and the targets applicable to each condition).
3.2An Award shall lapse on the date on which (and to the extent that) the Committee determines that the Performance Condition has not been satisfied.
3.3Where a Performance Condition is to be measured over a shortened Performance Period for any reason (including pursuant to rules 6.1, 6.5 and 7.2 of the Plan) the Committee may make such adjustments to the Performance Condition as it, in its absolute discretion, considers appropriate so that the outcome fairly reflects the underlying financial performance of the Company (or applicable business unit) over that shortened Performance Period.
3.4The Committee’s calculations on the meeting of the Performance Condition shall not be open to question, its determinations shall be final and binding on all persons concerned in the absence of manifest error and an Award will not be subject to further testing once the Performance Condition in relation to that Award has been met or been determined not to have been met.
3.5The Committee may (but is not obliged to) vary the Performance Condition applying to existing Awards if an event occurs or there are circumstances (for example, an acquisition or disposal of a business or a significant part of a business), which the Committee considers justifies such a variation.
3.6The Committee shall, as soon as reasonably practicable, notify a Participant of any substitution or variation of the Performance Condition.
4.Awards which take the form of a Restricted Share Award
4.1If an Award takes the form of a Restricted Share Award, the Restricted Shares subject to the Award shall be subject to such restrictions on the transfer, assignment, sale, pledge, charge or other disposal of the Restricted Shares during the Vesting Period and except to the extent that the Award has Vested as the Committee may prescribe and an Eligible Employee may be required to enter into an irrevocable agreement with the Company and, if necessary, the Eligible Employee’s Employer, in such form as the Committee may prescribe which may include an agreement by the Eligible Employee:
(a)not to transfer, assign, sell, pledge, charge or otherwise dispose of any Restricted Shares subject to the Award except to the extent that the Award has Vested; and
(b)to transfer (or procure the transfer) to or to the order of the Company, for a total of one penny (or the equivalent in a Participant’s local currency), all the Restricted Shares in respect of which the Award does not Vest.
4.2If the Eligible Employee does not enter into any required agreement either before the Date of Grant or within such period after the Date of Grant as the Committee may specify, the Award shall not be granted or if it has been granted, such grant shall be ineffective.
4.3On or before the Date of Grant for an Award which takes the form of a Restricted Share Award, the Company shall transfer or procure the transfer to
the Participant or his nominee or such other person as the Committee may determine the number of Restricted Shares which are subject to the Award.
4.4To the extent that an Award which takes the form of a Restricted Share Award Vests, any restrictions referred to in rule 4.1 shall cease to have effect in relation to the Shares subject to it.
5.Vesting of Awards
5.1Save as otherwise provided in the Plan, as soon as reasonably practicable after the end of a Performance Period the Committee shall determine the number of Shares, Notional Shares or Restricted Shares (as applicable) that shall, subject to rule 5.2, Vest in accordance with the rules of the Plan.
5.2Subject to rules 6 and 7, Shares, Notional Shares or Restricted Shares comprised in the Award shall only Vest on the Vesting Date if the Participant has remained an Eligible Employee until that Vesting Date.
6.Leavers
6.1Subject to rule 6.3, where a Participant ceases to be an Eligible Employee at any time before the Vesting Date applicable to his Award by reason of:
(a)redundancy (as determined by the Committee);
(b)injury or disability (evidenced to the satisfaction of the Committee);
(c)retirement;
(d)his Employer ceasing to be under the Control of the Company;
(e)the business (or part of a business) in which he is employed being transferred to a person who is not a member of the Group, or
(f)for any other reason at the discretion of the Committee,
his Award shall continue, and will Vest on the original Vesting Date and the number of Shares, Notional Shares or Restricted Shares that Vest shall be determined under rule 6.4 save that the Committee may determine that an Award shall instead Vest on the Termination Date in accordance with rule 6.5.
6.2If a Participant ceases employment in any circumstances (other than death or as set out in rule 6.1), an Award (whether Vested or unvested) shall lapse automatically.
6.3If a Participant dies, Awards granted to him will Vest on the date of death in respect of the number of Shares, Notional Shares or Restricted Shares as determined under rule 6.5.
6.4Reduction of Award – Delayed Vesting. Where the Award Vests on a Participant ceasing to be an Eligible Employee under rule 6.1 above and Vesting occurs on the original Vesting Date, the total number of Shares,
Notional Shares or Restricted Shares which shall Vest shall be determined by taking the following steps:
(a)by calculating the number of Shares (or Notional Shares or Restricted Shares) at the Vesting Date by reference to the extent to which the Performance Condition has been achieved at the original Vesting Date; and
(b)by multiplying the number of Shares (or Notional Shares or Restricted Shares) determined under rule 6.4(a) by the fraction A/B (where A is that part of the Vesting Period (measured in complete months) that has elapsed from the Date of Grant to the Termination Date and B is the number of complete months in the Vesting Period, SAVE THAT the Committee may, in its absolute discretion, disapply in whole or in part the application of the time pro-rating fraction.
For the avoidance of doubt, this rule 6.4 shall not apply where Awards Vest under rules 7.1 to 7.3 (inclusive).
6.5Reduction of Award – Immediate Vesting. Where the Award Vests on a Participant ceasing to be an Eligible Employee under rule 6.1 above and the Committee determines Vesting shall occur on the Termination Date, or under rule 6.3 above, the total number of Shares, Notional Shares or Restricted Shares which shall Vest shall be determined by taking the following steps:
(a)by calculating the number of Shares (or Notional Shares or Restricted Shares) at the Vesting Date by reference to the extent to which the Performance Condition has been achieved over the period to the Termination Date (and the Committee shall make such adjustments as it thinks fit where the date of cessation is not at the end of a Financial Year); and
(b)by multiplying the number of Shares (or Notional Shares or Restricted Shares) determined under rule 6.5(a) by the fraction A/B (where A is that part of the Vesting Period (measured in complete months) that has elapsed from the Date of Grant to the Termination Date (or death, as the case may be) and B is the number of complete months in the Vesting Period, SAVE THAT the Committee may, in its absolute discretion, disapply in whole or in part the application of the time pro-rating fraction. Where parts of the Award vest on different Vesting Dates, the Committee shall calculate any pro-rata reduction under this rule 6.5 by reference to the Vesting Period applicable to each separate part of the Award.
For the avoidance of doubt, this rule 6.5 shall not apply where Awards Vest under rules 7.1 to 7.3 (inclusive).
6.6Meaning of ceasing employment. For the purposes of rule 6.1, a Participant shall not be treated as ceasing to be an Eligible Employee until he ceases to be employed by the Company or any member of the Group. The reason for the termination of office or employment of a Participant shall be determined by reference to rules 6.1, 6.2 and 6.3 regardless of whether such termination was lawful or unlawful (and howsoever caused).
7.Take-over and Liquidation
7.1This rule 7 applies if
(a)any person (either alone or together with any person acting in concert with him) obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied, the person making the offer will have Control of the Company; or
(ii)a general offer to acquire all of Shares;
(b)any person proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law;
(c)any person becomes bound or entitled to acquire Shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(d)notice is given of a resolution for the voluntary or compulsory winding-up of the Company,
(each a Relevant Event).
7.2Where this rule 7 applies and subject to rules 7.3 and 8 below, all outstanding Awards will automatically Vest and the number of Shares, Notional Shares or Restricted Shares in respect of which the Award shall Vest shall be determined by reference to the extent to which the Performance Condition has been achieved at the date of the Relevant Event and, in the case of an Award granted in the form of an Option shall be automatically exercised on the Relevant Date provided that any exercise price payable by the Participant on exercise is equal to or less than the relevant offer price or consideration (as determined by the Committee). Where this rule 7 applies, and subject to rule 7.3 below, any outstanding Awards granted in the form of Options that are not exercised on the Relevant Date shall lapse automatically.
7.3Without prejudice to the operation of rule 7, Awards shall not Vest or be exercised without the consent of the Committee under the foregoing provisions of this rule 7 if the purpose and effect of the Relevant Event, together with any associated transactions, is to create a new holding company
for the Company, such company having substantially the same shareholders and proportionate shareholdings as those of the Company immediately prior to the Relevant Event. Unless the Committee determines otherwise in its absolute discretion, an Award will in such circumstances be exchanged for an equivalent award in accordance with rule 8 below.
8.Rollover of Awards
8.1If any other business entity (the acquiring company):
(a)obtains Control of the Company as a result of making:
(i)a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the acquiring company will have Control of the Company; or
(ii)a general offer to acquire all the Shares; or
(b)proposes to obtain Control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Article 125 of the Companies (Jersey) Law 1991 or its equivalent under applicable law; or
(c)becomes bound or entitled to acquire shares in the Company under Part 18 of the Companies (Jersey) Law 1991 or their equivalent under applicable law,
and notice of a replacement Award is given pursuant to rule 7.3 (with the consent of the acquiring company), then, on the Relevant Date, any Award which has not lapsed (the old award) shall automatically be released and shall be replaced by an award (the new award) which (in the opinion of the Committee) is equivalent to the old award but relates to shares in a different company (whether the acquiring company itself or another company) (the new grantor).
8.2The provisions of the Plan shall be construed as if:
(a)the new award were an award granted under the Plan at the same time as the old award;
(b)if appropriate, references to the Performance Condition were references to such new performance condition(s) relating to the new grantor or such subsidiary or business of the new grantor as the Committee may consider appropriate in the circumstances;
(c)references to the Company in the rules were references to the new grantor;
(d)references to the Committee in the rules were references to the board of directors of the new grantor or any duly authorised committee thereof;
(e)references to Shares were references to shares in the new grantor; and
(f)the Vesting Date in relation to the new award was the same as that in relation to the old award.
9.Consequences of Vesting
9.1On the Vesting of an Award which takes the form of an Option the Participant (or, if the Vesting occurs by reason of the Participant’s death, the Participant’s legal representative) may, subject to rules 9.7, 9.8 and 9.9, elect to exercise the Option over some or all of the Vested Shares during the period of 30 days following the Vesting Date. If the Award has Vested due to a Participant’s death or if the Participant dies during the 30 days’ period, the Award may be exercised during the period of 12 months following the date of death. If, during the 30 days or 12 months’ exercise period (as the case may be), the Participant is subject to any dealing restrictions under the Market Abuse Regulation or any relevant share dealing code of the Company, the applicable exercise period shall be suspended until such later date as those dealing restrictions lift provided that no Option may be exercised more than 10 years after its Date of Grant. Subject to rules 9.7, 9.8 and 9.10, the Company shall procure the transfer of the Vested Shares as soon as reasonably practicable after the exercise date and in any event not later than 30 days thereafter.
9.2If a Participant has not exercised his Option before the end of the relevant exercise period mentioned in rule 9.1, the following provisions shall apply:
(a)if the exercise price payable by the Participant is nil, the Option shall be deemed to have been exercised on the last day of the relevant period; or
(b)subject to (a) above, the Option shall be settled by the Committee making a payment of (or procuring the payment of) a cash sum to the Participant equal to any Option Exercise Value, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
9.3The Participant may exercise a Vested Option by written notice to the Company in such form as the Committee may prescribe.
9.4On the Vesting of an Award which takes the form of a Conditional Award a Participant need take no action and the Company shall, subject to rules 9.7, 9.8 and 9.10 procure the transfer of the Vested Shares to the Participant (or his nominee or legal representative) as soon as reasonably practicable after the
Vesting Date and in any event no later than 30 days thereafter. If the Award has Vested due to a Participant’s death or if the Participant dies during the 30 days’ period the Shares shall be transferred to the Participant’s legal representatives as soon as reasonably practicable after the date of death.
9.5On the Vesting of an Award which takes the form of a Restricted Share Award the Shares shall cease to be subject to all restrictions and any agreement applying to the Restricted Shares shall cease to have effect.
9.6On the Vesting of an Award which takes the form of a Phantom Award, the Committee shall pay, or procure the payment of, a cash sum to the Participant equal to the Final Value of the Vested Notional Shares to which the Phantom Award relates subject to such deductions for any Tax Liability as are required by applicable law. The Committee may in its discretion pay or procure payment of the cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine). The cash sum will be paid as soon as reasonably practicable following the Vesting Date.
9.7Restrictions on Vesting. An Award shall not Vest unless and until the transfer of Shares (if relevant) after such Vesting would be lawful in all relevant jurisdictions and in compliance with the Listing Rules, the Market Abuse Regulation, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other relevant UK or overseas regulation or enactment related to the Vesting of an Award in the jurisdictions in which the relevant Participant is resident for tax purposes.
9.8Payment of Tax Liability. Any liability of a Participant to taxation or social security contributions shall be for the account of the relevant Participant and the transfer of Vested Shares subject to a Participant’s Vested Award shall be conditional upon the Participant having discharged the amount required to satisfy the Tax Liability which arises on Vesting or exercise to the satisfaction of the Company, or otherwise having complied with any arrangements specified by the Company to secure that such Tax Liability is satisfied including irrevocably authorising the Company to sell or procure the sale of sufficient Vested Shares on or following the Vesting or exercise of his Award (as applicable) on his behalf to ensure that any relevant member of the Group or former member of the Group receives the amount required to discharge the Tax Liability which arises as a result of the Vesting or exercise of his Award and by participating in the Plan a Participant is deemed to have given such authorisation.
9.9Elections. A Participant shall enter into any agreement, election or arrangement which the Committee may consider appropriate within such period as may be specified by the Committee, in relation to or in connection with any liability to income tax or social security contributions (including, if permitted under local law, any employer’s social security contributions) in respect of the Participant’s Award or the Shares subject to his Award. For example, but without limitation, the Committee may require Participants who are resident in the UK for tax purposes to enter into an agreement or election pursuant to paragraphs 3A or 3B of Schedule 1 to the UK Social Security Contributions and Benefits Act 1992 or a joint election under Section 431 of
the Income Tax (Earnings and Pensions) Act 2003 by the fourteenth day following the acquisition of any Shares by the Participant.
9.10Cash settlement. If for any reason the Committee considers that it is impractical or legally onerous to deliver Shares in satisfaction of a Vested Award, it may instead pay or procure the payment to the Participant of a cash sum equal to the Final Value of the Vested Shares, subject to such deductions for any Tax Liability required by applicable law. The Committee may in its discretion pay or procure the payment of any cash sum in sterling or the equivalent in a Participant’s local currency (converted on the basis of such exchange rate as the Committee may in its discretion determine).
10.Malus and Clawback
10.1Notwithstanding any other rule of the Plan, if one or more of the circumstances set out in rule 10.2 occur, the Committee may: (i) at any time, (where the circumstances fall within rule 10.2(d) below); or (ii) prior to the fifth anniversary of the Date of Grant in all other circumstances, determine (acting fairly and reasonably having taken into account the scale of loss or damage to the Company or the extent of the risk taken by the Company) to take one or more of the following actions in relation to any one or more Participants:
(a)reduce (including to nil) the number of Shares, Notional Shares or Restricted Shares in respect of which any future Award is granted to a Participant; or
(b)reduce (including to nil) the cash amount payable under an unvested Award held by a Participant or the number of Shares, Notional Shares or Restricted Shares under an unvested Award and/or the number of Shares under a Vested but unexercised Option held by a Participant, by such amount and/or such number as the Committee considers appropriate in the circumstances; or
(c)in relation to a Vested Award, require a Participant to pay to the Company or such other person as the Company may direct within 30 days of a written demand from the Company such number of Shares or such monetary amount with a value to be determined in the Committee’s absolute discretion provided such value on the date of demand is no greater than the value of the Vested Shares under Award at the Vesting Date, less any amount paid by or in respect of the Participant in respect of a Tax Liability incurred as a result of the Vesting of the relevant Award (except to the extent the Participant is able to recover amounts paid in respect of such Tax Liability).
10.2The circumstances in which the Committee may consider that it is appropriate to exercise its discretion under rule 10.1 are the following:
(a)a material financial misstatement of the Company’s, or, if appropriate, the relevant business’ audited financial accounts (other than as a result of a change in accounting practice);
(b)conduct by a Participant which results in or is reasonably likely to result in significant reputational damage to the Company;
(c)the negligence or gross misconduct of a Participant; or
(d)fraud effected by or with the knowledge of a Participant.
10.3If the Committee decides to exercise its discretion under this rule 10, it shall confirm this in writing to each affected Participant.
10.4For the purposes of these rules, if the Committee decides to exercise its discretion under Rule 10.1(b) before an Award Vests:
(a)the Award shall be deemed to have been granted over the reduced number of Shares, Notional Shares or Restricted Shares (as the case may be); and
(b)any subsequent Vesting of the Award shall be determined by reference to this reduced number of Shares, Notional Shares or Restricted Shares,
(c)save that if the number of Shares, Notional Shares or Restricted Shares is reduced to nil, the Award shall be treated as if it had never been granted and such Participant (including a Participant who has left employment before the Vesting Date) shall have no rights to any cash amount, Shares, Notional Shares or Restricted Shares.
10.5Each Participant shall be deemed to undertake, as a condition of participation in the Plan, to be bound by this rule 10 and shall, if necessary to enforce the terms of this rule 10 enter into any agreement, election or arrangement which the Committee may consider appropriate.
11.Relationship of Plan to contract of employment
11.1The rights and obligations of a Participant under the terms and conditions of employment shall not be affected by his participation in the Plan or any right he may have to participate in the Plan. An individual who participates in the Plan waives all and any rights to compensation or damages in consequence of the termination of his employment with any member of the Group (or former member of the Group if applicable) for any reason whatsoever (whether lawfully or unlawfully) insofar as those rights arise, or may arise from his ceasing to have rights under or be entitled to exercise any Award under the Plan, as a result of such termination or from the loss or diminution in value of such rights or entitlements. In the event of any conflict between the terms of
this rule 11 and the Participant’s terms of employment, this rule shall take precedence.
11.2Notwithstanding any other provision of the Plan:
(a)the Plan shall not form part of any contract of employment between the Company or any Subsidiary and a Participant;
(b)no Eligible Employee has any right to be granted an Award and the fact that an Eligible Employee may have participated in the Plan and/or been granted Awards under the Plan shall not entitle any Eligible Employee to future participation or grants;
(c)the benefit to a Participant of participation in the Plan (including, in particular but not by way of limitation, any Awards held by him) shall not form any part of his contractual remuneration or benefits or count as his contractual remuneration or benefits for any purpose;
(d)nothing in the Plan shall in any way be construed as imposing upon any member of the Group a contractual obligation as between the member of the Group and a Participant to contribute to the Plan;
(e)if a Participant ceases to be employed within the Group, he shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit under the Plan (including, in particular but not by way of limitation, any Awards held by him which lapse by reason of his ceasing to be employed within the Group, whether lawfully or unlawfully) by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise (or by way of similar provisions of the law of the jurisdiction in which the Participant is resident); and
(f)by accepting the grant of an Award and not renouncing it a Participant is deemed to have agreed to the provisions of the Plan and in particular, this rule 11.2.
12.Adjustment of Awards
In the event of any Capital Reorganisation (or the implementation by the Company of a demerger or payment of a super dividend which would otherwise materially affect the value of an Award), the price payable by a Participant on Vesting (or exercise of an Option) (if any), the description of Shares, the number of Shares comprised in an Award and the Performance Condition applicable to an Award may be adjusted in such manner as the Committee may determine. Any adjustment to Awards made pursuant to this rule 12 shall be notified to the relevant Participant. The Committee may make such adjustments as it considers appropriate to the number of Shares
comprised in an Award and the Performance Condition applicable to an Award.
13.Administration and Amendment
13.1Committee responsible for administration. The decision of the Committee shall be final and binding in all matters relating to the Plan and it may at any time discontinue the grant of further Awards or amend any of the provisions of the Plan in any way it thinks fit: Provided that:
(a)except as herein provided, the Committee shall not make any amendment that would materially prejudice the interests of existing Participants in any jurisdiction in which the Plan operates except with the prior consent or sanction of Participants in that jurisdiction who, if their Awards Vested in full, would thereby become entitled to a majority of all the Shares which would fall to be transferred upon satisfaction of all outstanding Awards in that jurisdiction; and
(b)without prejudice to any provision of the Plan which provides for the lapse of an Award, the Committee may not cancel an Award unless the Participant agrees in writing to such cancellation.
14.Data Protection
14.1By accepting the grant of an Award, a Participant acknowledges that the Company or any member of the Group may hold, process and transfer personal data relating to them to other members of the Group or to any third parties engaged by them (whether within or outside of the European Economic Area (EEA) and that personal data may also be processed outside the EEA by the Company or any member of the Group or by one or more held or of its or their service providers) for any and all purposes related to the operation and administration of the Plan and/or in order to meet any legal obligation, in each case in accordance with the Company’s Share Plan Data Protection Protocol and applicable law.
15.General
15.1Any member of the Group may provide money to the Trustee or any other person to enable them or him to acquire (but not to subscribe for) Shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent not prohibited by applicable law.
15.2The existence of any Award shall not affect in any way the right or power of the Company or its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or other changes in the Company’s capital structure, or any merger or consolidation of the Company, or any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or convertible into, or otherwise affecting the Shares or the rights thereof, 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.
15.3Any notice or other document required to be given under or in connection with the Plan may be delivered to a Participant or sent by post to him at his home address according to the records of his Employer or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document require to be given to the Company under or in connection with the Plan may be delivered or sent by post to it at its corporate services office at 1020 Eskdale Road, Winnersh, Wokingham RG41 5TS (or such other place or places as the Committee may from time to time determine and notify to Participants).
15.4The Company, or where the Committee so directs any Subsidiary, shall pay the appropriate stamp duty on behalf of the Participants in respect of any transfer of Shares on the Vesting or exercise of the Awards.
15.5Benefits under this Plan shall not be pensionable.
15.6These rules shall be governed by, and construed in accordance with, the laws of England. Neither the Plan nor any Award agreement shall be construed or interpreted with any presumption against the Company by reason of the Company causing the Plan or Award agreement to be drafted.
Unless specifically stated otherwise, each Participant, the Company and any other member of the Group submits to the exclusive jurisdiction of the English courts in relation to all disputes arising out of or in connection with the Plan. By accepting the grant of an Award and not renouncing it, Participants are deemed to have agreed to submit to such jurisdiction.
APPENDIX A
U.S. Rules
The U.S. Rules in this Appendix A are intended to conform the Plan, in its documentation and in its operation, so as to be exempt from, and to the extent not so exempt, to meet such requirements of Section 409A of the Code and the regulations thereunder (collectively, Section 409A) as are applicable to the Plan with respect to Awards that take the form of an Option, a Conditional Award or a Phantom Award. The provisions of rules 1 to 15 of the Plan shall, save where otherwise specified below, apply in relation to Awards subject to the U.S. Rules, and references to the “Plan” shall include the U.S. Rules. If there is a conflict between any provisions of the U.S. Rules and the provisions of the main text of the Plan, the provisions of the U.S. Rules shall govern with respect to any Participant who is subject to U.S. federal income tax with respect to an Award.
1.Definitions
For purposes of the U.S. Rules, in addition to the definitions in rule 1 the following definitions shall be applicable. If there is a conflict between any definitions in the U.S. Rules and those in rule 1, the definitions in the U.S. Rules shall govern with respect to any Participant who is subject to U.S. income tax with respect to an Award.
Change in Control means, with respect to an entity that is organized as a corporation (a “Corporation”), any of the following events:
(a)a change in the ownership of the Corporation;
(b)a change in the effective control of the Corporation; or
(c)a change in the ownership of a substantial portion of the assets of the Corporation.
For purposes of this definition:
(i)a “change in the ownership of the Corporation” occurs on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Corporation that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Corporation;
(ii)a “change in the effective control of the Corporation” occurs on the date on which either: (1) a person, or more than one person acting as a group, acquires ownership of stock of the Corporation possessing 50% or more of the total voting power
of the stock of the Corporation, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, or (2) a majority of the members of the Corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such board of directors prior to the date of the appointment or election, but only if no other corporation is a majority shareholder of the Corporation; and
(iii)a “change in the ownership of a substantial portion of the assets of the Corporation” occurs on the date on which any one person, or more than one person acting as a group, other than a person or group of persons that is related to the Corporation, acquires assets from the Corporation that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition.
An event constitutes a Change in Control with respect to a Participant only if the Participant performs services for the Corporation that has experienced the Change in Control, or the Participant’s relationship to the affected Corporation otherwise satisfies the requirements of Regulation §1.409A-3(i)(5)(ii).
Notwithstanding anything to the contrary herein, with respect to an entity that is a partnership, Change in Control means only a change in the ownership of the partnership or a change in the ownership of a substantial portion of the assets of the partnership, and the provisions set forth above respecting such changes relative to a corporation shall be applied by analogy.
The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Section 409A.
Code means the U.S. Internal Revenue Code of 1986, as amended from time to time, and regulations thereunder. References to any section of the Code shall be to that section as it may be renumbered, amended, supplemented or re-enacted from time to time. For this purpose, “regulation” means a regulation, ruling or other interpretation or guidance, validly promulgated by the U.S. Department of Treasury and in effect at the time in question. Reference to a regulation or section thereof includes that regulation or section and any comparable regulation or section that amends, supplements or supersedes that regulation or section.
For purposes of the U.S. Rules, a Participant will be considered Disabled if he is:
(a)unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or
(b)by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an Employer-sponsored accident and health plan in which he participates.
Separation from Service (and variations of such term) have the meaning ascribed to such term under Section 409A, and generally refers to a cessation of employment described in rule 6.6, a reduction in hours to be worked (e.g. by at least 80%) or another event described in the regulations under Section 409A.
Shares means:
(a)fully paid ordinary shares in the capital of the Company, whether held in certificated or uncertificated form, via a DRS statement or via the DTC; and/or
(b)shares representing those shares following any reorganisation of the share capital of the Company.
Substantial risk of forfeiture shall have the meaning ascribed to such term under Section 409A. Generally, an Award is subject to a substantial risk of forfeiture only if the Award would lapse and be forfeited with no payment to the Participant if the Participant were to resign voluntarily, in the absence of an exercise of discretion by the Committee to vest the Award. A Participant’s Awards shall cease to be subject to a substantial risk of forfeiture when the Participant becomes eligible to retire regardless of whether he continues to be employed. In addition, the addition of any risk of forfeiture after an Award is granted or any extension of a period during which an Award is subject to a risk of forfeiture, is disregarded for purposes of determining whether the Award is subject to a substantial risk of forfeiture.
2.Grant of Awards
For the purposes of the U.S. Rules and rule 2, Awards granted under the U.S. Rules may be granted in respect of Shares.
6. Leavers
Rule 6 of the Plan shall govern the extent to which an Award becomes Vested and payable upon termination of employment prior to the Vesting Date, except that if an Award ceased to be subject to a substantial risk of forfeiture prior to the Vesting Date for any reason, including eligibility for retirement, then the following shall apply:
(a)Payment with respect to the Award, to the extent made upon a termination of employment, shall be made only if the termination of employment constitutes a Separation from Service, and if the termination of employment does not constitute a Separation from Service the Award shall Vest to the extent provided in rule 6 but payment shall be deferred until the earlier of the Vesting Date described in rule 6.1 or the date on which a Separation from Service occurs; and
(b)If the Participant is a “specified employee” as defined in Section 409A at the time of the Separation from Service, then payment shall be subject to rule 9.11 of the U.S. Rules.
7. Take-over and Liquidation
For purposes of the U.S. Rules, if a Relevant Event occurs that is not a Change in Control, and if a Participant’s Award ceased to be subject to a substantial risk of forfeiture prior to the Relevant Date for any reason, then the Participant’s Award shall Vest to the extent provided in rule 7, but payment shall be deferred until the earliest of the Vesting Date described in rule 6, a Change in Control or the Participant’s Separation from Service (subject to rule 9.11 of the U.S. Rules).
8. Rollover of Awards
For purposes of the U.S. Rules, a new paragraph is added at the end of rule 8.1 to provide as follows:
“Notwithstanding the foregoing, if at any time prior to the occurrence of the event described in rule 8.1, an Award ceased to be subject to a substantial risk of forfeiture, then a replacement Award shall be issued with respect to such Award only if the event does not constitute a Change in Control, and the provisions of rule 7 shall apply. Notwithstanding the foregoing, if the event does not constitute a Change in Control, but the Participant would otherwise incur a Separation from Service by reason of being transferred to the employment of an employer outside of the Group, then a replacement Award shall not be issued (and rule 6 shall apply) unless the terms of the agreement governing such transaction provide that the transfer of employment shall not
be treated as a Separation from Service in accordance with Regs. §1.409A-1(b)(h)(4).”
9. Consequences of Vesting
For purposes of the U.S. Rules, rules 9.1, 9.4 and 9.7 are amended, and a new rule 9.11 is added, to provide as follows:
9.1 On the Vesting of an Award which takes the form of an Option the Participant (or, if the Vesting occurs by reason of the Participant’s death, the Participant’s legal representative) may, subject to rules 9.7, 9.8 and 9.11, elect to exercise the Option over some or all of the Vested Shares during the period of 30 days following the Vesting Date. Subject to rules 9.7, 9.8, 9.10 and 9.11, the Company shall procure that the transfer of the Vested Shares for which such election is made will be effected on or before the 60th day following the Vesting Date. Any Option for which such an election is not made within the 30 day period will be treated as if it were a Phantom Award which will be settled in accordance with rule 9.6 of the Plan save that the cash payment will be paid not later than the 60th day following the Vesting Date.
9.4 On the Vesting of an Award which takes the form of a Conditional Award a Participant need take no action and the Company shall, subject to rules 9.7, 9.8, 9.10 and 9.11 procure the transfer of the Vested Shares to the Participant (or his nominee or legal representative) as soon as reasonably practicable after the Vesting Date and in any event not later than 30 days thereafter.
9.7 Restrictions on Transfer. A transfer of Shares pursuant to an Award shall not be made unless and until the transfer of Shares would be lawful in all relevant jurisdictions and in compliance with the Listing Rules, the Market Abuse Regulation, any relevant share dealing code of the Company, the City Code on Takeovers and Mergers and any other relevant UK or overseas regulation or enactment in the jurisdictions in which the relevant Participant is resident for tax purposes. If within ten (10) business days following the Vesting of an Award the Committee is unsure whether such transfer of Shares will be permitted or will be feasible (e.g., in the event of the Participant’s death), the Award will be settled in cash on the 60th day following the Vesting Date in accordance with the provisions of rule 9.10 of the Plan.
9.11 If the Vesting of an Award that ceased to be subject to a substantial risk of forfeiture prior to the Vesting Date (or Relevant Date under rule 7 or 8) is on account of a Participant’s Separation from Service (other than by reason of his death), payment of the Award will be delayed if so required pursuant to rule 17 of the U.S. Rules.
16. Unfunded Status
Awards subject to the U.S. Rules constitute unsecured promises by the Employers to pay benefits in the future. Participants holding such Awards shall have the status of general unsecured creditors of the Company or the Employer, as applicable. Each Employer shall be solely responsible for payment of the benefits of its employees and their beneficiaries. The Plan is unfunded for U.S. federal tax purposes. Any amounts set aside to defray the liabilities assumed by the Company or an Employer will remain the general assets of the Company or the Employer, as applicable, and shall remain subject to the claims of the Company’s or the Employer’s creditors until such amounts are distributed to the Participants.
Notwithstanding the preceding, an Employer may, in its sole discretion, establish a trust as a vehicle for accumulating assets, including Shares, to pay benefits under the Plan, with the intent that such trust shall be considered unfunded for U.S. federal tax purposes. Payments under the Plan may be paid from the general assets of the Employer or from the assets of any such trust. Payment from any such trust shall reduce the obligation owed to the Participant under the Plan. Any references in the main text of the Plan to a trust or a trustee shall be construed to be a reference to such an unfunded trust or the trustee of such a trust.
17. Section 409A
This Plan is intended to be exempt from, and to the extent not so exempt to comply with, the requirements of Section 409A and shall be interpreted and administered accordingly. Notwithstanding anything to the contrary in this Plan, if a Participant is a “specified employee” as defined in Section 409A as of the Participant’s Separation from Service, then, to the extent required by Section 409A, no payments due under this Plan resulting from the Participant’s Separation from Service may be made until the earlier of: (i) the first day following the sixth month anniversary of the Participant’s Separation from Service; and (ii) the Participant’s date of death; provided, however, that any payments delayed during this period shall be paid in the aggregate in a lump sum as soon as reasonably practicable following the sixth month anniversary of the Participant’s Separation from Service or the Participant’s date of death, as the case may be. Notwithstanding the foregoing, the Employers do not guarantee the tax treatment of any payments or benefits under this Plan including, without limitation, under the Code, federal, state, municipal, local or foreign laws.
AMENDED & RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED & RESTATED AGREEMENT (this “Agreement”) is made and entered into as of September 1, 2022 by and between Ferguson Enterprises, LLC (“FELLC”), a Virginia limited liability company, on behalf of itself and its ultimate parent company, Ferguson plc (“Ferguson”; collectively, with their subsidiaries, the “Company”) and Kevin Murphy, an individual currently residing at [ ] (“Executive”).
WHEREAS, FELLC and Executive entered into a prior employment agreement, dated September 2, 2019 (“Prior Agreement”), and now wish to replace such Prior Agreement in its entirety with this Agreement, as of the effective date of this Agreement set forth above;
WHEREAS, on behalf of the Company, FELLC desires to continue to retain the services of Executive, and Executive desires to continue to be employed by FELLC, all on the terms and subject to the conditions set forth herein;
WHEREAS, Executive desires to enter into this Agreement in consideration of Executive’s employment by FELLC and the benefits that Executive will receive under the terms hereof; and
WHEREAS, FELLC and Executive wish to amend and restate this Agreement, as of the date set forth on the last page below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
1.Term of Employment: Executive’s employment with FELLC on the terms of this Agreement shall commence on September 1, 2022 (the “Commencement Date”) and shall continue subject to the terms of this Agreement until terminated in accordance with Section 12.
2.Position: Executive’s position within the Company shall continue to be Chief Executive Officer (“CEO”) and Executive agrees to serve in such position, on the terms and subject to the conditions set forth in this Agreement. Executive shall continue to report to Ferguson’s Board of Directors (“Board”), shall continue to lead Ferguson’s Executive Committee (“ExCom”), and shall continue to serve (subject to any applicable shareholder approvals) as an Executive Director on Ferguson’s Board.
3.Location & Travel: Executive’s job will be based in Newport News, Virginia. FELLC reserves the right to change this location to any place within the United States as may be reasonably required from time to time for the proper performance of Executive’s duties. Executive agrees to travel on the business of the Company (both within the United States and abroad) as may be required for the proper performance of Executive’s duties.
4.Duties and Responsibilities:
4.1.Executive shall work the hours necessary to carry out Executive’s duties properly and effectively.
4.2.As part of Executive’s duties, Executive shall:
a)Act as a director or officer of any appropriate Company subsidiary, as may be reasonably required;
b)Carry out duties on behalf of any Company subsidiary as may be reasonably required; provided that such duties are consistent with Executive’s position;
c)Comply with the articles of association, bylaws, operating agreement, or similar governing documents (as amended from time to time) of any Company subsidiary of which Executive is a director and/or officer, which shall be made available to Executive as and when appropriate;
d)Abide by any statutory, fiduciary or common-law duties to FELLC, Ferguson, or any other Company subsidiary of which Executive is a director and/or officer;
e)Not do anything that would cause Executive to be disqualified from acting as a director and/or officer of any Company entity;
f)Personally comply with all applicable requirements, recommendations or regulations (as amended from time to time) of the UK Financial Conduct Authority, the Market Abuse Regulations, U.S. securities laws and regulations, NYSE Listing Standards, and all other regulatory authorities relevant to the Company and/or any Company subsidiary, as well as any policy issued by Ferguson (as amended from time to time) relating to dealing in the securities of Ferguson or any Company subsidiary;
g)Comply with all legal requirements as to the handling, protection and disclosure of “Inside Information” and/or “Material Non-Public Information” (each as defined under applicable UK and US laws);
h)Comply with the Company’s anti-corruption and bribery policy and related procedures;
i)Unless prevented by incapacity and subject always to Section 5 of this Agreement, devote substantially all of Executive’s working time, attention and abilities to the business of the Company;
j)Report Executive’s own wrongdoing and/or any wrongdoing or proposed wrongdoing of any other employee or any director of the Company, FELLC or any other Company subsidiary to the Ferguson Board and the Chief Legal Officer immediately on becoming aware of it;
k)Use all reasonable endeavors to promote, protect, develop and extend the business of the Company;
l)Consent to the monitoring and recording of Executive’s use of any of the Company’s electronic communications systems for the purpose of ensuring that the
Company’s rules are being complied with and for legitimate business purposes, to the extent such monitoring is permitted by applicable law; and
m)Comply with any electronic communication systems policy or policies that the Company may issue from time to time.
5.Outside Interests
5.1.Subject to Sections 5.2 through 5.4, Executive shall not (except as a representative of the Company or with the prior written approval of the Chairman of the Board) be directly or indirectly engaged in any other business, trade, profession or occupation, whether paid or unpaid.
5.2.Notwithstanding Section 5.1, Executive may hold (as a passive investment by way of shares or other securities) up to 3% of the voteable shares in another publicly traded company that is listed on any recognized stock exchange.
5.3.It is agreed that the Executive may continue to hold certain property and land investment interests which take the form of partnerships and which he has notified to the Company prior to the Commencement Date; provided that, this is in his own time and does not interfere with any Company responsibilities. Any such further investments shall be subject to the prior approval of the Chairman of the Board; such approval not to be unreasonably refused, conditioned or delayed.
5.4.Subject to the prior written approval by the Chairman of the Board, Executive will be able to undertake one external non-executive director role.
6.Compensation
6.1.Base Salary: Executive’s annual base salary will be $1,155,660 per annum by twelve equal payments on a pre-determined date in each calendar month (“Base Salary”). Executive’s Base Salary will be reviewed annually by the Ferguson Board’s Compensation Committee (“CompCo”), which is under no obligation to award an increase following a salary review.
6.2.Bonuses: Executive shall be eligible to be considered for a bonus, subject always to the rules of the applicable discretionary bonus plan as may be implemented by the CompCo from time to time. Any bonus payment shall be entirely discretionary and subject to Executive’s continued employment at the time of any such payment, and the CompCo has the right to amend, vary, suspend or withdraw any such bonus plan at any time and without prior notice. If Executive receives a bonus or incentive payment in any one year, this shall not give rise to a contractual entitlement to a bonus or incentive payment in future years. Any bonus payments are subject to applicable deductions as required by law or authorized by Executive.
6.3.Inclusive of Director or Office Holder Sums or Fees: The compensation payable under this Agreement shall be inclusive of any sums or fees to which Executive may otherwise be entitled as a director and/or officer of any Company subsidiary.
6.4.Accrual of Compensation: All compensation payable to Executive under this Agreement shall be deemed to accrue from day to day.
6.5.Compensation Reimbursable to the Company: To the extent permitted by applicable U.S. federal and state law, in the event of termination of Executive’s employment for any reason whatsoever, FELLC shall be entitled to deduct from any compensation payable to Executive upon such termination (whether in respect of any period before such termination or otherwise) any monies that may be owed by Executive to any Company entity.1
7.Long Term Incentive Plans; Fringe Benefits; Expense Reimbursement
7.1.Long Term Incentive Plans: Executive will be eligible to participate in the Company’s long-term incentive plans (“LTIP”) in accordance with the terms and conditions set forth in the respective plan documents. Participation in such plans will be at the discretion of the CompCo. Executive shall be subject to a shareholding requirement equal to 600% of Executive’s Base Salary.
7.2.Company Car: During the term of this Agreement, the FELLC shall provide a gross cash allowance (the amount of which in accordance with the then-current Company policy) or shall provide free of charge (including insurance) a company car for Executive’s use, of such type appropriate (in the Company’s opinion) for Executive’s status.2 Executive will receive a fuel card and shall be liable for any income tax on the fuel used for non-business purposes.
7.3.Employee Benefits: Executive shall be eligible to participate in the current benefit programs offered to FELLC’s senior executives. These benefits currently include, without limitation, short term disability benefit, long term disability benefit, healthcare coverage, and paid holidays. These benefits are subject to change from time to time at FELLC’s sole discretion.
7.4.Retirement Benefits and Life Insurance: Executive shall be entitled to participate in the Ferguson Enterprises Retirement Plan ("FERP"), the Supplemental Executive Retirement Plan (“SERP”), 401(k) retirement savings plan, and any life insurance program offered to FELLC’s senior executives. In aggregate, the employer contribution for the FERP, SERP and 401(k) plans will be 16% of Base Salary each year.
7.5.Executive Physical Plan: Executive shall be entitled to participate in the Executive Physical Plan.3
7.6.Vacation:
a)In addition to paid Public Holidays, Executive is entitled to 5 weeks’ vacation under the Ferguson Vacation Plan, which shall accrue at 16.75 hours per month and have an accrual cap of 252 hours.
1 To the extent such deduction is not permissible under applicable law, Executive shall repay such Company entity immediately upon such termination any monies that may at that time be owed by Executive.
2 Executive shall not use such car in breach of any legal, contractual or Company policy requirements.
3 The frequency of such physicals is age dependent. Please see the Executive Benefits brochure for details.
b)In the event of termination of employment, Executive shall be entitled to receive payment for any accrued vacation hours outstanding and untaken at the effective date of termination.4
c)For every 30 days of overnight travel, Executive shall earn one additional personal day, up to a maximum of five days.
7.7.Expense Reimbursement: Executive shall be entitled to receive reimbursement for all appropriate business expenses incurred by Executive in connection with Executive’s duties under this Agreement and in accordance with Company policies (as in effect from time to time).
8.Additional Conditions on Remuneration
8.1.Clawback. In addition to any malus/clawback provisions set forth in any applicable Company performance-based pay arrangements5, Executive shall be subject to the requirements of the Company's Executive Compensation Clawback Policy.
8.2.The CompCo may require Executive to sign and return by a specified time a copy of any award certificate or other document acknowledging Executive’s agreement to be bound by the terms of such performance-related pay arrangements. Failure to do so within the specified period shall cause the award to lapse and shall be treated as if it had never been granted.
8.3.If, upon termination of this Agreement, whether lawfully or in breach of contract, Executive loses any of the rights or benefits under any share plan operated by the Company from time to time (including rights or benefits which Executive would not have lost had the Agreement not been terminated), Executive shall not be entitled, by way of compensation for loss of office or otherwise, to any compensation for the loss of any rights under any such plan.
9.Duty of Loyalty: In consideration of this Agreement and the severance pay and other benefits that may be available herein, Executive agrees to the following:
9.1.Confidentiality: Executive agrees to maintain in strictest confidence all proprietary data and other confidential or non-public information (whether concerning the Company, its suppliers, or any of its customers or proposed customers) obtained or developed by Executive during Executive’s employment with FELLC. Such information and data shall include but not be limited to the Company’s trade secrets, patents, inventions, systems, computer programs and software, technical data and know-how, procedures, manuals, confidential reports and communications, lists of customers and clients, terms of business with suppliers and prices charged, specific contract details and terms of business with customers, customer requirements and prices charged, business plans,
4 To the extent permitted by applicable law, FELLC shall be entitled to recover from Executive the value of any vacation taken in excess of accrued vacation entitlement.
5 Executive acknowledges having access to all applicable terms of such performance-based pay arrangements in advance of the signing of this Agreement. The Company shall make available to Executive a copy of the terms of any future performance-related pay arrangements prior to the grant of any awards under it.
strategies, marking plans and sales forecasts, management and financial information (including but not limited to results and forecasts, dividend information, turnover and stock levels, profits and profit margins), confidential employee information, as well as information that the Company may obtain from third parties in confidence or subject to non-disclosure or similar agreements (“Confidential Information”). All such Confidential Information is and shall remain the exclusive property of the Company (or, in certain circumstances, its customer or vendor) and shall be used solely for the benefit of the Company. Any such information and data in Executive’s possession after termination of Executive’s employment shall be promptly returned to the Company. Executive’s obligations under this Section shall survive any termination of Executive’s employment.
9.2.Non-Competition: Executive acknowledges that Executive is a key employee of FELLC and that Executive’s talents and services are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company. By virtue of Executive’s involvement in the Company’s daily operations and long-term strategic initiatives, holding the same or similar position at a competitor will inevitably require disclosure of the Company’s trade secrets and proprietary or confidential information. In order to protect the interests of the Company against the competitive use of any confidential information, knowledge or relationships concerning the Company to which Executive will have access by virtue of the special nature of Executive’s relationship with FELLC, Ferguson, and/or any other Company subsidiary, and Executive’s involvement in their collective affairs, and in consideration of the payments made to Executive hereunder and the agreements of the parties herein, Executive agrees that, for so long as this Agreement is in effect and for a period of 12 months following the termination of Executive’s employment hereunder for any reason whatsoever, Executive will not own (by ownership of securities or otherwise), control, engage in as an equity participant, or be employed in a managerial, leadership or strategic capacity by or act as a consultant to, or be connected with, the ownership, management, operation or control of any business (i) a substantial portion of whose business directly or indirectly competes with that of Ferguson, FELLC, or any other Company subsidiary, or (ii) that owns more than 1% of the shares of Ferguson. In recognition of the geographic extent of the Company’s existing and anticipated operations and the nature of the Company and competitive circumstances, the restrictive covenant contained in this Section shall apply throughout the United States and Canada. For the avoidance of doubt, the restrictions contained in subpart (i) of this Section shall not prohibit any activities that are not in direct or indirect competition with any business being carried on by Ferguson, FELLC or any other Company subsidiary as of the date of Executive’s termination.
9.3.Non-Solicitation: Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not (directly or indirectly) solicit or induce any Company employee to leave the Company’s employ, or to (directly or indirectly) hire or attempt to hire any person who was a Company employee within the twelve (12) month period preceding.
9.4.Non-Interference with Business Contracts. Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not interfere with, disrupt or attempt to disrupt any past, present or prospective contractual or other relationship between Ferguson, FELLC, or any other Company
subsidiary and any of their respective (current or prospective) clients, customers, suppliers or employees.
9.5.Non-Disparagement: Executive agrees not to make any statement that would disparage the Company, any members of the Ferguson Board, and/or any officers or employees or any product line of Ferguson, FELLC or any other Company subsidiary; provided that this Section does not, in any way, restrict or impede Executive from exercising their protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency.
9.6.Remedy for Breach: The parties recognize that the services to be rendered under this Agreement by Executive are special, unique, and of an extraordinary character, and that in the event of a breach of this Section 9 by Executive, then FELLC shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction in equity, to enforce or have specifically performed any terms, conditions, obligations and requirements of this Section 9, and/or to enjoin Executive from continuing those actions which are in breach of this Agreement, or to take any or all of the foregoing actions. Without limitation of the foregoing, in the event of a breach by Executive of this Section 9, Executive shall forfeit any and all rights to receive severance payments under this Agreement and, if such severance payments have already been paid, Executive shall repay them to FELLC. Nothing herein contained shall be construed to prevent the pursuit of any other remedy, judicial or otherwise, in case of any breach of this Section 9.
Executive acknowledges and agrees that the restrictions contained in this Section 9 are reasonable and necessary for the protection of the Company and that they do not bear harshly upon Executive and agrees that: each restriction shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable for any reason the remaining restrictions shall not be affected; and if any restriction is found to be void but would be valid and enforceable if some part of it were deleted or modified, that restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.
10.Intellectual Property: The parties expect that Executive will in the performance of Executive’s duties develop intellectual property related to the business of the Company. Executive hereby assigns to FELLC any and all right, title and interest in and to such intellectual property, including any and all ideas, inventions, discoveries, trademarks, trade names, copyrights, patents and all other confidential, proprietary, or valuable information and data of any kind, developed by Executive in the course of performing Executive’s duties, or developed using Company property or resources (“Intellectual Property”). To the maximum extent permitted by law, all Intellectual Property shall be deemed “works made for hire” under the United States Copyright Act and FELLC is deemed to sole author of any Intellectual Property. To the extent any Intellectual Property is determined not to constitute “works made for hire,” Executive hereby assigns and transfers to FELLC all right, title, and interest in the Intellectual Property. Executive shall cooperate with the Company in taking any steps deemed necessary by the Company to protect, preserve, defend or enforce the Intellectual Property, such as filing patent applications. Executive will execute on request of the Company or its attorneys any and all documents necessary to record the assignment of Intellectual Property to FELLC, or to protect, preserve, defend or enforce it. Executive will disclose any Intellectual Property to the Company promptly upon its
development. Executive agrees not to improperly use the intellectual property of any third party knowingly in the performance of Executive’s duties.
11.Company Rules, Policies and Procedures
11.1.Executive shall at all times observe the Ferguson Code of Conduct and all policies and procedures, codes and guidelines as may be issued by the Company, including any codes and guidelines relating to share dealings as may be issued from time to time, a copy of which is available on the Company’s Intranet. The Company may amend such policies and procedures at any time.
11.2.Consistent with the Ferguson Code of Conduct, Executive shall not at any time make any false, misleading or fraudulent statements in relation to the Company. This requirement shall survive the termination of Executive’s employment (for any reason).
12.Termination
12.1.Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. FELLC may terminate Executive’s employment after having established Executive’s Disability6 and while Executive remains Disabled by giving Executive written notice of its intention to terminate Executive’s employment. In such a case, Executive’s employment shall terminate effective on the 30th day after receipt of such notice; provided that, within 30 days after such receipt, Executive shall have failed to return to continuous full-time performance of Executive’s duties.
12.2.Cause. FELLC may terminate Executive’s employment for Cause effective immediately and Executive will automatically forfeit all entitlement to any and all bonuses (as described in Section 6.2), any and all entitlement to awards under the LTIP (as described in Section 7.1), and any and all other benefits described in this Agreement.
“Cause” shall exist in the event that Executive:
a)commits or is guilty of any gross misconduct, gross incompetence, or any wilful neglect in the discharge of Executive’s duties;
b)commits or continues (after warning) any material breach of this Agreement that amounts to gross misconduct, gross incompetence or wilful neglect in the discharge of Executive’s duties;
c)fails to perform adequately the duties assigned to Executive in the good faith opinion of the Chairman of the Board; provided that the Chairman of the Board has provided notice to Executive of such failure and an opportunity to cure such failure within thirty (30) days of such notice if such failure is realistically capable of being cured within thirty (30) days;
6 As used in this Agreement, “Disability” means an accidental injury, sickness, or mental illness of Executive that has prevented Executive from performing their essential duties for the Company, with or without a reasonable accommodation, for any consecutive period of 180 days; provided that any return to employment of less than 10 consecutive days shall be ignored and counted as an absence period. Such disability shall be deemed to have occurred on the 180th day of a given period (“Disability Effective Date”).
d)willfully fails to comply with any valid and legal directive of the Board;
e)material violation(s) of the Company’s written policies and/or Code of Conduct, including but not limited to, those related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct;
f)engages in any material act or acts of fraud, dishonesty, illegal behavior, or other conduct tending to bring Executive or the Company into disrepute;
g)commits any act of bankruptcy or takes advantage of any statute for the time being in force offering relief for insolvent debtors; or
h)is indicted for, convicted of, or pleads guilty or nolo contendre to any felony offence or any other crime involving dishonesty, fraud or moral turpitude.
The Chairman of the Board shall, in good faith, determine whether the definition of Cause has been met.7 There is no requirement that this determination be reduced to writing.
12.3.Good Reason. Executive’s employment may be terminated by Executive at any time for Good Reason or upon 12 months’ written notice to FELLC without Good Reason.
For purposes of this Agreement, “Good Reason” means the occurrence of one or more of the following, which is not cured within thirty (30) days of written notice thereof and which is asserted within 90 days of the occurrence thereof:
a)the assignment to Executive of any duties inconsistent in any material adverse respect with Executive’s duties or responsibilities as contemplated by Sections 2 and 4 of this Agreement;
b)any reduction in Executive’s Base Salary;
c)any other action by FELLC or Ferguson that results in material diminishment in Executive’s duties or responsibilities; provided that FELLC shall not be deemed to have breached this Section due to any change in the number of positions reporting to Executive as a result of a reduction in force.
d)FELLC’s failure to comply with any material provisions of this Agreement;
e)any purported termination of Executive’s employment by FELLC other than as permitted by this Agreement; or
f)a change in Executive’s reporting relationship (as set forth in Section 2 above) that is not mutually-agreed upon by the parties.
12.4.Notice of Termination. Any termination by FELLC or by Executive shall be communicated by a Notice of Termination to the other party in writing, which shall indicate the specific termination provision(s) of this Agreement relied upon, set forth in reasonable
7 In the event of any conflict between this Agreement and any other agreement with respect to the definition of “cause”, the definition of Cause set forth in this Agreement shall prevail.
detail the facts and circumstances claimed to provide a basis for such termination, and specifies the effective date of Executive’s termination (“Termination Date”).
13.Obligations of the Company Upon Termination.
13.1.Death. If Executive’s employment is terminated by reason of Executive’s death, FELLC’s compensation obligations to Executive’s legal representatives under this Agreement shall be only those obligations accrued but unpaid hereunder at the date of Executive’s death, including, but not limited to, Base Salary, unused vacation, unreimbursed expenses, and any bonus for any completed fiscal year (collectively, “Accrued Amounts”), plus a pro rata bonus for the year of termination based on then-current projected Company performance and personal performance to date (both as reasonably determined by the Compensation Committee) for the number of days that Executive was employed during the fiscal year (“Pro Rata Bonus”). Executive’s family also shall be entitled to receive benefits at least equal to those provided by FELLC to surviving families of similarly situated executives of the Company under such plans, programs, and policies relating to family death benefits, if any, as in effect at such time.
13.2.Disability. If Executive’s employment is terminated by reason of Executive’s disability, Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to those provided by FELLC to similarly situated executives of the Company and/or their families in accordance with such plans, programs, and policies relating to disability, if any, as in effect at such time.
13.3.Good Reason; Other Than For Cause. If FELLC terminates Executive’s employment for any reason other than for Cause, but not due to Disability, or if Executive’s employment shall be terminated by Executive for Good Reason, then, subject to Section 13.4 below, FELLC shall pay to Executive an amount equal to:
a)any Accrued Amounts (as defined in Section 13.1 above); plus
b)Executive’s annual Base Salary (i.e., 12 months) in effect at the time the Notice of Termination was given; plus
c)Executive’s Pro Rata Bonus (as defined in Section 13.1 above) for the fiscal year in which such termination occurs.
In respect of any then-outstanding compensation, options, and rights of Executive under the Company’s applicable Long Term Incentive Plans, such compensation, options, and rights shall be paid or exercisable according to the terms of the relevant plan (including any discretions) then in effect and the terms of the applicable grant.
Executive and their dependents may be eligible for COBRA continuation coverage under the Company’s medical benefit plan following termination. FELLC shall provide a lump sum payment to Executive in an amount that would equal the cost that Executive would have to incur to purchase 12 months of such benefits with equivalent terms and conditions, less any employee contribution.
In the event of a Change in Control (as defined in the Company’s Change in Control Policy), Executive also may be eligible for the benefits and protections set forth in such policy.
13.4.Separation Agreement and Release. Executive’s eligibility for the severance payments described in Section 13.3 above is conditioned upon Executive, after Executive’s employment ends, signing and delivering and not revoking a release of claims in favor of the Company in a form consistent with FELLC’s then-current practice and reasonable satisfactory to FELLC. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.
The amounts specified in Section 13.3 above shall be paid in lieu of any separation payments that Executive would otherwise be entitled to under any severance plan or program covering employees of the Company. Subject to any applicable Internal Revenue Code Section 409A restrictions, as described more fully in Section 18 below, such amounts shall be paid in a lump sum in cash within thirty (30) days after the expiration of any applicable revocation period following Executive’s execution and delivery of such release to FELLC.
13.5.Cause or Voluntary Resignation. In the event of Executive’s voluntary resignation without Good Reason or termination for Cause, Executive shall only be entitled to their Accrued Amounts (as defined in Section 13.1 above) and such other amounts as may be provided for under the Company’s plans. Executive shall provide FELLC with 12 months’ written notice of any voluntary termination without Good Reason, but FELLC may waive any portion of such notice period.
14.Notice Leave
14.1.If Executive resigns voluntarily without Good Reason, FELLC shall be under no obligation to provide work for or assign any duties to Executive for the whole or any part of the 12 months’ notice period, and may place Executive on leave by requiring Executive:
a)not to attend any Company premises; and/or
b)to resign with immediate effect from any offices that Executive holds with any Company entity (or any related trusteeships); and/or
c)to refrain from business contact with any customers, clients or employees of the Company; and/or
d)to take any holiday that has accrued in accordance with Section 7.6 during any period of suspension under this Section 14; and/or
e)not to compete with the Company; and/or
f)not to do any act or thing or make or cause to be made any statement reasonably likely to damage the business or reputation of the Company.
14.2.The provisions of Section 15 (Post-Termination Obligations) shall remain in full force and effect during any period of such notice leave. Executive also shall continue to be bound by Executive’s duties of good faith and fidelity to the Company and remain available to
perform such duties and/or exercise such powers, authorities and discretions (if any) when called upon by FELLC to do so during such leave.
15.Post-Termination Obligations: On termination of Executive’s employment (however arising), Executive shall:
15.1.If required by FELLC, resign immediately and without compensation from any office or trusteeship that Executive holds in or on behalf of any Company entity;
15.2.Immediately deliver to FELLC all tangible Confidential Information, as well as any keys, credit cards and other property of the Company8 that is in Executive’s possession or control; and
15.3.Provide a signed statement that Executive has complied fully with Executive’s obligations under this Section 15, and further stating that Executive understands and will continue to comply with Executive’s post-employment obligations in this Agreement. FELLC may request, and Executive shall provide, reasonable evidence of Executive’s compliance with these provisions.
16.Suspension: For the purpose of carrying out an investigation in relation to any acts or defaults (or alleged or suspected acts or defaults) of Executive, FELLC may at any time, at its sole discretion, suspend Executive from employment hereunder, but without prejudice to Executive’s right to receive full remuneration hereunder. FELLC may require Executive not to enter any of the Company’s premises and/or may vary or remove Executive’s work duties during such period of suspension. Executive and FELLC agree that time would be of the essence under such circumstances, and FELLC agrees to use reasonable endeavors to expedite such investigation.
17.Ongoing Assistance: Subject to Executive’s reasonable availability on reasonable notice, Executive shall assist the Company in any internal investigations or administrative, regulatory, judicial or quasi-judicial proceedings. Executive acknowledges that this could involve, but is not limited to, responding or defending any regulatory or legal process, providing information in relation to any such process, preparing witness statements, and/or giving evidence in person on behalf of the Company. FELLC shall reimburse any reasonable out-of-pocket expenses incurred by Executive in connection with fulfilling this obligation.
18.Compliance With IRC Section 409A: The provisions of this Section will apply notwithstanding any provision to the contrary in this Agreement. In the event of any inconsistency between a provision in this Section and another provision in this Agreement, the provision in this Section will be the controlling provision:
18.1.To the extent applicable, it is intended that the compensation arrangements under this Agreement be in full compliance with Section 409A of the Internal Revenue Code (“Section 409A”). This Agreement shall be construed in a manner to give effect to such intention. Notwithstanding the foregoing, FELLC does not guarantee to Executive any specific tax consequences relating to entitlement to or receipt of payments or benefits pursuant to this Agreement. Executive shall be solely responsible for payment of any taxes or penalties in connection with this Agreement.
8 Including, without limitation, any company car provided by FELLC to Executive.
18.2.If at the time of Executive’s separation from service (within the meaning of Section 409A), (a) Executive is a specified employee (within the meaning of Section 409A and using the identification methodology selection by FELLC from time to time) and (b) FELLC makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid adverse tax consequences under Section 409A, then FELLC shall not pay such amount on the otherwise scheduled payment date, but shall instead pay it, without interest, on the first business day of the seventh month after such six-month period.
18.3.No payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon Executive’s termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A). Each payment and benefit to be made or provided to Executive pursuant to this Agreement will be considered a separate payment and not one of a series of payments for purposes of Section 409A. Whenever a payment period is specified with reference to a number of days, the actual date of payment within the specified period will be within the sole discretion of FELLC.
19.Governing Law; Dispute Resolution: This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia excluding that body of law known as conflicts of law. To give effect to this provision, the parties expressly and irrevocably consent to personal jurisdiction and exclusive venue in Virginia state and federal courts.
20.Notices: Any notice or other communication required, permitted or desirable hereunder shall be hand delivered (including, without limitation, delivery by a commercial courier service) or sent by United States registered or certified mail, postage prepaid, by facsimile or electronic mail addressed as follows:
If to FELLC:
Ferguson Enterprises, LLC
Attention: Chief Human Resources Officer
751 Lakefront Commons
Newport News, Virginia 23606
If to Executive:
Kevin Murphy
[ ]
[ ]
Or such other addresses as shall be furnished in writing by the parties. Any such notice of communication shall be deemed to have been given as of the date so delivered in person or three business days after so mailed.
21.Successors and Assigns: FELLC may assign its rights under this Agreement to any successor to its business (by merger, acquisition of substantially all of FELLC’s assets, or otherwise). Executive may not assign Executive’s rights or delegate Executive’s duties under this Agreement without the prior written consent of FELLC. Executive also understands and agrees that this
Agreement shall be binding upon and inure to the benefit of Executive’s heirs and executors or administrators.
22.Entire Agreement; Amendments: This Agreement sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof, and all other written or oral agreements are void. This Agreement may be amended, modified or terminated only by a written instrument signed by the parties hereto. This Agreement replaces the parties’ Prior Agreement in its entirety, as of the effective date of this Agreement set forth at the top of page 1; provided that the Prior Agreement shall remain in full force and effect until such date.
23.Severability: If any provision of this Agreement, or the applications thereof under certain circumstances, is held to be invalid or unenforceable for any reason, the remainder of this Agreement, or the application of such provision under other circumstances, shall not be affected thereby.
24.Protected Rights Exclusion: Notwithstanding any contrary provision, this Agreement shall not, in any way, restrict or impede Executive from: (a) exercising their protected rights (including, without limitation, under applicable SEC or other governmental rules and regulations), to the extent that such rights cannot be waived by agreement; or (b) complying with any applicable law, regulation, rule, or valid order of a court of competent jurisdiction or an authorized government agency.
IN WITNESS WHEREOF, the parties have executed this Amended & Restated Employment Agreement as of the day and year written below.
FERGUSON ENTERPRISES, LLC:
By: /s/ Sammie Long
Sammie Long
Chief Human Resources Officer
EXECUTIVE:
/s/ Kevin Murphy
Kevin Murphy
AMENDED ON:
August 30, 2023
AMENDED & RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED & RESTATED AGREEMENT (this “Agreement”) is made and entered into as of September 1, 2022 by and between Ferguson Enterprises, LLC (“FELLC”), a Virginia limited liability company, on behalf of itself and its ultimate parent company, Ferguson plc (“Ferguson”; collectively, with their subsidiaries, the “Company”) and William Brundage, an individual currently residing at [ ] (“Executive”).
WHEREAS, FELLC and Executive entered into a prior employment agreement, dated September 24, 2020 (“Prior Agreement”), and now wish to replace such Prior Agreement in its entirety with this Agreement, as of the effective date of this Agreement set forth above;
WHEREAS, on behalf of the Company, FELLC desires to continue to retain the services of Executive, and Executive desires to continue to be employed by FELLC, all on the terms and subject to the conditions set forth herein;
WHEREAS, Executive desires to enter into this Agreement in consideration of Executive’s employment by FELLC and the benefits that Executive will receive under the terms hereof; and
WHEREAS, FELLC and Executive wish to amend and restate this Agreement, as of the date set forth on the last page below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
1.Term of Employment: Executive’s employment with FELLC on the terms of this Agreement shall commence on September 1, 2022 (the “Commencement Date”) and shall continue subject to the terms of this Agreement until terminated in accordance with Section 12.
2.Position: Executive’s position within the Company shall continue to be Chief Financial Officer (“CFO”) and Executive agrees to serve in such position, on the terms and subject to the conditions set forth in this Agreement. Executive shall continue to report to Ferguson’s Chief Executive Officer (“CEO”), shall continue to serve as a member of Ferguson’s Executive Committee (“ExCom”), and shall continue to serve (subject to any applicable shareholder approvals) as an Executive Director on Ferguson’s Board of Directors.
3.Location & Travel: Executive’s job will be based in Newport News, Virginia. FELLC reserves the right to change this location to any place within the United States as may be reasonably required from time to time for the proper performance of Executive’s duties. Executive agrees to travel on the business of the Company (both within the United States and abroad) as may be required for the proper performance of Executive’s duties.
4.Duties and Responsibilities:
4.1.Executive shall work the hours necessary to carry out Executive’s duties properly and effectively.
4.2.As part of Executive’s duties, Executive shall:
a)Act as a director or officer of any appropriate Company subsidiary, as may be reasonably required;
b)Carry out duties on behalf of any Company subsidiary as may be reasonably required; provided that such duties are consistent with Executive’s position;
c)Comply with the articles of association, bylaws, operating agreement, or similar governing documents (as amended from time to time) of any Company subsidiary of which Executive is a director and/or officer, which shall be made available to Executive as and when appropriate;
d)Abide by any statutory, fiduciary or common-law duties to FELLC, Ferguson, or any other Company subsidiary of which Executive is a director and/or officer;
e)Not do anything that would cause Executive to be disqualified from acting as a director and/or officer of any Company entity;
f)Personally comply with all applicable requirements, recommendations or regulations (as amended from time to time) of the UK Financial Conduct Authority, the Market Abuse Regulations, U.S. securities laws and regulations, NYSE Listing Standards, and all other regulatory authorities relevant to the Company and/or any Company subsidiary, as well as any policy issued by Ferguson (as amended from time to time) relating to dealing in the securities of Ferguson or any Company subsidiary;
g)Comply with all legal requirements as to the handling, protection and disclosure of “Inside Information” and/or “Material Non-Public Information” (each as defined under applicable UK and US laws);
h)Comply with the Company’s anti-corruption and bribery policy and related procedures;
i)Unless prevented by incapacity and subject always to Section 5 of this Agreement, devote substantially all of Executive’s working time, attention and abilities to the business of the Company;
j)Report Executive’s own wrongdoing and/or any wrongdoing or proposed wrongdoing of any other employee or any director of the Company, FELLC or any other Company subsidiary to the Ferguson Board and the Chief Legal Officer immediately on becoming aware of it;
k)Use all reasonable endeavors to promote, protect, develop and extend the business of the Company;
l)Consent to the monitoring and recording of Executive’s use of any of the Company’s electronic communications systems for the purpose of ensuring that the
Company’s rules are being complied with and for legitimate business purposes, to the extent such monitoring is permitted by applicable law; and
m)Comply with any electronic communication systems policy or policies that the Company may issue from time to time.
5.Outside Interests
5.1.Subject to Sections 5.2 through 5.3, Executive shall not (except as a representative of the Company or with the prior written approval of the CEO) be directly or indirectly engaged in any other business, trade, profession or occupation, whether paid or unpaid.
5.2.Notwithstanding Section 5.1, Executive may hold (as a passive investment by way of shares or other securities) up to 3% of the voteable shares in another publicly traded company that is listed on any recognized stock exchange.
5.3.Subject to the prior written approval by the CEO, Executive will be able to undertake one external non-executive director role.
6.Compensation
6.1.Base Salary: Executive’s annual base salary will be $645,000 per annum by twelve equal payments on a pre-determined date in each calendar month (“Base Salary”). Executive’s Base Salary will be reviewed annually by the Ferguson Board’s Compensation Committee (“CompCo”), which is under no obligation to award an increase following a salary review.
6.2.Bonuses: Executive shall be eligible to be considered for a bonus, subject always to the rules of the applicable discretionary bonus plan as may be implemented by the CompCo from time to time. Any bonus payment shall be entirely discretionary and subject to Executive’s continued employment at the time of any such payment, and the CompCo has the right to amend, vary, suspend or withdraw any such bonus plan at any time and without prior notice. If Executive receives a bonus or incentive payment in any one year, this shall not give rise to a contractual entitlement to a bonus or incentive payment in future years. Any bonus payments are subject to applicable deductions as required by law or authorized by Executive.
6.3.Inclusive of Director or Office Holder Sums or Fees: The compensation payable under this Agreement shall be inclusive of any sums or fees to which Executive may otherwise be entitled as a director and/or officer of any Company subsidiary.
6.4.Accrual of Compensation: All compensation payable to Executive under this Agreement shall be deemed to accrue from day to day.
6.5.Compensation Reimbursable to the Company: To the extent permitted by applicable U.S. federal and state law, in the event of termination of Executive’s employment for any reason whatsoever, FELLC shall be entitled to deduct from any compensation payable to Executive upon such termination (whether in respect of any period before such
termination or otherwise) any monies that may be owed by Executive to any Company entity.1
7.Long Term Incentive Plans; Fringe Benefits; Expense Reimbursement
7.1.Long Term Incentive Plans: Executive will be eligible to participate in the Company’s long-term incentive plans (“LTIP”) in accordance with the terms and conditions set forth in the respective plan documents. Participation in such plans will be at the discretion of the CompCo. Executive shall be subject to a shareholding requirement equal to 300% of Executive’s Base Salary, to be satisfied within 7 years of Executive’s original appointment to the Company’s Executive Committee.2
7.2.Company Car: During the term of this Agreement, the FELLC shall provide a gross cash allowance (the amount of which in accordance with the then-current Company policy) or shall provide free of charge (including insurance) a company car for Executive’s use, of such type appropriate (in the Company’s opinion) for Executive’s status.3 Executive will receive a fuel card and shall be liable for any income tax on the fuel used for non-business purposes.
7.3.Employee Benefits: Executive shall be eligible to participate in the current benefit programs offered to FELLC’s senior executives. These benefits currently include, without limitation, short term disability benefit, long term disability benefit, healthcare coverage, and paid holidays. These benefits are subject to change from time to time at FELLC’s sole discretion.
7.4.Retirement Benefits and Life Insurance: Executive shall be entitled to participate in the Ferguson Enterprises Retirement Plan ("FERP"), the Supplemental Executive Retirement Plan (“SERP”), 401(k) retirement savings plan, and any life insurance program offered to FELLC’s senior executives. In aggregate, the employer contribution for the FERP, SERP and 401(k) plans will be 16% of Base Salary each year.
7.5.Executive Physical Plan: Executive shall be entitled to participate in the Executive Physical Plan.4
7.6.Vacation:
a)In addition to paid Public Holidays, Executive is entitled to 4 weeks’ vacation under the Ferguson Vacation Plan, which shall accrue at 13.34 hours per month and have an accrual cap of 200 hours.
1 To the extent such deduction is not permissible under applicable law, Executive shall repay such Company entity immediately upon such termination any monies that may at that time be owed by Executive.
2 [Reserved]
3 Executive shall not use such car in breach of any legal, contractual or Company policy requirements.
4 The frequency of such physicals is age dependent. Please see the Executive Benefits brochure for details.
b)In the event of termination of employment, Executive shall be entitled to receive payment for any accrued vacation hours outstanding and untaken at the effective date of termination.5
c)For every 30 days of overnight travel, Executive shall earn one additional personal day, up to a maximum of five days.
7.7.Expense Reimbursement: Executive shall be entitled to receive reimbursement for all appropriate business expenses incurred by Executive in connection with Executive’s duties under this Agreement and in accordance with Company policies (as in effect from time to time).
8.Additional Conditions on Remuneration
8.1.Clawback. In addition to any malus/clawback provisions set forth in any applicable Company performance-based pay arrangements6, Executive shall be subject to the requirements of the Company's Executive Compensation Clawback Policy.
8.2.The CompCo may require Executive to sign and return by a specified time a copy of any award certificate or other document acknowledging Executive’s agreement to be bound by the terms of such performance-related pay arrangements. Failure to do so within the specified period shall cause the award to lapse and shall be treated as if it had never been granted.
8.3.If, upon termination of this Agreement, whether lawfully or in breach of contract, Executive loses any of the rights or benefits under any share plan operated by the Company from time to time (including rights or benefits which Executive would not have lost had the Agreement not been terminated), Executive shall not be entitled, by way of compensation for loss of office or otherwise, to any compensation for the loss of any rights under any such plan.
9.Duty of Loyalty: In consideration of this Agreement and the severance pay and other benefits that may be available herein, Executive agrees to the following:
9.1.Confidentiality: Executive agrees to maintain in strictest confidence all proprietary data and other confidential or non-public information (whether concerning the Company, its suppliers, or any of its customers or proposed customers) obtained or developed by Executive during Executive’s employment with FELLC. Such information and data shall include but not be limited to the Company’s trade secrets, patents, inventions, systems, computer programs and software, technical data and know-how, procedures, manuals, confidential reports and communications, lists of customers and clients, terms of business with suppliers and prices charged, specific contract details and terms of business with customers, customer requirements and prices charged, business plans, strategies, marking plans and sales forecasts, management and financial information
5 To the extent permitted by applicable law, FELLC shall be entitled to recover from Executive the value of any vacation taken in excess of accrued vacation entitlement.
6 Executive acknowledges having access to all applicable terms of such performance-based pay arrangements in advance of the signing of this Agreement. The Company shall make available to Executive a copy of the terms of any future performance-related pay arrangements prior to the grant of any awards under it.
(including but not limited to results and forecasts, dividend information, turnover and stock levels, profits and profit margins), confidential employee information, as well as information that the Company may obtain from third parties in confidence or subject to non-disclosure or similar agreements (“Confidential Information”). All such Confidential Information is and shall remain the exclusive property of the Company (or, in certain circumstances, its customer or vendor) and shall be used solely for the benefit of the Company. Any such information and data in Executive’s possession after termination of Executive’s employment shall be promptly returned to the Company. Executive’s obligations under this Section shall survive any termination of Executive’s employment.
9.2.Non-Competition: Executive acknowledges that Executive is a key employee of FELLC and that Executive’s talents and services are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company. By virtue of Executive’s involvement in the Company’s daily operations and long-term strategic initiatives, holding the same or similar position at a competitor will inevitably require disclosure of the Company’s trade secrets and proprietary or confidential information. In order to protect the interests of the Company against the competitive use of any confidential information, knowledge or relationships concerning the Company to which Executive will have access by virtue of the special nature of Executive’s relationship with FELLC, Ferguson, and/or any other Company subsidiary, and Executive’s involvement in their collective affairs, and in consideration of the payments made to Executive hereunder and the agreements of the parties herein, Executive agrees that, for so long as this Agreement is in effect and for a period of 12 months following the termination of Executive’s employment hereunder for any reason whatsoever, Executive will not own (by ownership of securities or otherwise), control, engage in as an equity participant, or be employed in a managerial, leadership or strategic capacity by or act as a consultant to, or be connected with, the ownership, management, operation or control of any business (i) a substantial portion of whose business directly or indirectly competes with that of Ferguson, FELLC, or any other Company subsidiary, or (ii) that owns more than 1% of the shares of Ferguson. In recognition of the geographic extent of the Company’s existing and anticipated operations and the nature of the Company and competitive circumstances, the restrictive covenant contained in this Section shall apply throughout the United States and Canada. For the avoidance of doubt, the restrictions contained in subpart (i) of this Section shall not prohibit any activities that are not in direct or indirect competition with any business being carried on by Ferguson, FELLC or any other Company subsidiary as of the date of Executive’s termination.
9.3.Non-Solicitation: Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not (directly or indirectly) solicit or induce any Company employee to leave the Company’s employ, or to (directly or indirectly) hire or attempt to hire any person who was a Company employee within the twelve (12) month period preceding.
9.4.Non-Interference with Business Contracts. Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not interfere with, disrupt or attempt to disrupt any past, present or prospective contractual or other relationship between Ferguson, FELLC, or any other Company
subsidiary and any of their respective (current or prospective) clients, customers, suppliers or employees.
9.5.Non-Disparagement: Executive agrees not to make any statement that would disparage the Company, any members of the Ferguson Board, and/or any officers or employees or any product line of Ferguson, FELLC or any other Company subsidiary; provided that this Section does not, in any way, restrict or impede Executive from exercising their protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency.
9.6.Remedy for Breach: The parties recognize that the services to be rendered under this Agreement by Executive are special, unique, and of an extraordinary character, and that in the event of a breach of this Section 9 by Executive, then FELLC shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction in equity, to enforce or have specifically performed any terms, conditions, obligations and requirements of this Section 9, and/or to enjoin Executive from continuing those actions which are in breach of this Agreement, or to take any or all of the foregoing actions. Without limitation of the foregoing, in the event of a breach by Executive of this Section 9, Executive shall forfeit any and all rights to receive severance payments under this Agreement and, if such severance payments have already been paid, Executive shall repay them to FELLC. Nothing herein contained shall be construed to prevent the pursuit of any other remedy, judicial or otherwise, in case of any breach of this Section 9.
Executive acknowledges and agrees that the restrictions contained in this Section 9 are reasonable and necessary for the protection of the Company and that they do not bear harshly upon Executive and agrees that: each restriction shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable for any reason the remaining restrictions shall not be affected; and if any restriction is found to be void but would be valid and enforceable if some part of it were deleted or modified, that restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.
10.Intellectual Property: The parties expect that Executive will in the performance of Executive’s duties develop intellectual property related to the business of the Company. Executive hereby assigns to FELLC any and all right, title and interest in and to such intellectual property, including any and all ideas, inventions, discoveries, trademarks, trade names, copyrights, patents and all other confidential, proprietary, or valuable information and data of any kind, developed by Executive in the course of performing Executive’s duties, or developed using Company property or resources (“Intellectual Property”). To the maximum extent permitted by law, all Intellectual Property shall be deemed “works made for hire” under the United States Copyright Act and FELLC is deemed to sole author of any Intellectual Property. To the extent any Intellectual Property is determined not to constitute “works made for hire,” Executive hereby assigns and transfers to FELLC all right, title, and interest in the Intellectual Property. Executive shall cooperate with the Company in taking any steps deemed necessary by the Company to protect, preserve, defend or enforce the Intellectual Property, such as filing patent applications. Executive will execute on request of the Company or its attorneys any and all documents necessary to record the assignment of Intellectual Property to FELLC, or to protect, preserve, defend or enforce it. Executive will disclose any Intellectual Property to the Company promptly upon its
development. Executive agrees not to improperly use the intellectual property of any third party knowingly in the performance of Executive’s duties.
11.Company Rules, Policies and Procedures
11.1.Executive shall at all times observe the Ferguson Code of Conduct and all policies and procedures, codes and guidelines as may be issued by the Company, including any codes and guidelines relating to share dealings as may be issued from time to time, a copy of which is available on the Company’s Intranet. The Company may amend such policies and procedures at any time.
11.2.Consistent with the Ferguson Code of Conduct, Executive shall not at any time make any false, misleading or fraudulent statements in relation to the Company. This requirement shall survive the termination of Executive’s employment (for any reason).
12.Termination
12.1.Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. FELLC may terminate Executive’s employment after having established Executive’s Disability7 and while Executive remains Disabled by giving Executive written notice of its intention to terminate Executive’s employment. In such a case, Executive’s employment shall terminate effective on the 30th day after receipt of such notice; provided that, within 30 days after such receipt, Executive shall have failed to return to continuous full-time performance of Executive’s duties.
12.2.Cause. FELLC may terminate Executive’s employment for Cause effective immediately and Executive will automatically forfeit all entitlement to any and all bonuses (as described in Section 6.2), any and all entitlement to awards under the LTIP (as described in Section 7.1), and any and all other benefits described in this Agreement.
“Cause” shall exist in the event that Executive:
a)commits or is guilty of any gross misconduct, gross incompetence, or any wilful neglect in the discharge of Executive’s duties;
b)commits or continues (after warning) any material breach of this Agreement that amounts to gross misconduct, gross incompetence or wilful neglect in the discharge of Executive’s duties;
c)fails to perform adequately the duties assigned to Executive in the good faith opinion of the CEO; provided that the CEO has provided notice to Executive of such failure and an opportunity to cure such failure within thirty (30) days of such notice if such failure is realistically capable of being cured within thirty (30) days;
7 As used in this Agreement, “Disability” means an accidental injury, sickness, or mental illness of Executive that has prevented Executive from performing their essential duties for the Company, with or without a reasonable accommodation, for any consecutive period of 180 days; provided that any return to employment of less than 10 consecutive days shall be ignored and counted as an absence period. Such disability shall be deemed to have occurred on the 180th day of a given period (“Disability Effective Date”).
d)willfully fails to comply with any valid and legal directive of the CEO;
e)material violation(s) of the Company’s written policies and/or Code of Conduct, including but not limited to, those related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct;
f)engages in any material act or acts of fraud, dishonesty, illegal behavior, or other conduct tending to bring Executive or the Company into disrepute;
g)commits any act of bankruptcy or takes advantage of any statute for the time being in force offering relief for insolvent debtors; or
h)is indicted for, convicted of, or pleads guilty or nolo contendre to any felony offence or any other crime involving dishonesty, fraud or moral turpitude.
The CEO shall, in good faith, determine whether the definition of Cause has been met.8 There is no requirement that this determination be reduced to writing.
12.3.Good Reason. Executive’s employment may be terminated by Executive at any time for Good Reason or upon 12 months’ written notice to FELLC without Good Reason.
For purposes of this Agreement, “Good Reason” means the occurrence of one or more of the following, which is not cured within thirty (30) days of written notice thereof and which is asserted within 90 days of the occurrence thereof:
a)the assignment to Executive of any duties inconsistent in any material adverse respect with Executive’s duties or responsibilities as contemplated by Sections 2 and 4 of this Agreement;
b)any reduction in Executive’s Base Salary;
c)any other action by FELLC or Ferguson that results in material diminishment in Executive’s duties or responsibilities; provided that FELLC shall not be deemed to have breached this Section due to any change in the number of positions reporting to Executive as a result of a reduction in force; provided further that a decision by the Board or shareholders to remove the CFO role from the Ferguson Board of Directors shall not, by itself, constitute Good Reason.
d)FELLC’s failure to comply with any material provisions of this Agreement;
e)any purported termination of Executive’s employment by FELLC other than as permitted by this Agreement; or
f)a change in Executive’s reporting relationship (as set forth in Section 2 above) that is not mutually-agreed upon by the parties.
8 In the event of any conflict between this Agreement and any other agreement with respect to the definition of “cause”, the definition of Cause set forth in this Agreement shall prevail.
12.4.Notice of Termination. Any termination by FELLC or by Executive shall be communicated by a Notice of Termination to the other party in writing, which shall indicate the specific termination provision(s) of this Agreement relied upon, set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination, and specifies the effective date of Executive’s termination (“Termination Date”).
13.Obligations of the Company Upon Termination.
13.1.Death. If Executive’s employment is terminated by reason of Executive’s death, FELLC’s compensation obligations to Executive’s legal representatives under this Agreement shall be only those obligations accrued but unpaid hereunder at the date of Executive’s death, including, but not limited to, Base Salary, unused vacation, unreimbursed expenses, and any bonus for any completed fiscal year (collectively, “Accrued Amounts”), plus a pro rata bonus for the year of termination based on then-current projected Company performance and personal performance to date (both as reasonably determined by the Compensation Committee) for the number of days that Executive was employed during the fiscal year (“Pro Rata Bonus”). Executive’s family also shall be entitled to receive benefits at least equal to those provided by FELLC to surviving families of similarly situated executives of the Company under such plans, programs, and policies relating to family death benefits, if any, as in effect at such time.
13.2.Disability. If Executive’s employment is terminated by reason of Executive’s disability, Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to those provided by FELLC to similarly situated executives of the Company and/or their families in accordance with such plans, programs, and policies relating to disability, if any, as in effect at such time.
13.3.Good Reason; Other Than For Cause. If FELLC terminates Executive’s employment for any reason other than for Cause, but not due to Disability, or if Executive’s employment shall be terminated by Executive for Good Reason, then, subject to Section 13.4 below, FELLC shall pay to Executive an amount equal to:
a)any Accrued Amounts (as defined in Section 13.1 above); plus
b)Executive’s annual Base Salary (i.e., 12 months) in effect at the time the Notice of Termination was given; plus
c)Executive’s Pro Rata Bonus (as defined in Section 13.1 above) for the fiscal year in which such termination occurs.
In respect of any then-outstanding compensation, options, and rights of Executive under the Company’s applicable Long Term Incentive Plans, such compensation, options, and rights shall be paid or exercisable according to the terms of the relevant plan (including any discretions) then in effect and the terms of the applicable grant.
Executive and their dependents may be eligible for COBRA continuation coverage under the Company’s medical benefit plan following termination. FELLC shall provide a lump sum payment to Executive in an amount that would equal the cost that Executive would
have to incur to purchase 12 months of such benefits with equivalent terms and conditions, less any employee contribution.
In the event of a Change in Control (as defined in the Company’s Change in Control Policy), Executive also may be eligible for the benefits and protections set forth in such policy.
13.4.Separation Agreement and Release. Executive’s eligibility for the severance payments described in Section 13.3 above is conditioned upon Executive, after Executive’s employment ends, signing and delivering and not revoking a release of claims in favor of the Company in a form consistent with FELLC’s then-current practice and reasonable satisfactory to FELLC. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.
The amounts specified in Section 13.3 above shall be paid in lieu of any separation payments that Executive would otherwise be entitled to under any severance plan or program covering employees of the Company. Subject to any applicable Internal Revenue Code Section 409A restrictions, as described more fully in Section 18 below, such amounts shall be paid in a lump sum in cash within thirty (30) days after the expiration of any applicable revocation period following Executive’s execution and delivery of such release to FELLC.
13.5.Cause or Voluntary Resignation. In the event of Executive’s voluntary resignation without Good Reason or termination for Cause, Executive shall only be entitled to their Accrued Amounts (as defined in Section 13.1 above) and such other amounts as may be provided for under the Company’s plans. Executive shall provide FELLC with 12 months’ written notice of any voluntary termination without Good Reason, but FELLC may waive any portion of such notice period.
14.Notice Leave
14.1.If Executive resigns voluntarily without Good Reason, FELLC shall be under no obligation to provide work for or assign any duties to Executive for the whole or any part of the 12 months’ notice period, and may place Executive on leave by requiring Executive:
a)not to attend any Company premises; and/or
b)to resign with immediate effect from any offices that Executive holds with any Company entity (or any related trusteeships); and/or
c)to refrain from business contact with any customers, clients or employees of the Company; and/or
d)to take any holiday that has accrued in accordance with Section 7.6 during any period of suspension under this Section 14; and/or
e)not to compete with the Company; and/or
f)not to do any act or thing or make or cause to be made any statement reasonably likely to damage the business or reputation of the Company.
14.2.The provisions of Section 15 (Post-Termination Obligations) shall remain in full force and effect during any period of such notice leave. Executive also shall continue to be bound by Executive’s duties of good faith and fidelity to the Company and remain available to perform such duties and/or exercise such powers, authorities and discretions (if any) when called upon by FELLC to do so during such leave.
15.Post-Termination Obligations: On termination of Executive’s employment (however arising), Executive shall:
15.1.If required by FELLC, resign immediately and without compensation from any office or trusteeship that Executive holds in or on behalf of any Company entity;
15.2.Immediately deliver to FELLC all tangible Confidential Information, as well as any keys, credit cards and other property of the Company9 that is in Executive’s possession or control; and
15.3.Provide a signed statement that Executive has complied fully with Executive’s obligations under this Section 15, and further stating that Executive understands and will continue to comply with Executive’s post-employment obligations in this Agreement. FELLC may request, and Executive shall provide, reasonable evidence of Executive’s compliance with these provisions.
16.Suspension: For the purpose of carrying out an investigation in relation to any acts or defaults (or alleged or suspected acts or defaults) of Executive, FELLC may at any time, at its sole discretion, suspend Executive from employment hereunder, but without prejudice to Executive’s right to receive full remuneration hereunder. FELLC may require Executive not to enter any of the Company’s premises and/or may vary or remove Executive’s work duties during such period of suspension. Executive and FELLC agree that time would be of the essence under such circumstances, and FELLC agrees to use reasonable endeavors to expedite such investigation.
17.Ongoing Assistance: Subject to Executive’s reasonable availability on reasonable notice, Executive shall assist the Company in any internal investigations or administrative, regulatory, judicial or quasi-judicial proceedings. Executive acknowledges that this could involve, but is not limited to, responding or defending any regulatory or legal process, providing information in relation to any such process, preparing witness statements, and/or giving evidence in person on behalf of the Company. FELLC shall reimburse any reasonable out-of-pocket expenses incurred by Executive in connection with fulfilling this obligation.
18.Compliance With IRC Section 409A: The provisions of this Section will apply notwithstanding any provision to the contrary in this Agreement. In the event of any inconsistency between a provision in this Section and another provision in this Agreement, the provision in this Section will be the controlling provision:
18.1.To the extent applicable, it is intended that the compensation arrangements under this Agreement be in full compliance with Section 409A of the Internal Revenue Code (“Section 409A”). This Agreement shall be construed in a manner to give effect to such intention. Notwithstanding the foregoing, FELLC does not guarantee to Executive any
9 Including, without limitation, any company car provided by FELLC to Executive.
specific tax consequences relating to entitlement to or receipt of payments or benefits pursuant to this Agreement. Executive shall be solely responsible for payment of any taxes or penalties in connection with this Agreement.
18.2.If at the time of Executive’s separation from service (within the meaning of Section 409A), (a) Executive is a specified employee (within the meaning of Section 409A and using the identification methodology selection by FELLC from time to time) and (b) FELLC makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid adverse tax consequences under Section 409A, then FELLC shall not pay such amount on the otherwise scheduled payment date, but shall instead pay it, without interest, on the first business day of the seventh month after such six-month period.
18.3.No payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon Executive’s termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A). Each payment and benefit to be made or provided to Executive pursuant to this Agreement will be considered a separate payment and not one of a series of payments for purposes of Section 409A. Whenever a payment period is specified with reference to a number of days, the actual date of payment within the specified period will be within the sole discretion of FELLC.
19.Governing Law; Dispute Resolution: This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia excluding that body of law known as conflicts of law. To give effect to this provision, the parties expressly and irrevocably consent to personal jurisdiction and exclusive venue in Virginia state and federal courts.
20.Notices: Any notice or other communication required, permitted or desirable hereunder shall be hand delivered (including, without limitation, delivery by a commercial courier service) or sent by United States registered or certified mail, postage prepaid, by facsimile or electronic mail addressed as follows:
If to FELLC:
Ferguson Enterprises, LLC
Attention: Chief Human Resources Officer
751 Lakefront Commons
Newport News, Virginia 23606
If to Executive:
William Brundage
[ ]
[ ]
Or such other addresses as shall be furnished in writing by the parties. Any such notice of communication shall be deemed to have been given as of the date so delivered in person or three business days after so mailed.
21.Successors and Assigns: FELLC may assign its rights under this Agreement to any successor to its business (by merger, acquisition of substantially all of FELLC’s assets, or otherwise). Executive may not assign Executive’s rights or delegate Executive’s duties under this Agreement without the prior written consent of FELLC. Executive also understands and agrees that this Agreement shall be binding upon and inure to the benefit of Executive’s heirs and executors or administrators.
22.Entire Agreement; Amendments: This Agreement sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof, and all other written or oral agreements are void. This Agreement may be amended, modified or terminated only by a written instrument signed by the parties hereto. This Agreement replaces the parties’ Prior Agreement in its entirety, as of the effective date of this Agreement set forth at the top of page 1; provided that the Prior Agreement shall remain in full force and effect until such date.
23.Severability: If any provision of this Agreement, or the applications thereof under certain circumstances, is held to be invalid or unenforceable for any reason, the remainder of this Agreement, or the application of such provision under other circumstances, shall not be affected thereby.
24.Protected Rights Exclusion: Notwithstanding any contrary provision, this Agreement shall not, in any way, restrict or impede Executive from: (a) exercising their protected rights (including, without limitation, under applicable SEC or other governmental rules and regulations), to the extent that such rights cannot be waived by agreement; or (b) complying with any applicable law, regulation, rule, or valid order of a court of competent jurisdiction or an authorized government agency.
IN WITNESS WHEREOF, the parties have executed this Amended & Restated Employment Agreement as of the day and year written below.
FERGUSON ENTERPRISES, LLC:
By: /s/ Sammie Long
Sammie Long
Chief Human Resources Officer
EXECUTIVE:
/s/ William Brundage
William Brundage
AMENDED ON:
August 30, 2023
AMENDED & RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED & RESTATED AGREEMENT (this “Agreement”) is made and entered into as of August 1, 2022 by and between Ferguson Enterprises, LLC (“FELLC”), a Virginia limited liability company, on behalf of itself and its ultimate parent company, Ferguson plc (“Ferguson”; collectively, with their subsidiaries, the “Company”) and Ian Graham, an individual currently residing at [ ] (“Executive”).
WHEREAS, FELLC and Executive entered into a prior employment agreement, dated May 14, 2019 (“Prior Agreement”), and now wish to replace such Prior Agreement in its entirety with this Agreement, as of the effective date of this Agreement set forth above;
WHEREAS, on behalf of the Company, FELLC desires to continue to retain the services of Executive, and Executive desires to continue to be employed by FELLC, all on the terms and subject to the conditions set forth herein;
WHEREAS, Executive desires to enter into this Agreement in consideration of Executive’s employment by FELLC and the benefits that Executive will receive under the terms hereof; and
WHEREAS, FELLC and Executive wish to amend and restate this Agreement, as of the date set forth on the last page below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
1.Term of Employment: Executive’s employment with FELLC on the terms of this Agreement shall commence on August 1, 2022 (the “Commencement Date”) and shall continue subject to the terms of this Agreement until terminated in accordance with Section 12.
2.Position: Executive’s position within the Company shall continue to be Group General Counsel / Chief Legal Officer (“CLO”) and Executive agrees to serve in such position, on the terms and subject to the conditions set forth in this Agreement. Executive shall continue to report to Ferguson’s Chief Executive Officer (“CEO”) and shall continue to serve as a member of Ferguson’s Executive Committee (“ExCom”).
3.Location & Travel: Executive’s job will be based in Newport News, Virginia. FELLC reserves the right to change this location to any place within the United States as may be reasonably required from time to time for the proper performance of Executive’s duties. Executive agrees to travel on the business of the Company (both within the United States and abroad) as may be required for the proper performance of Executive’s duties.
4.Duties and Responsibilities:
4.1.Executive shall work the hours necessary to carry out Executive’s duties properly and effectively.
4.2.As part of Executive’s duties, Executive shall:
a)Act as a director or officer of any appropriate Company subsidiary, as may be reasonably required;
b)Carry out duties on behalf of any Company subsidiary as may be reasonably required; provided that such duties are consistent with Executive’s position;
c)Comply with the articles of association, bylaws, operating agreement, or similar governing documents (as amended from time to time) of any Company subsidiary of which Executive is a director and/or officer, which shall be made available to Executive as and when appropriate;
d)Abide by any statutory, fiduciary or common-law duties to FELLC, Ferguson, or any other Company subsidiary of which Executive is a director and/or officer;
e)Not do anything that would cause Executive to be disqualified from acting as a director and/or officer of any Company entity;
f)Personally comply with all applicable requirements, recommendations or regulations (as amended from time to time) of the UK Financial Conduct Authority, the Market Abuse Regulations, U.S. securities laws and regulations, NYSE Listing Standards, and all other regulatory authorities relevant to the Company and/or any Company subsidiary, as well as any policy issued by Ferguson (as amended from time to time) relating to dealing in the securities of Ferguson or any Company subsidiary;
g)Comply with all legal requirements as to the handling, protection and disclosure of “Inside Information” and/or “Material Non-Public Information” (each as defined under applicable UK and US laws);
h)Comply with the Company’s anti-corruption and bribery policy and related procedures;
i)Unless prevented by incapacity and subject always to Section 5 of this Agreement, devote substantially all of Executive’s working time, attention and abilities to the business of the Company;
j)Report Executive’s own wrongdoing and/or any wrongdoing or proposed wrongdoing of any other employee or any director of the Company, FELLC or any other Company subsidiary to the Ferguson Board immediately on becoming aware of it;
k)Use all reasonable endeavors to promote, protect, develop and extend the business of the Company;
l)Consent to the monitoring and recording of Executive’s use of any of the Company’s electronic communications systems for the purpose of ensuring that the
Company’s rules are being complied with and for legitimate business purposes, to the extent such monitoring is permitted by applicable law; and
m)Comply with any electronic communication systems policy or policies that the Company may issue from time to time.
5.Outside Interests
5.1.Subject to Sections 5.2 through 5.3, Executive shall not (except as a representative of the Company or with the prior written approval of the CEO) be directly or indirectly engaged in any other business, trade, profession or occupation, whether paid or unpaid.
5.2.Notwithstanding Section 5.1, Executive may hold (as a passive investment by way of shares or other securities) up to 3% of the voteable shares in another publicly traded company that is listed on any recognized stock exchange.
5.3.Subject to the prior written approval by the CEO, Executive will be able to undertake one external non-executive director role.
6.Compensation
6.1.Base Salary: Executive’s annual base salary will be $575,280 per annum by twelve equal payments on a pre-determined date in each calendar month (“Base Salary”). Beginning on October 1, 2022, Executive’s Base Salary will be $610,000. Executive’s Base Salary will be reviewed annually by the Ferguson Board’s Compensation Committee (“CompCo”), which is under no obligation to award an increase following a salary review.
6.2.Bonuses: Executive shall be eligible to be considered for a bonus, subject always to the rules of the applicable discretionary bonus plan as may be implemented by the CompCo from time to time. Any bonus payment shall be entirely discretionary and subject to Executive’s continued employment at the time of any such payment, and the CompCo has the right to amend, vary, suspend or withdraw any such bonus plan at any time and without prior notice. If Executive receives a bonus or incentive payment in any one year, this shall not give rise to a contractual entitlement to a bonus or incentive payment in future years. Any bonus payments are subject to applicable deductions as required by law or authorized by Executive.
6.3.Inclusive of Director or Office Holder Sums or Fees: The compensation payable under this Agreement shall be inclusive of any sums or fees to which Executive may otherwise be entitled as a director and/or officer of any Company subsidiary.
6.4.Accrual of Compensation: All compensation payable to Executive under this Agreement shall be deemed to accrue from day to day.
6.5.Compensation Reimbursable to the Company: To the extent permitted by applicable U.S. federal and state law, in the event of termination of Executive’s employment for any reason whatsoever, FELLC shall be entitled to deduct from any compensation payable to Executive upon such termination (whether in respect of any period before such
termination or otherwise) any monies that may be owed by Executive to any Company entity.1
7.Long Term Incentive Plans; Fringe Benefits; Expense Reimbursement
7.1.Long Term Incentive Plans: Executive will be eligible to participate in the Company’s long-term incentive plans (“LTIP”) in accordance with the terms and conditions set forth in the respective plan documents. Participation in such plans will be at the discretion of the CompCo. Executive shall be subject to a shareholding requirement equal to 200% of Executive’s Base Salary, to be satisfied within 7 years of Executive’s original appointment to the Company’s Executive Committee.2
7.2.Company Car: During the term of this Agreement, the FELLC shall provide a gross cash allowance (the amount of which in accordance with the then-current Company policy) or shall provide free of charge (including insurance) a company car for Executive’s use, of such type appropriate (in the Company’s opinion) for Executive’s status.3 Executive will receive a fuel card and shall be liable for any income tax on the fuel used for non-business purposes.
7.3.Employee Benefits: Executive shall be eligible to participate in the current benefit programs offered to FELLC’s senior executives. These benefits currently include, without limitation, short term disability benefit, long term disability benefit, healthcare coverage, and paid holidays. These benefits are subject to change from time to time at FELLC’s sole discretion.
7.4.Retirement Benefits and Life Insurance: Executive shall be entitled to participate in the Ferguson Enterprises Retirement Plan ("FERP"), the Supplemental Executive Retirement Plan (“SERP”), 401(k) retirement savings plan, and any life insurance program offered to FELLC’s senior executives.
7.5.Executive Physical Plan: Executive shall be entitled to participate in the Executive Physical Plan.4
7.6.Vacation:
a)In addition to paid Public Holidays, Executive is entitled to 4 weeks’ vacation under the Ferguson Vacation Plan, which shall accrue at 13.34 hours per month and have an accrual cap of 200 hours.
1 To the extent such deduction is not permissible under applicable law, Executive shall repay such Company entity immediately upon such termination any monies that may at that time be owed by Executive.
2 Additionally, if Executive becomes a Named Executive Officer as noted in the Company’s Proxy filed with the SEC, this minimum shareholding requirement shall increase to 300% of Base Salary (with an additional 2 years to achieve such requirement).
3 Executive shall not use such car in breach of any legal, contractual or Company policy requirements.
4 The frequency of such physicals is age dependent. Please see the Executive Benefits brochure for details.
b)In the event of termination of employment, Executive shall be entitled to receive payment for any accrued vacation hours outstanding and untaken at the effective date of termination.5
c)For every 30 days of overnight travel, Executive shall earn one additional personal day, up to a maximum of five days.
7.7.Expense Reimbursement: Executive shall be entitled to receive reimbursement for all appropriate business expenses incurred by Executive in connection with Executive’s duties under this Agreement and in accordance with Company policies (as in effect from time to time).
8.Additional Conditions on Remuneration
8.1.Clawback. In addition to any malus/clawback provisions set forth in any applicable Company performance-based pay arrangements6, Executive shall be subject to the requirements of the Company's Executive Compensation Clawback Policy.
8.2.The CompCo may require Executive to sign and return by a specified time a copy of any award certificate or other document acknowledging Executive’s agreement to be bound by the terms of such performance-related pay arrangements. Failure to do so within the specified period shall cause the award to lapse and shall be treated as if it had never been granted.
8.3.If, upon termination of this Agreement, whether lawfully or in breach of contract, Executive loses any of the rights or benefits under any share plan operated by the Company from time to time (including rights or benefits which Executive would not have lost had the Agreement not been terminated), Executive shall not be entitled, by way of compensation for loss of office or otherwise, to any compensation for the loss of any rights under any such plan.
9.Duty of Loyalty: In consideration of this Agreement and the severance pay and other benefits that may be available herein, Executive agrees to the following:
9.1.Confidentiality: Executive agrees to maintain in strictest confidence all proprietary data and other confidential or non-public information (whether concerning the Company, its suppliers, or any of its customers or proposed customers) obtained or developed by Executive during Executive’s employment with FELLC. Such information and data shall include but not be limited to the Company’s trade secrets, patents, inventions, systems, computer programs and software, technical data and know-how, procedures, manuals, confidential reports and communications, lists of customers and clients, terms of business with suppliers and prices charged, specific contract details and terms of business with customers, customer requirements and prices charged, business plans, strategies, marking plans and sales forecasts, management and financial information
5 To the extent permitted by applicable law, FELLC shall be entitled to recover from Executive the value of any vacation taken in excess of accrued vacation entitlement.
6 Executive acknowledges having access to all applicable terms of such performance-based pay arrangements in advance of the signing of this Agreement. The Company shall make available to Executive a copy of the terms of any future performance-related pay arrangements prior to the grant of any awards under it.
(including but not limited to results and forecasts, dividend information, turnover and stock levels, profits and profit margins), confidential employee information, as well as information that the Company may obtain from third parties in confidence or subject to non-disclosure or similar agreements (“Confidential Information”). All such Confidential Information is and shall remain the exclusive property of the Company (or, in certain circumstances, its customer or vendor) and shall be used solely for the benefit of the Company. Any such information and data in Executive’s possession after termination of Executive’s employment shall be promptly returned to the Company. Executive’s obligations under this Section shall survive any termination of Executive’s employment.
9.2.Non-Competition: Executive acknowledges that Executive is a key employee of FELLC and that Executive’s talents and services are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company. By virtue of Executive’s involvement in the Company’s daily operations and long-term strategic initiatives, holding the same or similar position at a competitor will inevitably require disclosure of the Company’s trade secrets and proprietary or confidential information. In order to protect the interests of the Company against the competitive use of any confidential information, knowledge or relationships concerning the Company to which Executive will have access by virtue of the special nature of Executive’s relationship with FELLC, Ferguson, and/or any other Company subsidiary, and Executive’s involvement in their collective affairs, and in consideration of the payments made to Executive hereunder and the agreements of the parties herein, Executive agrees that, for so long as this Agreement is in effect and for a period of 12 months following the termination of Executive’s employment hereunder for any reason whatsoever, Executive will not own (by ownership of securities or otherwise), control, engage in as an equity participant, or be employed in a managerial, leadership or strategic capacity by or act as a consultant to, or be connected with, the ownership, management, operation or control of any business (i) a substantial portion of whose business directly or indirectly competes with that of Ferguson, FELLC, or any other Company subsidiary, or (ii) that owns more than 1% of the shares of Ferguson. In recognition of the geographic extent of the Company’s existing and anticipated operations and the nature of the Company and competitive circumstances, the restrictive covenant contained in this Section shall apply throughout the United States and Canada. For the avoidance of doubt, the restrictions contained in subpart (i) of this Section shall not prohibit any activities that are not in direct or indirect competition with any business being carried on by Ferguson, FELLC or any other Company subsidiary as of the date of Executive’s termination.
9.3.Non-Solicitation: Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not (directly or indirectly) solicit or induce any Company employee to leave the Company’s employ, or to (directly or indirectly) hire or attempt to hire any person who was a Company employee within the twelve (12) month period preceding.
9.4.Non-Interference with Business Contracts. Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not interfere with, disrupt or attempt to disrupt any past, present or prospective contractual or other relationship between Ferguson, FELLC, or any other Company
subsidiary and any of their respective (current or prospective) clients, customers, suppliers or employees.
9.5.Non-Disparagement: Executive agrees not to make any statement that would disparage the Company, any members of the Ferguson Board, and/or any officers or employees or any product line of Ferguson, FELLC or any other Company subsidiary; provided that this Section does not, in any way, restrict or impede Executive from exercising their protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency.
9.6.Remedy for Breach: The parties recognize that the services to be rendered under this Agreement by Executive are special, unique, and of an extraordinary character, and that in the event of a breach of this Section 9 by Executive, then FELLC shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction in equity, to enforce or have specifically performed any terms, conditions, obligations and requirements of this Section 9, and/or to enjoin Executive from continuing those actions which are in breach of this Agreement, or to take any or all of the foregoing actions. Without limitation of the foregoing, in the event of a breach by Executive of this Section 9, Executive shall forfeit any and all rights to receive severance payments under this Agreement and, if such severance payments have already been paid, Executive shall repay them to FELLC. Nothing herein contained shall be construed to prevent the pursuit of any other remedy, judicial or otherwise, in case of any breach of this Section 9.
Executive acknowledges and agrees that the restrictions contained in this Section 9 are reasonable and necessary for the protection of the Company and that they do not bear harshly upon Executive and agrees that: each restriction shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable for any reason the remaining restrictions shall not be affected; and if any restriction is found to be void but would be valid and enforceable if some part of it were deleted or modified, that restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.
10.Intellectual Property: The parties expect that Executive will in the performance of Executive’s duties develop intellectual property related to the business of the Company. Executive hereby assigns to FELLC any and all right, title and interest in and to such intellectual property, including any and all ideas, inventions, discoveries, trademarks, trade names, copyrights, patents and all other confidential, proprietary, or valuable information and data of any kind, developed by Executive in the course of performing Executive’s duties, or developed using Company property or resources (“Intellectual Property”). To the maximum extent permitted by law, all Intellectual Property shall be deemed “works made for hire” under the United States Copyright Act and FELLC is deemed to sole author of any Intellectual Property. To the extent any Intellectual Property is determined not to constitute “works made for hire,” Executive hereby assigns and transfers to FELLC all right, title, and interest in the Intellectual Property. Executive shall cooperate with the Company in taking any steps deemed necessary by the Company to protect, preserve, defend or enforce the Intellectual Property, such as filing patent applications. Executive will execute on request of the Company or its attorneys any and all documents necessary to record the assignment of Intellectual Property to FELLC, or to protect, preserve, defend or enforce it. Executive will disclose any Intellectual Property to the Company promptly upon its
development. Executive agrees not to improperly use the intellectual property of any third party knowingly in the performance of Executive’s duties.
11.Company Rules, Policies and Procedures
11.1.Executive shall at all times observe the Ferguson Code of Conduct and all policies and procedures, codes and guidelines as may be issued by the Company, including any codes and guidelines relating to share dealings as may be issued from time to time, a copy of which is available on the Company’s Intranet. The Company may amend such policies and procedures at any time.
11.2.Consistent with the Ferguson Code of Conduct, Executive shall not at any time make any false, misleading or fraudulent statements in relation to the Company. This requirement shall survive the termination of Executive’s employment (for any reason).
12.Termination
12.1.Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. FELLC may terminate Executive’s employment after having established Executive’s Disability7 and while Executive remains Disabled by giving Executive written notice of its intention to terminate Executive’s employment. In such a case, Executive’s employment shall terminate effective on the 30th day after receipt of such notice; provided that, within 30 days after such receipt, Executive shall have failed to return to continuous full-time performance of Executive’s duties.
12.2.Cause. FELLC may terminate Executive’s employment for Cause effective immediately and Executive will automatically forfeit all entitlement to any and all bonuses (as described in Section 6.2), any and all entitlement to awards under the LTIP (as described in Section 7.1), and any and all other benefits described in this Agreement.
“Cause” shall exist in the event that Executive:
a)commits or is guilty of any gross misconduct, gross incompetence, or any wilful neglect in the discharge of Executive’s duties;
b)commits or continues (after warning) any material breach of this Agreement that amounts to gross misconduct, gross incompetence or wilful neglect in the discharge of Executive’s duties;
c)fails to perform adequately the duties assigned to Executive in the good faith opinion of the CEO; provided that the CEO has provided notice to Executive of such failure and an opportunity to cure such failure within thirty (30) days of such notice if such failure is realistically capable of being cured within thirty (30) days;
7 As used in this Agreement, “Disability” means an accidental injury, sickness, or mental illness of Executive that has prevented Executive from performing their essential duties for the Company, with or without a reasonable accommodation, for any consecutive period of 180 days; provided that any return to employment of less than 10 consecutive days shall be ignored and counted as an absence period. Such disability shall be deemed to have occurred on the 180th day of a given period (“Disability Effective Date”).
d)willfully fails to comply with any valid and legal directive of the CEO;
e)material violation(s) of the Company’s written policies and/or Code of Conduct, including but not limited to, those related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct;
f)engages in any material act or acts of fraud, dishonesty, illegal behavior, or other conduct tending to bring Executive or the Company into disrepute;
g)commits any act of bankruptcy or takes advantage of any statute for the time being in force offering relief for insolvent debtors; or
h)is indicted for, convicted of, or pleads guilty or nolo contendre to any felony offence or any other crime involving dishonesty, fraud or moral turpitude.
The CEO shall, in good faith, determine whether the definition of Cause has been met.8 There is no requirement that this determination be reduced to writing.
12.3.Good Reason. Executive’s employment may be terminated by Executive at any time for Good Reason or upon 6 months’ written notice to FELLC without Good Reason.
For purposes of this Agreement, “Good Reason” means the occurrence of one or more of the following, which is not cured within thirty (30) days of written notice thereof and which is asserted within 90 days of the occurrence thereof:
a)the assignment to Executive of any duties inconsistent in any material adverse respect with Executive’s duties or responsibilities as contemplated by Sections 2 and 4 of this Agreement;
b)any reduction in Executive’s Base Salary;
c)any other action by FELLC or Ferguson that results in material diminishment in Executive’s duties or responsibilities; provided that FELLC shall not be deemed to have breached this Section due to any change in the number of positions reporting to Executive as a result of a reduction in force;
d)FELLC’s failure to comply with any material provisions of this Agreement;
e)any purported termination of Executive’s employment by FELLC other than as permitted by this Agreement; or
f)a change in Executive’s reporting relationship (as set forth in Section 2 above) that is not mutually-agreed upon by the parties.
12.4.Notice of Termination. Any termination by FELLC or by Executive shall be communicated by a Notice of Termination to the other party in writing, which shall indicate the specific termination provision(s) of this Agreement relied upon, set forth in reasonable
8 In the event of any conflict between this Agreement and any other agreement with respect to the definition of “cause”, the definition of Cause set forth in this Agreement shall prevail.
detail the facts and circumstances claimed to provide a basis for such termination, and specifies the effective date of Executive’s termination (“Termination Date”).
13.Obligations of the Company Upon Termination.
13.1.Death. If Executive’s employment is terminated by reason of Executive’s death, FELLC’s compensation obligations to Executive’s legal representatives under this Agreement shall be only those obligations accrued but unpaid hereunder at the date of Executive’s death, including, but not limited to, Base Salary, unused vacation, unreimbursed expenses, and any bonus for any completed fiscal year (collectively, “Accrued Amounts”), plus a pro rata bonus for the year of termination based on target results and the number of days that Executive was employed during the fiscal year (“Pro Rata Bonus”). Executive’s family also shall be entitled to receive benefits at least equal to those provided by FELLC to surviving families of similarly situated executives of the Company under such plans, programs, and policies relating to family death benefits, if any, as in effect at such time.
13.2.Disability. If Executive’s employment is terminated by reason of Executive’s disability, Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to those provided by FELLC to similarly situated executives of the Company and/or their families in accordance with such plans, programs, and policies relating to disability, if any, as in effect at such time.
13.3.Good Reason; Other Than For Cause. If FELLC terminates Executive’s employment for any reason other than for Cause, but not due to Disability, or if Executive’s employment shall be terminated by Executive for Good Reason, then, subject to Section 13.4 below, FELLC shall pay to Executive an amount equal to:
a)any Accrued Amounts (as defined in Section 13.1 above); plus
b)Executive’s annual Base Salary (i.e., 12 months) in effect at the time the Notice of Termination was given; plus
c)Executive’s Pro Rata Bonus (as defined in Section 13.1 above) for the fiscal year in which such termination occurs.
In respect of any then-outstanding compensation, options, and rights of Executive under the Company’s applicable Long Term Incentive Plans, such compensation, options, and rights shall be paid or exercisable according to the terms of the relevant plan (including any discretions) then in effect and the terms of the applicable grant.
Executive and their dependents may be eligible for COBRA continuation coverage under the Company’s medical benefit plan following termination. FELLC shall provide a lump sum payment to Executive in an amount that would equal the cost that Executive would have to incur to purchase 12 months of such benefits with equivalent terms and conditions, less any employee contribution.
In the event of a Change in Control (as defined in the Company’s Change in Control Policy), Executive also may be eligible for the benefits and protections set forth in such policy.
13.4.Separation Agreement and Release. Executive’s eligibility for the severance payments described in Section 13.3 above is conditioned upon Executive, after Executive’s employment ends, signing and delivering and not revoking a release of claims in favor of the Company in a form consistent with FELLC’s then-current practice and reasonable satisfactory to FELLC. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.
The amounts specified in Section 13.3 above shall be paid in lieu of any separation payments that Executive would otherwise be entitled to under any severance plan or program covering employees of the Company. Subject to any applicable Internal Revenue Code Section 409A restrictions, as described more fully in Section 18 below, such amounts shall be paid in a lump sum in cash within thirty (30) days after the expiration of any applicable revocation period following Executive’s execution and delivery of such release to FELLC.
13.5.Cause or Voluntary Resignation. In the event of Executive’s voluntary resignation without Good Reason or termination for Cause, Executive shall only be entitled to their Accrued Amounts (as defined in Section 13.1 above) and such other amounts as may be provided for under the Company’s plans. Executive shall provide FELLC with 6 months’ written notice of any voluntary termination without Good Reason, but FELLC may waive any portion of such notice period.
14.Notice Leave
14.1.If Executive resigns voluntarily without Good Reason, FELLC shall be under no obligation to provide work for or assign any duties to Executive for the whole or any part of the 6 months’ notice period, and may place Executive on leave by requiring Executive:
a)not to attend any Company premises; and/or
b)to resign with immediate effect from any offices that Executive holds with any Company entity (or any related trusteeships); and/or
c)to refrain from business contact with any customers, clients or employees of the Company; and/or
d)to take any holiday that has accrued in accordance with Section 7.5 during any period of suspension under this Section 14; and/or
e)not to compete with the Company; and/or
f)not to do any act or thing or make or cause to be made any statement reasonably likely to damage the business or reputation of the Company.
14.2.The provisions of Section 15 (Post-Termination Obligations) shall remain in full force and effect during any period of such notice leave. Executive also shall continue to be bound by Executive’s duties of good faith and fidelity to the Company and remain available to perform such duties and/or exercise such powers, authorities and discretions (if any) when called upon by FELLC to do so during such leave.
15.Post-Termination Obligations: On termination of Executive’s employment (however arising), Executive shall:
15.1.If required by FELLC, resign immediately and without compensation from any office or trusteeship that Executive holds in or on behalf of any Company entity;
15.2.Immediately deliver to FELLC all tangible Confidential Information, as well as any keys, credit cards and other property of the Company9 that is in Executive’s possession or control; and
15.3.Provide a signed statement that Executive has complied fully with Executive’s obligations under this Section 15, and further stating that Executive understands and will continue to comply with Executive’s post-employment obligations in this Agreement. FELLC may request, and Executive shall provide, reasonable evidence of Executive’s compliance with these provisions.
16.Suspension: For the purpose of carrying out an investigation in relation to any acts or defaults (or alleged or suspected acts or defaults) of Executive, FELLC may at any time, at its sole discretion, suspend Executive from employment hereunder, but without prejudice to Executive’s right to receive full remuneration hereunder. FELLC may require Executive not to enter any of the Company’s premises and/or may vary or remove Executive’s work duties during such period of suspension. Executive and FELLC agree that time would be of the essence under such circumstances, and FELLC agrees to use reasonable endeavors to expedite such investigation.
17.Ongoing Assistance: Subject to Executive’s reasonable availability on reasonable notice, Executive shall assist the Company in any internal investigations or administrative, regulatory, judicial or quasi-judicial proceedings. Executive acknowledges that this could involve, but is not limited to, responding or defending any regulatory or legal process, providing information in relation to any such process, preparing witness statements, and/or giving evidence in person on behalf of the Company. FELLC shall reimburse any reasonable out-of-pocket expenses incurred by Executive in connection with fulfilling this obligation.
18.Compliance With IRC Section 409A: The provisions of this Section will apply notwithstanding any provision to the contrary in this Agreement. In the event of any inconsistency between a provision in this Section and another provision in this Agreement, the provision in this Section will be the controlling provision:
18.1.To the extent applicable, it is intended that the compensation arrangements under this Agreement be in full compliance with Section 409A of the Internal Revenue Code (“Section 409A”). This Agreement shall be construed in a manner to give effect to such intention. Notwithstanding the foregoing, FELLC does not guarantee to Executive any specific tax consequences relating to entitlement to or receipt of payments or benefits pursuant to this Agreement. Executive shall be solely responsible for payment of any taxes or penalties in connection with this Agreement.
18.2.If at the time of Executive’s separation from service (within the meaning of Section 409A), (a) Executive is a specified employee (within the meaning of Section 409A and using the
9 Including, without limitation, any company car provided by FELLC to Executive.
identification methodology selection by FELLC from time to time) and (b) FELLC makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid adverse tax consequences under Section 409A, then FELLC shall not pay such amount on the otherwise scheduled payment date, but shall instead pay it, without interest, on the first business day of the seventh month after such six-month period.
18.3.No payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon Executive’s termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A). Each payment and benefit to be made or provided to Executive pursuant to this Agreement will be considered a separate payment and not one of a series of payments for purposes of Section 409A. Whenever a payment period is specified with reference to a number of days, the actual date of payment within the specified period will be within the sole discretion of FELLC.
19.Governing Law; Dispute Resolution: This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia excluding that body of law known as conflicts of law. To give effect to this provision, the parties expressly and irrevocably consent to personal jurisdiction and exclusive venue in Virginia state and federal courts.
20.Notices: Any notice or other communication required, permitted or desirable hereunder shall be hand delivered (including, without limitation, delivery by a commercial courier service) or sent by United States registered or certified mail, postage prepaid, by facsimile or electronic mail addressed as follows:
If to FELLC:
Ferguson Enterprises, LLC
Attention: Chief Human Resources Officer
751 Lakefront Commons
Newport News, Virginia 23606
If to Executive:
Ian Graham
[ ]
[ ]
Or such other addresses as shall be furnished in writing by the parties. Any such notice of communication shall be deemed to have been given as of the date so delivered in person or three business days after so mailed.
21.Successors and Assigns: FELLC may assign its rights under this Agreement to any successor to its business (by merger, acquisition of substantially all of FELLC’s assets, or otherwise). Executive may not assign Executive’s rights or delegate Executive’s duties under this Agreement without the prior written consent of FELLC. Executive also understands and agrees that this Agreement shall be binding upon and inure to the benefit of Executive’s heirs and executors or administrators.
22.Entire Agreement; Amendments: This Agreement sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof, and all other written or oral agreements are void. This Agreement may be amended, modified or terminated only by a written instrument signed by the parties hereto. This Agreement replaces the parties’ Prior Agreement in its entirety, as of the effective date of this Agreement set forth at the top of page 1; provided that the Prior Agreement shall remain in full force and effect until such date.
23.Severability: If any provision of this Agreement, or the applications thereof under certain circumstances, is held to be invalid or unenforceable for any reason, the remainder of this Agreement, or the application of such provision under other circumstances, shall not be affected thereby.
24.Protected Rights Exclusion: Notwithstanding any contrary provision, this Agreement shall not, in any way, restrict or impede Executive from: (a) exercising their protected rights (including, without limitation, under applicable SEC or other governmental rules and regulations), to the extent that such rights cannot be waived by agreement; or (b) complying with any applicable law, regulation, rule, or valid order of a court of competent jurisdiction or an authorized government agency.
IN WITNESS WHEREOF, the parties have executed this Amended & Restated Employment Agreement as of the day and year written below.
FERGUSON ENTERPRISES, LLC:
By: /s/ Sammie Long
Sammie Long
Chief Human Resources Officer
EXECUTIVE:
/s/ Ian Graham
Ian Graham
AMENDED ON:
August 30, 2023
AMENDED & RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED & RESTATED AGREEMENT (this “Agreement”) is made and entered into as of August 29, 2022 by and between Ferguson Enterprises, LLC (“FELLC”), a Virginia limited liability company, on behalf of itself and its ultimate parent company, Ferguson plc (“Ferguson”; collectively, with their subsidiaries, the “Company”) and Samantha Long, an individual currently residing at [ ] (“Executive”).
WHEREAS, Ferguson Enterprises, Inc. and Executive entered into a prior employment agreement, dated October 17, 2017 (“Prior Agreement”), and now wish to replace such Prior Agreement in its entirety with this Agreement, as of the effective date of this Agreement set forth above;
WHEREAS, on behalf of the Company, FELLC desires to continue to retain the services of Executive, and Executive desires to continue to be employed by FELLC, all on the terms and subject to the conditions set forth herein;
WHEREAS, Executive desires to enter into this Agreement in consideration of Executive’s employment by FELLC and the benefits that Executive will receive under the terms hereof; and
WHEREAS, FELLC and Executive wish to amend and restate this Agreement, as of the date set forth on the last page below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
1.Term of Employment: Executive’s employment with FELLC on the terms of this Agreement shall commence on August 29, 2022 (the “Commencement Date”) and shall continue subject to the terms of this Agreement until terminated in accordance with Section 12.
2.Position: Executive’s position within the Company shall continue to be Chief Human Resources Officer (“CHRO”) and Executive agrees to serve in such position, on the terms and subject to the conditions set forth in this Agreement. Executive shall continue to report to Ferguson’s Chief Executive Officer (“CEO”) and shall continue to serve as a member of Ferguson’s Executive Committee (“ExCom”).
3.Location & Travel: Executive’s job will be based in Newport News, Virginia. FELLC reserves the right to change this location to any place within the United States as may be reasonably required from time to time for the proper performance of Executive’s duties. Executive agrees to travel on the business of the Company (both within the United States and abroad) as may be required for the proper performance of Executive’s duties.
4.Duties and Responsibilities:
4.1.Executive shall work the hours necessary to carry out Executive’s duties properly and effectively.
4.2.As part of Executive’s duties, Executive shall:
a)Act as a director or officer of any appropriate Company subsidiary, as may be reasonably required;
b)Carry out duties on behalf of any Company subsidiary as may be reasonably required; provided that such duties are consistent with Executive’s position;
c)Comply with the articles of association, bylaws, operating agreement, or similar governing documents (as amended from time to time) of any Company subsidiary of which Executive is a director and/or officer, which shall be made available to Executive as and when appropriate;
d)Abide by any statutory, fiduciary or common-law duties to FELLC, Ferguson, or any other Company subsidiary of which Executive is a director and/or officer;
e)Not do anything that would cause Executive to be disqualified from acting as a director and/or officer of any Company entity;
f)Personally comply with all applicable requirements, recommendations or regulations (as amended from time to time) of the UK Financial Conduct Authority, the Market Abuse Regulations, U.S. securities laws and regulations, NYSE Listing Standards, and all other regulatory authorities relevant to the Company and/or any Company subsidiary, as well as any policy issued by Ferguson (as amended from time to time) relating to dealing in the securities of Ferguson or any Company subsidiary;
g)Comply with all legal requirements as to the handling, protection and disclosure of “Inside Information” and/or “Material Non-Public Information” (each as defined under applicable UK and US laws);
h)Comply with the Company’s anti-corruption and bribery policy and related procedures;
i)Unless prevented by incapacity and subject always to Section 5 of this Agreement, devote substantially all of Executive’s working time, attention and abilities to the business of the Company;
j)Report Executive’s own wrongdoing and/or any wrongdoing or proposed wrongdoing of any other employee or any director of the Company, FELLC or any other Company subsidiary to the Ferguson Board and the Chief Legal Officer immediately on becoming aware of it;
k)Use all reasonable endeavors to promote, protect, develop and extend the business of the Company;
l)Consent to the monitoring and recording of Executive’s use of any of the Company’s electronic communications systems for the purpose of ensuring that the
Company’s rules are being complied with and for legitimate business purposes, to the extent such monitoring is permitted by applicable law; and
m)Comply with any electronic communication systems policy or policies that the Company may issue from time to time.
5.Outside Interests
5.1.Subject to Sections 5.2 through 5.3, Executive shall not (except as a representative of the Company or with the prior written approval of the CEO) be directly or indirectly engaged in any other business, trade, profession or occupation, whether paid or unpaid.
5.2.Notwithstanding Section 5.1, Executive may hold (as a passive investment by way of shares or other securities) up to 3% of the voteable shares in another publicly traded company that is listed on any recognized stock exchange.
5.3.Subject to the prior written approval by the CEO, Executive will be able to undertake one external non-executive director role.
6.Compensation
6.1.Base Salary: Executive’s annual base salary will be $585,000 per annum by twelve equal payments on a pre-determined date in each calendar month (“Base Salary”). Beginning with the October 2022 compensation cycle, Executive’s Base Salary will be reviewed annually by the Ferguson Board’s Compensation Committee (“CompCo”), which is under no obligation to award an increase following a salary review.
6.2.Bonuses: Executive shall be eligible to be considered for a bonus, subject always to the rules of the applicable discretionary bonus plan as may be implemented by the CompCo from time to time. Any bonus payment shall be entirely discretionary and subject to Executive’s continued employment at the time of any such payment, and the CompCo has the right to amend, vary, suspend or withdraw any such bonus plan at any time and without prior notice. If Executive receives a bonus or incentive payment in any one year, this shall not give rise to a contractual entitlement to a bonus or incentive payment in future years. Any bonus payments are subject to applicable deductions as required by law or authorized by Executive.
6.3.Inclusive of Director or Office Holder Sums or Fees: The compensation payable under this Agreement shall be inclusive of any sums or fees to which Executive may otherwise be entitled as a director and/or officer of any Company subsidiary.
6.4.Accrual of Compensation: All compensation payable to Executive under this Agreement shall be deemed to accrue from day to day.
6.5.Compensation Reimbursable to the Company: To the extent permitted by applicable U.S. federal and state law, in the event of termination of Executive’s employment for any reason whatsoever, FELLC shall be entitled to deduct from any compensation payable to Executive upon such termination (whether in respect of any period before such
termination or otherwise) any monies that may be owed by Executive to any Company entity.1
7.Long Term Incentive Plans; Fringe Benefits; Expense Reimbursement
7.1.Long Term Incentive Plans: Executive will be eligible to participate in the Company’s long-term incentive plans (“LTIP”) in accordance with the terms and conditions set forth in the respective plan documents. Participation in such plans will be at the discretion of the CompCo. Executive shall be subject to a shareholding requirement equal to 200% of Executive’s Base Salary, to be satisfied within 7 years of Executive’s original appointment to the Company’s Executive Committee.2
7.2.Company Car: During the term of this Agreement, the FELLC shall provide a gross cash allowance (the amount of which in accordance with the then-current Company policy) or shall provide free of charge (including insurance) a company car for Executive’s use, of such type appropriate (in the Company’s opinion) for Executive’s status.3 Executive will receive a fuel card and shall be liable for any income tax on the fuel used for non-business purposes.
7.3.Employee Benefits: Executive shall be eligible to participate in the current benefit programs offered to FELLC’s senior executives. These benefits currently include, without limitation, short term disability benefit, long term disability benefit, healthcare coverage, and paid holidays. These benefits are subject to change from time to time at FELLC’s sole discretion.
7.4.Retirement Benefits and Life Insurance: Executive shall be entitled to participate in the Ferguson Enterprises Retirement Plan ("FERP"), the Supplemental Executive Retirement Plan (“SERP”), 401(k) retirement savings plan, and any life insurance program offered to FELLC’s senior executives.
7.5.Executive Physical Plan: Executive shall be entitled to participate in the Executive Physical Plan.4
7.6.Vacation:
a)In addition to paid Public Holidays, Executive is entitled to four weeks’ vacation under the Ferguson Vacation Plan, which shall accrue at 13.34 hours per month and have an accrual cap of 200 hours.
b)In the event of termination of employment, Executive shall be entitled to receive payment for any accrued vacation hours outstanding and untaken at the effective date of termination.5
1 To the extent such deduction is not permissible under applicable law, Executive shall repay such Company entity immediately upon such termination any monies that may at that time be owed by Executive.
2 Additionally, if Executive becomes a Named Executive Officer as noted in the Company’s Proxy filed with the SEC, this minimum shareholding requirement shall increase to 300% of Base Salary.
3 Executive shall not use such car in breach of any legal, contractual or Company policy requirements.
4 The frequency of such physicals is age dependent. Please see the Executive Benefits brochure for details.
5 To the extent permitted by applicable law, FELLC shall be entitled to recover from Executive the value of any vacation taken in excess of accrued vacation entitlement.
c)For every 30 days of overnight travel, Executive shall earn one additional personal day, up to a maximum of five days.
7.7.Expense Reimbursement: Executive shall be entitled to receive reimbursement for all appropriate business expenses incurred by Executive in connection with Executive’s duties under this Agreement and in accordance with Company policies (as in effect from time to time).
8.Additional Conditions on Remuneration
8.1.Clawback. In addition to any malus/clawback provisions set forth in any applicable Company performance-based pay arrangements6, Executive shall be subject to the requirements of the Company's Executive Compensation Clawback Policy.
8.2.The CompCo may require Executive to sign and return by a specified time a copy of any award certificate or other document acknowledging Executive’s agreement to be bound by the terms of such performance-related pay arrangements. Failure to do so within the specified period shall cause the award to lapse and shall be treated as if it had never been granted.
8.3.If, upon termination of this Agreement, whether lawfully or in breach of contract, Executive loses any of the rights or benefits under any share plan operated by the Company from time to time (including rights or benefits which Executive would not have lost had the Agreement not been terminated), Executive shall not be entitled, by way of compensation for loss of office or otherwise, to any compensation for the loss of any rights under any such plan.
9.Duty of Loyalty: In consideration of this Agreement and the severance pay and other benefits that may be available herein, Executive agrees to the following:
9.1.Confidentiality: Executive agrees to maintain in strictest confidence all proprietary data and other confidential or non-public information (whether concerning the Company, its suppliers, or any of its customers or proposed customers) obtained or developed by Executive during Executive’s employment with FELLC. Such information and data shall include but not be limited to the Company’s trade secrets, patents, inventions, systems, computer programs and software, technical data and know-how, procedures, manuals, confidential reports and communications, lists of customers and clients, terms of business with suppliers and prices charged, specific contract details and terms of business with customers, customer requirements and prices charged, business plans, strategies, marking plans and sales forecasts, management and financial information (including but not limited to results and forecasts, dividend information, turnover and stock levels, profits and profit margins), confidential employee information, as well as information that the Company may obtain from third parties in confidence or subject to non-disclosure or similar agreements (“Confidential Information”). All such Confidential Information is and shall remain the exclusive property of the Company (or, in certain
6 Executive acknowledges having access to all applicable terms of such performance-based pay arrangements in advance of the signing of this Agreement. The Company shall make available to Executive a copy of the terms of any future performance-related pay arrangements prior to the grant of any awards under it.
circumstances, its customer or vendor) and shall be used solely for the benefit of the Company. Any such information and data in Executive’s possession after termination of Executive’s employment shall be promptly returned to the Company. Executive’s obligations under this Section shall survive any termination of Executive’s employment.
9.2.Non-Competition: Executive acknowledges that Executive is a key employee of FELLC and that Executive’s talents and services are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company. By virtue of Executive’s involvement in the Company’s daily operations and long-term strategic initiatives, holding the same or similar position at a competitor will inevitably require disclosure of the Company’s trade secrets and proprietary or confidential information. In order to protect the interests of the Company against the competitive use of any confidential information, knowledge or relationships concerning the Company to which Executive will have access by virtue of the special nature of Executive’s relationship with FELLC, Ferguson, and/or any other Company subsidiary, and Executive’s involvement in their collective affairs, and in consideration of the payments made to Executive hereunder and the agreements of the parties herein, Executive agrees that, for so long as this Agreement is in effect and for a period of 12 months following the termination of Executive’s employment hereunder for any reason whatsoever, Executive will not own (by ownership of securities or otherwise), control, engage in as an equity participant, or be employed in a managerial, leadership or strategic capacity by or act as a consultant to, or be connected with, the ownership, management, operation or control of any business (i) a substantial portion of whose business directly or indirectly competes with that of Ferguson, FELLC, or any other Company subsidiary, or (ii) that owns more than 1% of the shares of Ferguson. In recognition of the geographic extent of the Company’s existing and anticipated operations and the nature of the Company and competitive circumstances, the restrictive covenant contained in this Section shall apply throughout the United States and Canada. For the avoidance of doubt, the restrictions contained in subpart (i) of this Section shall not prohibit any activities that are not in direct or indirect competition with any business being carried on by Ferguson, FELLC or any other Company subsidiary as of the date of Executive’s termination.
9.3.Non-Solicitation: Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not (directly or indirectly) solicit or induce any Company employee to leave the Company’s employ, or to (directly or indirectly) hire or attempt to hire any person who was a Company employee within the twelve (12) month period preceding.
9.4.Non-Interference with Business Contracts. Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not interfere with, disrupt or attempt to disrupt any past, present or prospective contractual or other relationship between Ferguson, FELLC, or any other Company subsidiary and any of their respective (current or prospective) clients, customers, suppliers or employees.
9.5.Non-Disparagement: Executive agrees not to make any statement that would disparage the Company, any members of the Ferguson Board, and/or any officers or employees or any product line of Ferguson, FELLC or any other Company subsidiary;
provided that this Section does not, in any way, restrict or impede Executive from exercising their protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency.
9.6.Remedy for Breach: The parties recognize that the services to be rendered under this Agreement by Executive are special, unique, and of an extraordinary character, and that in the event of a breach of this Section 9 by Executive, then FELLC shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction in equity, to enforce or have specifically performed any terms, conditions, obligations and requirements of this Section 9, and/or to enjoin Executive from continuing those actions which are in breach of this Agreement, or to take any or all of the foregoing actions. Without limitation of the foregoing, in the event of a breach by Executive of this Section 9, Executive shall forfeit any and all rights to receive severance payments under this Agreement and, if such severance payments have already been paid, Executive shall repay them to FELLC. Nothing herein contained shall be construed to prevent the pursuit of any other remedy, judicial or otherwise, in case of any breach of this Section 9.
Executive acknowledges and agrees that the restrictions contained in this Section 9 are reasonable and necessary for the protection of the Company and that they do not bear harshly upon Executive and agrees that: each restriction shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable for any reason the remaining restrictions shall not be affected; and if any restriction is found to be void but would be valid and enforceable if some part of it were deleted or modified, that restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.
10.Intellectual Property: The parties expect that Executive will in the performance of Executive’s duties develop intellectual property related to the business of the Company. Executive hereby assigns to FELLC any and all right, title and interest in and to such intellectual property, including any and all ideas, inventions, discoveries, trademarks, trade names, copyrights, patents and all other confidential, proprietary, or valuable information and data of any kind, developed by Executive in the course of performing Executive’s duties, or developed using Company property or resources (“Intellectual Property”). To the maximum extent permitted by law, all Intellectual Property shall be deemed “works made for hire” under the United States Copyright Act and FELLC is deemed to sole author of any Intellectual Property. To the extent any Intellectual Property is determined not to constitute “works made for hire,” Executive hereby assigns and transfers to FELLC all right, title, and interest in the Intellectual Property. Executive shall cooperate with the Company in taking any steps deemed necessary by the Company to protect, preserve, defend or enforce the Intellectual Property, such as filing patent applications. Executive will execute on request of the Company or its attorneys any and all documents necessary to record the assignment of Intellectual Property to FELLC, or to protect, preserve, defend or enforce it. Executive will disclose any Intellectual Property to the Company promptly upon its development. Executive agrees not to improperly use the intellectual property of any third party knowingly in the performance of Executive’s duties.
11.Company Rules, Policies and Procedures
11.1.Executive shall at all times observe the Ferguson Code of Conduct and all policies and procedures, codes and guidelines as may be issued by the Company, including any codes and guidelines relating to share dealings as may be issued from time to time, a copy of which is available on the Company’s Intranet. The Company may amend such policies and procedures at any time.
11.2.Consistent with the Ferguson Code of Conduct, Executive shall not at any time make any false, misleading or fraudulent statements in relation to the Company. This requirement shall survive the termination of Executive’s employment (for any reason).
12.Termination
12.1.Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. FELLC may terminate Executive’s employment after having established Executive’s Disability7 and while Executive remains Disabled by giving Executive written notice of its intention to terminate Executive’s employment. In such a case, Executive’s employment shall terminate effective on the 30th day after receipt of such notice; provided that, within 30 days after such receipt, Executive shall have failed to return to continuous full-time performance of Executive’s duties.
12.2.Cause. FELLC may terminate Executive’s employment for Cause effective immediately and Executive will automatically forfeit all entitlement to any and all bonuses (as described in Section 6.2), any and all entitlement to awards under the LTIP (as described in Section 7.1), and any and all other benefits described in this Agreement.
“Cause” shall exist in the event that Executive:
a)commits or is guilty of any gross misconduct, gross incompetence, or any wilful neglect in the discharge of Executive’s duties;
b)commits or continues (after warning) any material breach of this Agreement that amounts to gross misconduct, gross incompetence or wilful neglect in the discharge of Executive’s duties;
c)fails to perform adequately the duties assigned to Executive in the good faith opinion of the CEO; provided that the CEO has provided notice to Executive of such failure and an opportunity to cure such failure within thirty (30) days of such notice if such failure is realistically capable of being cured within thirty (30) days;
d)willfully fails to comply with any valid and legal directive of the CEO;
e)material violation(s) of the Company’s written policies and/or Code of Conduct, including but not limited to, those related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct;
7 As used in this Agreement, “Disability” means an accidental injury, sickness, or mental illness of Executive that has prevented Executive from performing their essential duties for the Company, with or without a reasonable accommodation, for any consecutive period of 180 days; provided that any return to employment of less than 10 consecutive days shall be ignored and counted as an absence period. Such disability shall be deemed to have occurred on the 180th day of a given period (“Disability Effective Date”).
f)engages in any material act or acts of fraud, dishonesty, illegal behavior, or other conduct tending to bring Executive or the Company into disrepute;
g)commits any act of bankruptcy or takes advantage of any statute for the time being in force offering relief for insolvent debtors; or
h)is indicted for, convicted of, or pleads guilty or nolo contendre to any felony offence or any other crime involving dishonesty, fraud or moral turpitude.
The CEO shall, in good faith, determine whether the definition of Cause has been met.8 There is no requirement that this determination be reduced to writing.
12.3.Good Reason. Executive’s employment may be terminated by Executive at any time for Good Reason or upon 6 months’ written notice to FELLC without Good Reason.
For purposes of this Agreement, “Good Reason” means the occurrence of one or more of the following, which is not cured within thirty (30) days of written notice thereof and which is asserted within 90 days of the occurrence thereof:
a)the assignment to Executive of any duties inconsistent in any material adverse respect with Executive’s duties or responsibilities as contemplated by Sections 2 and 4 of this Agreement;
b)any reduction in Executive’s Base Salary;
c)any other action by FELLC or Ferguson that results in material diminishment in Executive’s duties or responsibilities; provided that FELLC shall not be deemed to have breached this Section due to any change in the number of positions reporting to Executive as a result of a reduction in force;
d)FELLC’s failure to comply with any material provisions of this Agreement;
e)any purported termination of Executive’s employment by FELLC other than as permitted by this Agreement; or
f)a change in Executive’s reporting relationship (as set forth in Section 2 above) that is not mutually-agreed upon by the parties.
12.4.Notice of Termination. Any termination by FELLC or by Executive shall be communicated by a Notice of Termination to the other party in writing, which shall indicate the specific termination provision(s) of this Agreement relied upon, set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination, and specifies the effective date of Executive’s termination (“Termination Date”).
13.Obligations of the Company Upon Termination.
8 In the event of any conflict between this Agreement and any other agreement with respect to the definition of “cause”, the definition of Cause set forth in this Agreement shall prevail.
13.1.Death. If Executive’s employment is terminated by reason of Executive’s death, FELLC’s compensation obligations to Executive’s legal representatives under this Agreement shall be only those obligations accrued but unpaid hereunder at the date of Executive’s death, including, but not limited to, Base Salary, unused vacation, unreimbursed expenses, and any bonus for any completed fiscal year (collectively, “Accrued Amounts”), plus a pro rata bonus for the year of termination based on target results and the number of days that Executive was employed during the fiscal year (“Pro Rata Bonus”). Executive’s family also shall be entitled to receive benefits at least equal to those provided by FELLC to surviving families of similarly situated executives of the Company under such plans, programs, and policies relating to family death benefits, if any, as in effect at such time.
13.2.Disability. If Executive’s employment is terminated by reason of Executive’s disability, Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to those provided by FELLC to similarly situated executives of the Company and/or their families in accordance with such plans, programs, and policies relating to disability, if any, as in effect at such time.
13.3.Good Reason; Other Than For Cause. If FELLC terminates Executive’s employment for any reason other than for Cause, but not due to Disability, or if Executive’s employment shall be terminated by Executive for Good Reason, then, subject to Section 13.4 below, FELLC shall pay to Executive an amount equal to:
a)any Accrued Amounts (as defined in Section 13.1 above); plus
b)Executive’s annual Base Salary (i.e., 12 months) in effect at the time the Notice of Termination was given; plus
c)Executive’s Pro Rata Bonus (as defined in Section 13.1 above) for the fiscal year in which such termination occurs.
In respect of any then-outstanding compensation, options, and rights of Executive under the Company’s applicable Long Term Incentive Plans, such compensation, options, and rights shall be paid or exercisable according to the terms of the relevant plan (including any discretions) then in effect and the terms of the applicable grant.
Executive and their dependents may be eligible for COBRA continuation coverage under the Company’s medical benefit plan following termination. FELLC shall provide a lump sum payment to Executive in an amount that would equal the cost that Executive would have to incur to purchase 12 months of such benefits with equivalent terms and conditions, less any employee contribution.
In the event of a Change in Control (as defined in the Company’s Change in Control Policy), Executive also may be eligible for the benefits and protections set forth in such policy.
13.4.Separation Agreement and Release. Executive’s eligibility for the severance payments described in Section 13.3 above is conditioned upon Executive, after Executive’s employment ends, signing and delivering and not revoking a release of claims in favor of the Company in a form consistent with FELLC’s then-current practice and reasonable
satisfactory to FELLC. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.
The amounts specified in Section 13.3 above shall be paid in lieu of any separation payments that Executive would otherwise be entitled to under any severance plan or program covering employees of the Company. Subject to any applicable Internal Revenue Code Section 409A restrictions, as described more fully in Section 18 below, such amounts shall be paid in a lump sum in cash within thirty (30) days after the expiration of any applicable revocation period following Executive’s execution and delivery of such release to FELLC.
13.5.Cause or Voluntary Resignation. In the event of Executive’s voluntary resignation without Good Reason or termination for Cause, Executive shall only be entitled to their Accrued Amounts (as defined in Section 13.1 above) and such other amounts as may be provided for under the Company’s plans. Executive shall provide FELLC with 6 months’ written notice of any voluntary termination without Good Reason, but FELLC may waive any portion of such notice period.
14.Notice Leave
14.1.If Executive resigns voluntarily without Good Reason, FELLC shall be under no obligation to provide work for or assign any duties to Executive for the whole or any part of the 6 months’ notice period, and may place Executive on leave by requiring Executive:
a)not to attend any Company premises; and/or
b)to resign with immediate effect from any offices that Executive holds with any Company entity (or any related trusteeships); and/or
c)to refrain from business contact with any customers, clients or employees of the Company; and/or
d)to take any holiday that has accrued in accordance with Section 7.5 during any period of suspension under this Section 14; and/or
e)not to compete with the Company; and/or
f)not to do any act or thing or make or cause to be made any statement reasonably likely to damage the business or reputation of the Company.
14.2.The provisions of Section 15 (Post-Termination Obligations) shall remain in full force and effect during any period of such notice leave. Executive also shall continue to be bound by Executive’s duties of good faith and fidelity to the Company and remain available to perform such duties and/or exercise such powers, authorities and discretions (if any) when called upon by FELLC to do so during such leave.
15.Post-Termination Obligations: On termination of Executive’s employment (however arising), Executive shall:
15.1.If required by FELLC, resign immediately and without compensation from any office or trusteeship that Executive holds in or on behalf of any Company entity;
15.2.Immediately deliver to FELLC all tangible Confidential Information, as well as any keys, credit cards and other property of the Company9 that is in Executive’s possession or control; and
15.3.Provide a signed statement that Executive has complied fully with Executive’s obligations under this Section 15, and further stating that Executive understands and will continue to comply with Executive’s post-employment obligations in this Agreement. FELLC may request, and Executive shall provide, reasonable evidence of Executive’s compliance with these provisions.
16.Suspension: For the purpose of carrying out an investigation in relation to any acts or defaults (or alleged or suspected acts or defaults) of Executive, FELLC may at any time, at its sole discretion, suspend Executive from employment hereunder, but without prejudice to Executive’s right to receive full remuneration hereunder. FELLC may require Executive not to enter any of the Company’s premises and/or may vary or remove Executive’s work duties during such period of suspension. Executive and FELLC agree that time would be of the essence under such circumstances, and FELLC agrees to use reasonable endeavors to expedite such investigation.
17.Ongoing Assistance: Subject to Executive’s reasonable availability on reasonable notice, Executive shall assist the Company in any internal investigations or administrative, regulatory, judicial or quasi-judicial proceedings. Executive acknowledges that this could involve, but is not limited to, responding or defending any regulatory or legal process, providing information in relation to any such process, preparing witness statements, and/or giving evidence in person on behalf of the Company. FELLC shall reimburse any reasonable out-of-pocket expenses incurred by Executive in connection with fulfilling this obligation.
18.Compliance With IRC Section 409A: The provisions of this Section will apply notwithstanding any provision to the contrary in this Agreement. In the event of any inconsistency between a provision in this Section and another provision in this Agreement, the provision in this Section will be the controlling provision:
18.1.To the extent applicable, it is intended that the compensation arrangements under this Agreement be in full compliance with Section 409A of the Internal Revenue Code (“Section 409A”). This Agreement shall be construed in a manner to give effect to such intention. Notwithstanding the foregoing, FELLC does not guarantee to Executive any specific tax consequences relating to entitlement to or receipt of payments or benefits pursuant to this Agreement. Executive shall be solely responsible for payment of any taxes or penalties in connection with this Agreement.
18.2.If at the time of Executive’s separation from service (within the meaning of Section 409A), (a) Executive is a specified employee (within the meaning of Section 409A and using the identification methodology selection by FELLC from time to time) and (b) FELLC makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to
9 Including, without limitation, any company car provided by FELLC to Executive.
be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid adverse tax consequences under Section 409A, then FELLC shall not pay such amount on the otherwise scheduled payment date, but shall instead pay it, without interest, on the first business day of the seventh month after such six-month period.
18.3.No payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon Executive’s termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A). Each payment and benefit to be made or provided to Executive pursuant to this Agreement will be considered a separate payment and not one of a series of payments for purposes of Section 409A. Whenever a payment period is specified with reference to a number of days, the actual date of payment within the specified period will be within the sole discretion of FELLC.
19.Governing Law; Dispute Resolution: This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia excluding that body of law known as conflicts of law. To give effect to this provision, the parties expressly and irrevocably consent to personal jurisdiction and exclusive venue in Virginia state and federal courts.
20.Notices: Any notice or other communication required, permitted or desirable hereunder shall be hand delivered (including, without limitation, delivery by a commercial courier service) or sent by United States registered or certified mail, postage prepaid, by facsimile or electronic mail addressed as follows:
If to FELLC:
Ferguson Enterprises, LLC
Attention: Chief Legal Officer
751 Lakefront Commons
Newport News, Virginia 23606
If to Executive:
Samantha Long
[ ]
[ ]
Or such other addresses as shall be furnished in writing by the parties. Any such notice of communication shall be deemed to have been given as of the date so delivered in person or three business days after so mailed.
21.Successors and Assigns: FELLC may assign its rights under this Agreement to any successor to its business (by merger, acquisition of substantially all of FELLC’s assets, or otherwise). Executive may not assign Executive’s rights or delegate Executive’s duties under this Agreement without the prior written consent of FELLC. Executive also understands and agrees that this Agreement shall be binding upon and inure to the benefit of Executive’s heirs and executors or administrators.
22.Entire Agreement; Amendments: This Agreement sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof, and all other written or oral agreements are void. This Agreement may be amended, modified or terminated only by a written
instrument signed by the parties hereto. This Agreement replaces the parties’ Prior Agreement in its entirety, as of the effective date of this Agreement set forth at the top of page 1; provided that the Prior Agreement shall remain in full force and effect until such date.
23.Severability: If any provision of this Agreement, or the applications thereof under certain circumstances, is held to be invalid or unenforceable for any reason, the remainder of this Agreement, or the application of such provision under other circumstances, shall not be affected thereby.
24.Protected Rights Exclusion: Notwithstanding any contrary provision, this Agreement shall not, in any way, restrict or impede Executive from: (a) exercising their protected rights (including, without limitation, under applicable SEC or other governmental rules and regulations), to the extent that such rights cannot be waived by agreement; or (b) complying with any applicable law, regulation, rule, or valid order of a court of competent jurisdiction or an authorized government agency.
IN WITNESS WHEREOF, the parties have executed this Amended & Restated Employment Agreement as of the day and year written below.
FERGUSON ENTERPRISES, LLC:
By: /s/ Ian Graham
Ian Graham
Chief Legal Officer
EXECUTIVE:
/s/ Samantha Long
Samantha Long
AMENDED ON:
August 30, 2023
AMENDED & RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED & RESTATED AGREEMENT (this “Agreement”) is made and entered into as of June 1, 2022 by and between Ferguson Enterprises, LLC (“FELLC”), a Virginia limited liability company, on behalf of itself and its ultimate parent company, Ferguson plc (“Ferguson”; collectively, with their subsidiaries, the “Company”) and William Thees, an individual currently residing at [ ] (“Executive”).
WHEREAS, on behalf of the Company, FELLC desires to continue to retain the services of Executive, and Executive desires to continue to be employed by FELLC, all on the terms and subject to the conditions set forth herein;
WHEREAS, Executive desires to enter into this Agreement in consideration of Executive’s employment by FELLC and the benefits that Executive will receive under the terms hereof; and
WHEREAS, FELLC and Executive wish to amend and restate this Agreement, as of the date set forth on the last page below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
1.Term of Employment: Executive’s employment with FELLC on the terms of this Agreement shall commence on June 1, 2022 (the “Commencement Date”) and shall continue subject to the terms of this Agreement until terminated in accordance with Section 12.
2.Position: Executive’s position within the Company shall continue to be Senior Vice President and Executive agrees to serve in such position, on the terms and subject to the conditions set forth in this Agreement. Executive shall continue to report to Ferguson’s Chief Executive Officer (“CEO”) and shall continue to serve as a member of Ferguson’s Executive Committee (“ExCom”).
3.Location & Travel: Executive’s job will be based in Newport News, Virginia. FELLC reserves the right to change this location to any place within the United States as may be reasonably required from time to time for the proper performance of Executive’s duties. Executive agrees to travel on the business of the Company (both within the United States and abroad) as may be required for the proper performance of Executive’s duties.
4.Duties and Responsibilities:
4.1.Executive shall work the hours necessary to carry out Executive’s duties properly and effectively.
4.2.As part of Executive’s duties, Executive shall:
a)Act as a director or officer of any appropriate Company subsidiary, as may be reasonably required;
b)Carry out duties on behalf of any Company subsidiary as may be reasonably required; provided that such duties are consistent with Executive’s position;
c)Comply with the articles of association, bylaws, operating agreement, or similar governing documents (as amended from time to time) of any Company subsidiary of which Executive is a director and/or officer, which shall be made available to Executive as and when appropriate;
d)Abide by any statutory, fiduciary or common-law duties to FELLC, Ferguson, or any other Company subsidiary of which Executive is a director and/or officer;
e)Not do anything that would cause Executive to be disqualified from acting as a director and/or officer of any Company entity;
f)Personally comply with all applicable requirements, recommendations or regulations (as amended from time to time) of the UK Financial Conduct Authority, the Market Abuse Regulations, U.S. securities laws and regulations, NYSE Listing Standards, and all other regulatory authorities relevant to the Company and/or any Company subsidiary, as well as any policy issued by Ferguson (as amended from time to time) relating to dealing in the securities of Ferguson or any Company subsidiary;
g)Comply with all legal requirements as to the handling, protection and disclosure of “Inside Information” and/or “Material Non-Public Information” (each as defined under applicable UK and US laws);
h)Comply with the Company’s anti-corruption and bribery policy and related procedures;
i)Unless prevented by incapacity and subject always to Section 5 of this Agreement, devote substantially all of Executive’s working time, attention and abilities to the business of the Company;
j)Report Executive’s own wrongdoing and/or any wrongdoing or proposed wrongdoing of any other employee or any director of the Company, FELLC or any other Company subsidiary to the Ferguson Board and the Chief Legal Officer immediately on becoming aware of it;
k)Use all reasonable endeavors to promote, protect, develop and extend the business of the Company;
l)Consent to the monitoring and recording of Executive’s use of any of the Company’s electronic communications systems for the purpose of ensuring that the Company’s rules are being complied with and for legitimate business purposes, to the extent such monitoring is permitted by applicable law; and
m)Comply with any electronic communication systems policy or policies that the Company may issue from time to time.
5.Outside Interests
5.1.Subject to Sections 5.2 through 5.3, Executive shall not (except as a representative of the Company or with the prior written approval of the CEO) be directly or indirectly engaged in any other business, trade, profession or occupation, whether paid or unpaid.
5.2.Notwithstanding Section 5.1, Executive may hold (as a passive investment by way of shares or other securities) up to 3% of the voteable shares in another publicly traded company that is listed on any recognized stock exchange.
5.3.Subject to the prior written approval by the CEO, Executive will be able to undertake one external non-executive director role.
6.Compensation
6.1.Base Salary: Executive’s annual base salary will be $600,000 per annum by twelve equal payments on a pre-determined date in each calendar month (“Base Salary”). Executive’s Base Salary will be reviewed annually by the Ferguson Board’s Compensation Committee (“CompCo”), which is under no obligation to award an increase following a salary review.
6.2.Bonuses: Executive shall be eligible to be considered for a bonus, subject always to the rules of the applicable discretionary bonus plan as may be implemented by the CompCo from time to time. Any bonus payment shall be entirely discretionary and subject to Executive’s continued employment at the time of any such payment, and the CompCo has the right to amend, vary, suspend or withdraw any such bonus plan at any time and without prior notice. If Executive receives a bonus or incentive payment in any one year, this shall not give rise to a contractual entitlement to a bonus or incentive payment in future years. Any bonus payments are subject to applicable deductions as required by law or authorized by Executive.
6.3.Inclusive of Director or Office Holder Sums or Fees: The compensation payable under this Agreement shall be inclusive of any sums or fees to which Executive may otherwise be entitled as a director and/or officer of any Company subsidiary.
6.4.Accrual of Compensation: All compensation payable to Executive under this Agreement shall be deemed to accrue from day to day.
6.5.Compensation Reimbursable to the Company: To the extent permitted by applicable U.S. federal and state law, in the event of termination of Executive’s employment for any reason whatsoever, FELLC shall be entitled to deduct from any compensation payable to Executive upon such termination (whether in respect of any period before such termination or otherwise) any monies that may be owed by Executive to any Company entity.1
1 To the extent such deduction is not permissible under applicable law, Executive shall repay such Company entity immediately upon such termination any monies that may at that time be owed by Executive.
7.Long Term Incentive Plans; Fringe Benefits; Expense Reimbursement
7.1.Long Term Incentive Plans: Executive will be eligible to participate in the Company’s long-term incentive plans (“LTIP”) in accordance with the terms and conditions set forth in the respective plan documents. Participation in such plans will be at the discretion of the CompCo. Executive shall be subject to a shareholding requirement equal to 200% of Executive’s Base Salary, to be satisfied within 7 years of Executive’s original appointment to the Company’s Executive Committee.2
7.2.Company Car: During the term of this Agreement, the FELLC shall provide a gross cash allowance (the amount of which in accordance with the then-current Company policy) or shall provide free of charge (including insurance) a company car for Executive’s use, of such type appropriate (in the Company’s opinion) for Executive’s status.3 Executive will receive a fuel card and shall be liable for any income tax on the fuel used for non-business purposes.
7.3.Employee Benefits: Executive shall be eligible to participate in the current benefit programs offered to FELLC’s senior executives. These benefits currently include, without limitation, short term disability benefit, long term disability benefit, healthcare coverage, and paid holidays. These benefits are subject to change from time to time at FELLC’s sole discretion.
7.4.Retirement Benefits and Life Insurance: Executive shall be entitled to participate in the Ferguson Enterprises Retirement Plan ("FERP"), the Supplemental Executive Retirement Plan (“SERP”), 401(k) retirement savings plan, and any life insurance program offered to FELLC’s senior executives.
7.5.Executive Physical Plan: Executive shall be entitled to participate in the Executive Physical Plan.4
7.6.Vacation:
a)In addition to paid Public Holidays, Executive is entitled to 5 weeks’ vacation under the Ferguson Vacation Plan, which shall accrue at 16.75 hours per month and have an accrual cap of 252 hours.
b)In the event of termination of employment, Executive shall be entitled to receive payment for any accrued vacation hours outstanding and untaken at the effective date of termination.5
c)For every 30 days of overnight travel, Executive shall earn one additional personal day, up to a maximum of five days.
2 Additionally, if Executive becomes a Named Executive Officer as noted in the Company’s Proxy filed with the SEC, this minimum shareholding requirement shall increase to 300% of Base Salary.
3 Executive shall not use such car in breach of any legal, contractual or Company policy requirements.
4 The frequency of such physicals is age dependent. Please see the Executive Benefits brochure for details.
5 To the extent permitted by applicable law, FELLC shall be entitled to recover from Executive the value of any vacation taken in excess of accrued vacation entitlement.
7.7.Expense Reimbursement: Executive shall be entitled to receive reimbursement for all appropriate business expenses incurred by Executive in connection with Executive’s duties under this Agreement and in accordance with Company policies (as in effect from time to time).
8.Additional Conditions on Remuneration
8.1.Clawback. In addition to any malus/clawback provisions set forth in any applicable Company performance-based pay arrangements6, Executive shall be subject to the requirements of the Company's Executive Compensation Clawback Policy.
8.2.The CompCo may require Executive to sign and return by a specified time a copy of any award certificate or other document acknowledging Executive’s agreement to be bound by the terms of such performance-related pay arrangements. Failure to do so within the specified period shall cause the award to lapse and shall be treated as if it had never been granted.
8.3.If, upon termination of this Agreement, whether lawfully or in breach of contract, Executive loses any of the rights or benefits under any share plan operated by the Company from time to time (including rights or benefits which Executive would not have lost had the Agreement not been terminated), Executive shall not be entitled, by way of compensation for loss of office or otherwise, to any compensation for the loss of any rights under any such plan.
9.Duty of Loyalty: In consideration of this Agreement and the severance pay and other benefits that may be available herein, Executive agrees to the following:
9.1.Confidentiality: Executive agrees to maintain in strictest confidence all proprietary data and other confidential or non-public information (whether concerning the Company, its suppliers, or any of its customers or proposed customers) obtained or developed by Executive during Executive’s employment with FELLC. Such information and data shall include but not be limited to the Company’s trade secrets, patents, inventions, systems, computer programs and software, technical data and know-how, procedures, manuals, confidential reports and communications, lists of customers and clients, terms of business with suppliers and prices charged, specific contract details and terms of business with customers, customer requirements and prices charged, business plans, strategies, marking plans and sales forecasts, management and financial information (including but not limited to results and forecasts, dividend information, turnover and stock levels, profits and profit margins), confidential employee information, as well as information that the Company may obtain from third parties in confidence or subject to non-disclosure or similar agreements (“Confidential Information”). All such Confidential Information is and shall remain the exclusive property of the Company (or, in certain circumstances, its customer or vendor) and shall be used solely for the benefit of the Company. Any such information and data in Executive’s possession after termination of Executive’s employment shall be promptly returned to the Company. Executive’s obligations under this Section shall survive any termination of Executive’s employment.
6 Executive acknowledges having access to all applicable terms of such performance-based pay arrangements in advance of the signing of this Agreement. The Company shall make available to Executive a copy of the terms of any future performance-related pay arrangements prior to the grant of any awards under it.
9.2.Non-Competition: Executive acknowledges that Executive is a key employee of FELLC and that Executive’s talents and services are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company. By virtue of Executive’s involvement in the Company’s daily operations and long-term strategic initiatives, holding the same or similar position at a competitor will inevitably require disclosure of the Company’s trade secrets and proprietary or confidential information. In order to protect the interests of the Company against the competitive use of any confidential information, knowledge or relationships concerning the Company to which Executive will have access by virtue of the special nature of Executive’s relationship with FELLC, Ferguson, and/or any other Company subsidiary, and Executive’s involvement in their collective affairs, and in consideration of the payments made to Executive hereunder and the agreements of the parties herein, Executive agrees that, for so long as this Agreement is in effect and for a period of 12 months following the termination of Executive’s employment hereunder for any reason whatsoever, Executive will not own (by ownership of securities or otherwise), control, engage in as an equity participant, or be employed in a managerial, leadership or strategic capacity by or act as a consultant to, or be connected with, the ownership, management, operation or control of any business (i) a substantial portion of whose business directly or indirectly competes with that of Ferguson, FELLC, or any other Company subsidiary, or (ii) that owns more than 1% of the shares of Ferguson. In recognition of the geographic extent of the Company’s existing and anticipated operations and the nature of the Company and competitive circumstances, the restrictive covenant contained in this Section shall apply throughout the United States and Canada. For the avoidance of doubt, the restrictions contained in subpart (i) of this Section shall not prohibit any activities that are not in direct or indirect competition with any business being carried on by Ferguson, FELLC or any other Company subsidiary as of the date of Executive’s termination.
9.3.Non-Solicitation: Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not (directly or indirectly) solicit or induce any Company employee to leave the Company’s employ, or to (directly or indirectly) hire or attempt to hire any person who was a Company employee within the twelve (12) month period preceding.
9.4.Non-Interference with Business Contracts. Executive agrees that, for a period of 12 months following the termination of Executive’s employment (for any reason), Executive shall not interfere with, disrupt or attempt to disrupt any past, present or prospective contractual or other relationship between Ferguson, FELLC, or any other Company subsidiary and any of their respective (current or prospective) clients, customers, suppliers or employees.
9.5.Non-Disparagement: Executive agrees not to make any statement that would disparage the Company, any members of the Ferguson Board, and/or any officers or employees or any product line of Ferguson, FELLC or any other Company subsidiary; provided that this Section does not, in any way, restrict or impede Executive from exercising their protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency.
9.6.Remedy for Breach: The parties recognize that the services to be rendered under this Agreement by Executive are special, unique, and of an extraordinary character, and that in the event of a breach of this Section 9 by Executive, then FELLC shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction in equity, to enforce or have specifically performed any terms, conditions, obligations and requirements of this Section 9, and/or to enjoin Executive from continuing those actions which are in breach of this Agreement, or to take any or all of the foregoing actions. Without limitation of the foregoing, in the event of a breach by Executive of this Section 9, Executive shall forfeit any and all rights to receive severance payments under this Agreement and, if such severance payments have already been paid, Executive shall repay them to FELLC. Nothing herein contained shall be construed to prevent the pursuit of any other remedy, judicial or otherwise, in case of any breach of this Section 9.
Executive acknowledges and agrees that the restrictions contained in this Section 9 are reasonable and necessary for the protection of the Company and that they do not bear harshly upon Executive and agrees that: each restriction shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable for any reason the remaining restrictions shall not be affected; and if any restriction is found to be void but would be valid and enforceable if some part of it were deleted or modified, that restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.
10.Intellectual Property: The parties expect that Executive will in the performance of Executive’s duties develop intellectual property related to the business of the Company. Executive hereby assigns to FELLC any and all right, title and interest in and to such intellectual property, including any and all ideas, inventions, discoveries, trademarks, trade names, copyrights, patents and all other confidential, proprietary, or valuable information and data of any kind, developed by Executive in the course of performing Executive’s duties, or developed using Company property or resources (“Intellectual Property”). To the maximum extent permitted by law, all Intellectual Property shall be deemed “works made for hire” under the United States Copyright Act and FELLC is deemed to sole author of any Intellectual Property. To the extent any Intellectual Property is determined not to constitute “works made for hire,” Executive hereby assigns and transfers to FELLC all right, title, and interest in the Intellectual Property. Executive shall cooperate with the Company in taking any steps deemed necessary by the Company to protect, preserve, defend or enforce the Intellectual Property, such as filing patent applications. Executive will execute on request of the Company or its attorneys any and all documents necessary to record the assignment of Intellectual Property to FELLC, or to protect, preserve, defend or enforce it. Executive will disclose any Intellectual Property to the Company promptly upon its development. Executive agrees not to improperly use the intellectual property of any third party knowingly in the performance of Executive’s duties.
11.Company Rules, Policies and Procedures
11.1.Executive shall at all times observe the Ferguson Code of Conduct and all policies and procedures, codes and guidelines as may be issued by the Company, including any codes and guidelines relating to share dealings as may be issued from time to time, a copy of which is available on the Company’s Intranet. The Company may amend such policies and procedures at any time.
11.2.Consistent with the Ferguson Code of Conduct, Executive shall not at any time make any false, misleading or fraudulent statements in relation to the Company. This requirement shall survive the termination of Executive’s employment (for any reason).
12.Termination
12.1.Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. FELLC may terminate Executive’s employment after having established Executive’s Disability7 and while Executive remains Disabled by giving Executive written notice of its intention to terminate Executive’s employment. In such a case, Executive’s employment shall terminate effective on the 30th day after receipt of such notice; provided that, within 30 days after such receipt, Executive shall have failed to return to continuous full-time performance of Executive’s duties.
12.2.Cause. FELLC may terminate Executive’s employment for Cause effective immediately and Executive will automatically forfeit all entitlement to any and all bonuses (as described in Section 6.2), any and all entitlement to awards under the LTIP (as described in Section 7.1), and any and all other benefits described in this Agreement.
“Cause” shall exist in the event that Executive:
a)commits or is guilty of any gross misconduct, gross incompetence, or any wilful neglect in the discharge of Executive’s duties;
b)commits or continues (after warning) any material breach of this Agreement that amounts to gross misconduct, gross incompetence or wilful neglect in the discharge of Executive’s duties;
c)fails to perform adequately the duties assigned to Executive in the good faith opinion of the CEO; provided that the CEO has provided notice to Executive of such failure and an opportunity to cure such failure within thirty (30) days of such notice if such failure is realistically capable of being cured within thirty (30) days;
d)willfully fails to comply with any valid and legal directive of the CEO;
e)material violation(s) of the Company’s written policies and/or Code of Conduct, including but not limited to, those related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct;
f)engages in any material act or acts of fraud, dishonesty, illegal behavior, or other conduct tending to bring Executive or the Company into disrepute;
g)commits any act of bankruptcy or takes advantage of any statute for the time being in force offering relief for insolvent debtors; or
7 As used in this Agreement, “Disability” means an accidental injury, sickness, or mental illness of Executive that has prevented Executive from performing their essential duties for the Company, with or without a reasonable accommodation, for any consecutive period of 180 days; provided that any return to employment of less than 10 consecutive days shall be ignored and counted as an absence period. Such disability shall be deemed to have occurred on the 180th day of a given period (“Disability Effective Date”).
h)is indicted for, convicted of, or pleads guilty or nolo contendre to any felony offence or any other crime involving dishonesty, fraud or moral turpitude.
The CEO shall, in good faith, determine whether the definition of Cause has been met.8 There is no requirement that this determination be reduced to writing.
12.3.Good Reason. Executive’s employment may be terminated by Executive at any time for Good Reason or upon 6 months’ written notice to FELLC without Good Reason.
For purposes of this Agreement, “Good Reason” means the occurrence of one or more of the following, which is not cured within thirty (30) days of written notice thereof and which is asserted within 90 days of the occurrence thereof:
a)the assignment to Executive of any duties inconsistent in any material adverse respect with Executive’s duties or responsibilities as contemplated by Sections 2 and 4 of this Agreement;
b)any reduction in Executive’s Base Salary;
c)any other action by FELLC or Ferguson that results in material diminishment in Executive’s duties or responsibilities; provided that FELLC shall not be deemed to have breached this Section due to any change in the number of positions reporting to Executive as a result of a reduction in force;
d)FELLC’s failure to comply with any material provisions of this Agreement;
e)any purported termination of Executive’s employment by FELLC other than as permitted by this Agreement; or
f)a change in Executive’s reporting relationship (as set forth in Section 2 above) that is not mutually-agreed upon by the parties.
12.4.Notice of Termination. Any termination by FELLC or by Executive shall be communicated by a Notice of Termination to the other party in writing, which shall indicate the specific termination provision(s) of this Agreement relied upon, set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination, and specifies the effective date of Executive’s termination (“Termination Date”).
13.Obligations of the Company Upon Termination.
13.1.Death. If Executive’s employment is terminated by reason of Executive’s death, FELLC’s compensation obligations to Executive’s legal representatives under this Agreement shall be only those obligations accrued but unpaid hereunder at the date of Executive’s death, including, but not limited to, Base Salary, unused vacation, unreimbursed expenses, and any bonus for any completed fiscal year (collectively, “Accrued Amounts”), plus a pro rata bonus for the year of termination based on target results and the number of days that
8 In the event of any conflict between this Agreement and any other agreement with respect to the definition of “cause”, the definition of Cause set forth in this Agreement shall prevail.
Executive was employed during the fiscal year (“Pro Rata Bonus”). Executive’s family also shall be entitled to receive benefits at least equal to those provided by FELLC to surviving families of similarly situated executives of the Company under such plans, programs, and policies relating to family death benefits, if any, as in effect at such time.
13.2.Disability. If Executive’s employment is terminated by reason of Executive’s disability, Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to those provided by FELLC to similarly situated executives of the Company and/or their families in accordance with such plans, programs, and policies relating to disability, if any, as in effect at such time.
13.3.Good Reason; Other Than For Cause. If FELLC terminates Executive’s employment for any reason other than for Cause, but not due to Disability, or if Executive’s employment shall be terminated by Executive for Good Reason, then, subject to Section 13.4 below, FELLC shall pay to Executive an amount equal to:
a)any Accrued Amounts (as defined in Section 13.1 above); plus
b)Executive’s annual Base Salary (i.e., 12 months) in effect at the time the Notice of Termination was given; plus
c)Executive’s Pro Rata Bonus (as defined in Section 13.1 above) for the fiscal year in which such termination occurs.
In respect of any then-outstanding compensation, options, and rights of Executive under the Company’s applicable Long Term Incentive Plans, such compensation, options, and rights shall be paid or exercisable according to the terms of the relevant plan (including any discretions) then in effect and the terms of the applicable grant.
Executive and their dependents may be eligible for COBRA continuation coverage under the Company’s medical benefit plan following termination. FELLC shall provide a lump sum payment to Executive in an amount that would equal the cost that Executive would have to incur to purchase 12 months of such benefits with equivalent terms and conditions, less any employee contribution.
In the event of a Change in Control (as defined in the Company’s Change in Control Policy), Executive also may be eligible for the benefits and protections set forth in such policy.
13.4.Separation Agreement and Release. Executive’s eligibility for the severance payments described in Section 13.3 above is conditioned upon Executive, after Executive’s employment ends, signing and delivering and not revoking a release of claims in favor of the Company in a form consistent with FELLC’s then-current practice and reasonable satisfactory to FELLC. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.
The amounts specified in Section 13.3 above shall be paid in lieu of any separation payments that Executive would otherwise be entitled to under any severance plan or program covering employees of the Company. Subject to any applicable Internal Revenue Code Section 409A restrictions, as described more fully in Section 18 below,
such amounts shall be paid in a lump sum in cash within thirty (30) days after the expiration of any applicable revocation period following Executive’s execution and delivery of such release to FELLC.
13.5.Cause or Voluntary Resignation. In the event of Executive’s voluntary resignation without Good Reason or termination for Cause, Executive shall only be entitled to their Accrued Amounts (as defined in Section 13.1 above) and such other amounts as may be provided for under the Company’s plans. Executive shall provide FELLC with 6 months’ written notice of any voluntary termination without Good Reason, but FELLC may waive any portion of such notice period.
14.Notice Leave
14.1.If Executive resigns voluntarily without Good Reason, FELLC shall be under no obligation to provide work for or assign any duties to Executive for the whole or any part of the 6 months’ notice period, and may place Executive on leave by requiring Executive:
a)not to attend any Company premises; and/or
b)to resign with immediate effect from any offices that Executive holds with any Company entity (or any related trusteeships); and/or
c)to refrain from business contact with any customers, clients or employees of the Company; and/or
d)to take any holiday that has accrued in accordance with Section 7.5 during any period of suspension under this Section 14; and/or
e)not to compete with the Company; and/or
f)not to do any act or thing or make or cause to be made any statement reasonably likely to damage the business or reputation of the Company.
14.2.The provisions of Section 15 (Post-Termination Obligations) shall remain in full force and effect during any period of such notice leave. Executive also shall continue to be bound by Executive’s duties of good faith and fidelity to the Company and remain available to perform such duties and/or exercise such powers, authorities and discretions (if any) when called upon by FELLC to do so during such leave.
15.Post-Termination Obligations: On termination of Executive’s employment (however arising), Executive shall:
15.1.If required by FELLC, resign immediately and without compensation from any office or trusteeship that Executive holds in or on behalf of any Company entity;
15.2.Immediately deliver to FELLC all tangible Confidential Information, as well as any keys, credit cards and other property of the Company9 that is in Executive’s possession or control; and
9 Including, without limitation, any company car provided by FELLC to Executive.
15.3.Provide a signed statement that Executive has complied fully with Executive’s obligations under this Section 15, and further stating that Executive understands and will continue to comply with Executive’s post-employment obligations in this Agreement. FELLC may request, and Executive shall provide, reasonable evidence of Executive’s compliance with these provisions.
16.Suspension: For the purpose of carrying out an investigation in relation to any acts or defaults (or alleged or suspected acts or defaults) of Executive, FELLC may at any time, at its sole discretion, suspend Executive from employment hereunder, but without prejudice to Executive’s right to receive full remuneration hereunder. FELLC may require Executive not to enter any of the Company’s premises and/or may vary or remove Executive’s work duties during such period of suspension. Executive and FELLC agree that time would be of the essence under such circumstances, and FELLC agrees to use reasonable endeavors to expedite such investigation.
17.Ongoing Assistance: Subject to Executive’s reasonable availability on reasonable notice, Executive shall assist the Company in any internal investigations or administrative, regulatory, judicial or quasi-judicial proceedings. Executive acknowledges that this could involve, but is not limited to, responding or defending any regulatory or legal process, providing information in relation to any such process, preparing witness statements, and/or giving evidence in person on behalf of the Company. FELLC shall reimburse any reasonable out-of-pocket expenses incurred by Executive in connection with fulfilling this obligation.
18.Compliance With IRC Section 409A: The provisions of this Section will apply notwithstanding any provision to the contrary in this Agreement. In the event of any inconsistency between a provision in this Section and another provision in this Agreement, the provision in this Section will be the controlling provision:
18.1.To the extent applicable, it is intended that the compensation arrangements under this Agreement be in full compliance with Section 409A of the Internal Revenue Code (“Section 409A”). This Agreement shall be construed in a manner to give effect to such intention. Notwithstanding the foregoing, FELLC does not guarantee to Executive any specific tax consequences relating to entitlement to or receipt of payments or benefits pursuant to this Agreement. Executive shall be solely responsible for payment of any taxes or penalties in connection with this Agreement.
18.2.If at the time of Executive’s separation from service (within the meaning of Section 409A), (a) Executive is a specified employee (within the meaning of Section 409A and using the identification methodology selection by FELLC from time to time) and (b) FELLC makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid adverse tax consequences under Section 409A, then FELLC shall not pay such amount on the otherwise scheduled payment date, but shall instead pay it, without interest, on the first business day of the seventh month after such six-month period.
18.3.No payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon Executive’s termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A). Each payment and benefit to be made or provided to Executive pursuant to this
Agreement will be considered a separate payment and not one of a series of payments for purposes of Section 409A. Whenever a payment period is specified with reference to a number of days, the actual date of payment within the specified period will be within the sole discretion of FELLC.
19.Governing Law; Dispute Resolution: This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia excluding that body of law known as conflicts of law. To give effect to this provision, the parties expressly and irrevocably consent to personal jurisdiction and exclusive venue in Virginia state and federal courts.
20.Notices: Any notice or other communication required, permitted or desirable hereunder shall be hand delivered (including, without limitation, delivery by a commercial courier service) or sent by United States registered or certified mail, postage prepaid, by facsimile or electronic mail addressed as follows:
If to FELLC:
Ferguson Enterprises, LLC
Attention: Sammie Long
751 Lakefront Commons
Newport News, Virginia 23606
If to Executive:
William Thees
[ ]
[ ]
Or such other addresses as shall be furnished in writing by the parties. Any such notice of communication shall be deemed to have been given as of the date so delivered in person or three business days after so mailed.
21.Successors and Assigns: FELLC may assign its rights under this Agreement to any successor to its business (by merger, acquisition of substantially all of FELLC’s assets, or otherwise). Executive may not assign Executive’s rights or delegate Executive’s duties under this Agreement without the prior written consent of FELLC. Executive also understands and agrees that this Agreement shall be binding upon and inure to the benefit of Executive’s heirs and executors or administrators.
22.Entire Agreement; Amendments: This Agreement sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof, and all other written or oral agreements are void. This Agreement may be amended, modified or terminated only by a written instrument signed by the parties hereto.
23.Severability: If any provision of this Agreement, or the applications thereof under certain circumstances, is held to be invalid or unenforceable for any reason, the remainder of this Agreement, or the application of such provision under other circumstances, shall not be affected thereby.
24.Protected Rights Exclusion: Notwithstanding any contrary provision, this Agreement shall not, in any way, restrict or impede Executive from: (a) exercising their protected rights (including,
without limitation, under applicable SEC or other governmental rules and regulations), to the extent that such rights cannot be waived by agreement; or (b) complying with any applicable law, regulation, rule, or valid order of a court of competent jurisdiction or an authorized government agency.
IN WITNESS WHEREOF, the parties have executed this Amended & Restated Employment Agreement as of the day and year written below.
FERGUSON ENTERPRISES, LLC:
By: /s/ Sammie Long
Name: Sammie Long
Title: Chief Human Resources Officer
EXECUTIVE:
/s/ William Thees
William Thees
AMENDED ON:
August 30, 2023
| | | | | |
| [ XX], 202X] | |
Private & Confidential
[Name] [Address] [Address] [Address] [Country] | |
Dear [name]
Appointment as Non Executive Director of Ferguson plc (“Company”)
[I am delighted to confirm that the Company’s Board of Directors (the “Board”) has unanimously approved your appointment to the Board. This letter sets out the terms on which it is agreed that you will serve as a Non Executive Director of the Company.]1 / [In connection with the Company’s listing on the New York Stock Exchange and the transfer of the Company’s listing category on the Official List from Premium to Standard Listing, the terms of your appointment as a Non Executive Director have been updated to reflect these developments. This letter sets out the terms on which it is agreed that you will continue to serve as a Non Executive Director of the Company and shall be effective as of 1 October 2022 (the “Effective Date”). Any previous letter relating to the terms of your appointment as a Non Executive Director of the Company shall automatically cease to have effect as of the Effective Date.]2
Appointment
1.[Your appointment on the terms of this letter as a Non Executive Director will be effective from the Effective Date.]3 / [You were appointed as a Non Executive Director of the Company on [ ]]4 (the “Appointment Date”).
2.Your initial appointment as a Non Executive Director shall run from the Appointment Date until the earlier of the next annual general meeting (“AGM”), your resignation or the termination of your appointment in accordance with the terms of this letter (such period of appointment, a “Term”). Subject to review by the Board and the Nominations and Governance Committee of the Board, you may be nominated for appointment for one or more additional Terms, which appointment shall be subject to your successful election/re-election at the next applicable AGM. There is no right to re-nomination by the Board.
1 Note to Draft: For newly appointed directors.
2 Note to Draft: For existing directors.
3 Note to Draft: For newly appointed directors.
4 Note to Draft: For existing directors.
3.Nothing in this letter shall be taken to exclude or vary the terms of the Company’s Articles of Association (as amended from time to time, the “Articles of Association”) as they apply to you as a director of the Company. Your continued appointment as a Non Executive Director is subject to election by the Company’s shareholders at the AGM scheduled to be held in [insert year] and to re-election at any subsequent AGM at which the Articles of Association require, or the Board resolves, that you stand for re-election.
4.Your appointment is subject to compliance with the Corporate Governance Guidelines approved from time to time by the Board (“CGG”). The CGG in effect at the date of this letter require that all directors will be subject to annual election at the AGM. In connection with your appointment as a Non Executive Director, you will also serve on the [Audit Committee, the Compensation Committee, the Nominations and Governance Committee and the Major Announcements Committee]. You [will be sent/have access to] the Charters for those Committees.
5.You will comply with the Company’s requirements regarding the minimum shareholding level (approved from time to time by the Board or any Committee of the Board to which approval has been delegated).
Termination of appointment
6.You agree to immediately resign from your appointment as a Non Executive director, as a member of any Committee of the Board and as a director of any company in the Ferguson Group if you:
6.1.commit a material breach of your obligations under this letter; or
6.2.commit any serious or repeated breach or non-observance of your obligations to the Company (which include an obligation not to breach your duties to the Company, whether statutory, fiduciary or common-law); or
6.3.are disqualified from being a director by reason of any order made under the Companies (Jersey) Law 1991 (as amended), the Bankruptcy (Désastre) (Jersey) Law 1990 (as amended) or any other enactment or law; or
6.4.fail to comply with any rules which the Board adopts from time to time for the conduct of its proceedings and for the making of key strategic, management and commercial decisions which are necessary for the conduct of the Company’s business as a whole and, in the reasonable opinion of the Board, such failure will prejudicially affect the business of the Company; or
6.5.are guilty of conduct which in the reasonable opinion of the Board is likely to bring yourself or the Company into disrepute or otherwise affect prejudicially the interests of the Company or any company in the Ferguson Group; or
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
2
6.6.are convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the UK or elsewhere for which a fine or non-custodial penalty is imposed).
7.The Company Secretary is irrevocably authorised to sign a letter of resignation on your behalf if you fail to resign in accordance with paragraph [6].
8.Your appointment as a Non Executive Director and as a member of any Committee of the Board will terminate forthwith and automatically without any further action if you:
8.1.are not re-appointed as director at any AGM of the Company at which you stand for re-election; or
8.2.are removed as a director by resolution passed at a general meeting; or
8.3.cease to be a director pursuant to any provision of the Articles of Association, including but not limited to Article [147].
9.You undertake to resign as a director of any company in the Ferguson Group immediately upon termination of your appointment as a Non Executive director of the Company in accordance with paragraph [8]. The Company Secretary is irrevocably authorised to sign a letter of resignation on your behalf if you fail to do so.
10.You may resign from your position as Non Executive Director at any time by providing the Company with not less than 3 months’ notice in writing. If you resign from your position as Non Executive Director, you must concurrently resign as a member of any Committee of the Board and as a director of any company in the Ferguson Group. The Company Secretary is irrevocably authorised to sign a letter of resignation on your behalf if you fail to do so.
11.You will not be entitled to any compensation upon your resignation or the termination of your appointment as a Non Executive director of the Company howsoever occurring.
12.Upon resignation or the termination of your appointment you shall only be entitled to such fees as may have accrued to the date of termination, together with reimbursement in the normal way of any expenses properly incurred prior to that date, and any awards of shares, if relevant, in accordance with the rules of any NED Plan (as defined below).
13.Upon resignation or the termination of your appointment, you shall forthwith deliver to the Company all books, documents, papers and other property of or relating to the business of the Company which may then be in your possession or under your power or control and you shall not retain any copies or extracts.
Compensation and expenses
14.You will be entitled to a fee for your services as a Non Executive Director of the Company at the rate of [$/£XX,XXX] per annum[, a fee for your services as chair of
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
3
the Audit/Compensation/Nominations and Governance Committee of $/£XXXX, and a fee for your services as Employee Engagement Director of $/£XXX]. Such fees will accrue from day to day and be payable monthly in arrears not later than the last day of each calendar month subject to deduction of any taxes or other amounts that are required by the law of any relevant jurisdiction, including but not limited to any deduction required to be made in accordance with UK tax legislation and US social security contributions. You will not be entitled to participate in any bonus plan or arrangements, executive or employee share scheme, pension plan, private medical health and sickness plan or in any prolonged disability plan. You may be entitled to participate in any shareholder approved share plan that permits awards to be made to Non Executive Directors (“NED Plan”). Your participation in and receipt of awards under a NED Plan are discretionary and not an entitlement, and are subject to: the approval of the Board; the terms of the NED Plan; the terms on which any NED Plan award is made, including those terms in an award agreement; and all applicable laws, rules and regulations. The Company will provide you with support to assist you with the additional administration required for you to complete any US and UK tax return filing obligations relating to your appointment as a Non Executive Director of the Company.
15.Your fee will be reviewed from time to time by the Board.
16.If you are called on or requested to perform any special duties or responsibilities outside your ordinary duties as a Non Executive Director, the Board may agree to pay you additional or special compensation.
17.In addition, the Company shall reimburse all reasonable out of pocket expenses incurred by you on the business of the Company (including, for the avoidance of doubt, all reasonable travel and accommodation expenses as may be required in the course of your appointment) on the basis prescribed by the Articles of Association, subject to you providing such receipts or other evidence as the Company may require.
18.Air travel on Company business is normally in business class. You will be provided with Travel and Personal Accident Insurance in accordance with the Company's policy from time to time. You acknowledge that the proceeds of any claim made on the personal accident policy are paid to the Company and that any payment made by the Company from such proceeds is currently discretionary.
19.In addition to the reimbursement of expenses referred to in paragraph [17], where there is the need for intercontinental flight in excess of five hours (one way) based on your home location and the location of the Board or Committee meeting which you need to attend, you will be entitled to receive an allowance of [$3,250/£2,500] (the “Allowance”). The maximum amount payable to you in relation to the Allowance is [$39,000/£30,000] per annum. If you attend Board or Committee meetings which entitle you to the Allowance, payment will be made to you in the next available payroll.
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
4
Duties and time commitment
20.As a Non Executive Director, you have the same general legal responsibilities to the Company as any other director and you will perform the duties normally attendant on those offices including (without limitation) attending periodic Board meetings. You are required to comply with any rules which the Board adopts from time to time for the conduct and location of its proceedings and for the making of the key strategic, management and commercial decisions which are necessary for the conduct of the Company's business as a whole. You are expected to work with and through the Board; you are not expected to undertake executive duties or to assume executive responsibilities. You will be expected to devote such time as is necessary for the proper performance of your duties including your membership of [the Audit Committee, the Compensation Committee, the Nominations and Governance Committee and the Major Announcement Committee]. Overall, it is estimated that a time commitment of [1 or 2] days per month (in addition to preparation work and travel) will be required.
21.The nature of the role makes it impossible to be specific about the maximum time commitment, and there is always the possibility of additional time commitments in respect of ad hoc matters which arise from time to time, and particularly when the Company is undergoing a period of increased activity. At certain times it may be necessary to convene additional Board, Committee or shareholder meetings.
22.The estimated time commitment stated at paragraph [20] will increase should you become a member or chair of any additional Committees, or if you are given other additional responsibilities. Details of the expected increase in time commitment will be covered in any relevant communication confirming the additional responsibility.
23.By accepting this appointment you will be expected to perform your duties faithfully, efficiently and diligently in accordance with statutory, fiduciary and common law, to a standard commensurate with both the functions of your role and your knowledge, skills and experience.
24.You will exercise your powers in your role as Non Executive Director in accordance with relevant obligations under prevailing law and regulation, including the Companies (Jersey) Law 1991 (as amended), the CGG, the New York Stock Exchange listing standards, the Sarbanes-Oxley (SOX) Act of 2002, the Securities Exchange Act of 1934, the Securities Act of 1933, any applicable regulations that may be issued by the U.S. Securities and Exchange Commission, any regulations that may be issued by the UK Financial Conduct Authority, any regulations that may be issued by any other regulatory body, the Market Abuse Regulation or any equivalent legislation, and all codes of conduct and other policies and procedures adopted from time to time by the Board or the Company.
25.In order for there to be a thorough consideration of the issues prior to, and informed debate and challenge at, Board meetings, it is essential that you have access to high quality information. You are entitled to request, and should insist on receiving, all
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
5
relevant information about the Company’s affairs as is reasonably necessary in order to enable you to discharge your duties. You should seek clarification or amplification from management where you consider that the information provided is inadequate or lacks clarity.
26.By accepting your appointment, you confirm that:
26.1.you are able to allocate sufficient time to meet the expectations of your role;
26.2.you have disclosed all significant other commitments to the Board, with an indication of the time involved;
26.3.you will inform the Company in writing in advance of any changes to these commitments; and
26.4.you understand that additional external appointments should not be undertaken except in accordance with the CGG.
Independence and outside interests
27.It is accepted and acknowledged that you have business interests other than those of the Company and have declared any conflicts that are apparent at present. The Board has determined that you are independent within the meaning of the CGG and the New York Stock Exchange listing standards and you will be identified as such in the Company's public documentation. If circumstances change, and you believe that your independence may be in doubt, you should discuss this with me as soon as practicable. The Board will annually review and determine the status of your independence.
28.During the term of your appointment, you shall not (except with the prior written permission of the Company) be directly or indirectly:
28.1.employed or engaged, in any other business or undertaking to the extent that such engagement prevents you carrying out your obligations under the terms of this letter or puts you in a position where your interests conflict or may conflict with those of the Company or a company in the Ferguson Group; or
28.2.concerned or interested in any trade or business competing with that carried on by the Company or any other company in the Ferguson Group, provided that this shall not prohibit the holding (directly or through nominees) of investments listed on any recognised stock exchange up to a maximum of 3 per cent of the issued shares or other securities of any class of any one company.
Confidentiality
29.You acknowledge that all information acquired during your appointment is confidential (such information, “Confidential Information”) to the Company and should only be used in the course of your duties as a Non Executive Director and in furtherance of
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
6
the Company’s business and you agree not to make use of any Confidential Information for your own purpose or for the benefit of any other entity or person. You agree to not release, communicate, or disclose either during your appointment or following termination (by whatever means), any Confidential Information to third parties without prior clearance from me or the Company Secretary. The restriction in this paragraph [29] shall cease to apply to any Confidential Information which may (other than by reason of your breach) become available to the public generally.
30.Your attention is drawn to requirements under both legislation and regulation as to the disclosure of inside information and material non-public information. Consequently, you should not make any written or oral statements that might risk a breach of these requirements without prior clearance from me or the Company Secretary.
31.You acknowledge the need to hold and retain Confidential Information (in whatever format you may receive it) under appropriately secure conditions.
32.You hereby waive all rights by virtue of Chapter IV of Part I of the Copyright Designs and Patents Act 1988 in respect of copyright works created by you in the course of performing your duties as a Non Executive Director.
Insurance and indemnity
33.The Company has directors’ and officers’ liability insurance in place and it is intended to maintain such cover for the full term of your appointment. You have been informed of the current indemnity limit on which the Board is updated from time to time. Other details of the cover are available from the Company Secretary.
34.You will also be granted a deed of indemnity by the Company, which shall replace any previous deeds of indemnity granted to you by any subsidiary of the Company.
Review process
35.The performance of individual directors and the whole Board, as well as its Committees, is reviewed annually. Please let me or the chair of the Nominations and Governance Committee know if, in the interim, there are any matters which cause you concern about your role.
General
36.All data which the Ferguson Group holds relating to you is held and processed in accordance with the Ferguson plc Employee Privacy Notice. A copy of the notice can be found on the Directors’ Portal in Diligent.
37.Circumstances may occur when it will be appropriate for you to seek advice from independent advisers at the Company’s expense. A copy of the Board’s agreed procedure under which directors may obtain independent advice will be provided by the Company Secretary. The Company will reimburse the reasonable cost of expenditure incurred by you in accordance with its policy.
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
7
38.You must inform the Company promptly of any change in your address or telephone (including mobile telephone) contact details.
39.For the purposes of this letter, “Ferguson Group” shall mean the Company and its subsidiary and associated undertakings, from time to time.
40.This Agreement may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this Agreement by e-mail attachment shall be an effective mode of delivery.
41.This letter is governed by, and shall be construed in accordance with, the laws of England and is subject to the exclusive jurisdiction of whose courts the parties agree to submit.
42.It is agreed that, on acceptance of this offer, this letter will constitute a contract for services and not a contract of employment.
I should be grateful if you would indicate your acceptance of these terms by executing as a deed and returning to me the enclosed copy of this letter.
Yours sincerely
____________________________
For and on behalf of the Company
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
8
ON COPY LETTER
I acknowledge that I have read and understood this letter and I hereby agree to the terms set out above.
SIGNED as a DEED and )
DELIVERED by )
[NAME] ) ………………………………
in the presence of: )
Witness’s Signature …………………………………
Witness’s Name (in capitals) ……………………......
Witness’s Address: ...…………………………………...
………………………………………………………......
…………………………………………………………...
Date: ……………………………………………………..
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
9
Schedule I
Ferguson plc (the “Company”) has entered into a Non Executive Director Appointment Letter (“Letter”) with each of the non executive directors of the Company named below, as of the dates indicated, which agreements are substantially identical in all material respects to the form set forth immediately above this Schedule I:
1.Letter dated January 25, 2023, acknowledged and agreed by Kelly Baker on January 25, 2023.
2.Letter, dated January 25, 2023, acknowledged and agreed by Geoff Drabble on January 25, 2023.
3.Letter, dated January 25, 2023, acknowledged and agreed by Cathy Halligan on January 25, 2023.
4.Letter, dated January 25, 2023, acknowledged and agreed by Brian May on January 27, 2023.
5.Letter, dated January 25, 2023, acknowledged and agreed by James S. Metcalf on January 28, 2023.
6.Letter, dated January 25, 2023, acknowledged and agreed by Alan Murray on January 25, 2023.
7.Letter, dated January 25, 2023, acknowledged and agreed by Tom Schmitt on January 25, 2023.
8.Letter, dated January 25, 2023, acknowledged and agreed by Nadia Shouraboura on January 25, 2023.
9.Letter, dated January 25, 2023, acknowledged and agreed by Suzanne Wood on January 25, 2023.
Ferguson plc 1020 Eskdale Road, Winnersh Triangle, Wokingham, RG41 5TS
Tel: +44 118 9273800 | www.fergusonplc.com
Registered in Jersey, Company No. 128484. Registered office: 13 Castle Street, St Helier, Jersey JE1 1ES, Channel Islands. Registered in the UK as Ferguson Group Holdings, UK Establishment No. BR021199
10
Change in Control Policy
Ferguson plc (including all of its subsidiaries worldwide, the Company) may from time to time consider the possibility of an acquisition by another company or other Change in Control transaction. The Company recognizes that such considerations can be a distraction to the executive officers of the Company and can cause these individuals to consider alternative employment opportunities.
The Committee has determined that it is in the best interests of the Company and its shareholders to incent these individuals to remain with the Company so that the Company will have the continued dedication and objectivity of such executive officers, notwithstanding the possibility, threat or occurrence of a Change in Control of the Company.
Accordingly, the Committee believes that it is in the best interests of the Company and its shareholders to provide such officers with an incentive to continue their employment and to motivate such individuals to maximize the value of the Company upon a Change in Control for the benefit of its shareholders by providing them with certain benefits upon a Change in Control that provide them with enhanced financial security and incentive notwithstanding the possibility or occurrence of a Change in Control.
POLICY PRINCIPLES
A.Definition Of Terms.
The following terms referred to in this Policy shall have the following meanings:
Committee means the Compensation Committee of the Board of Directors of the Company (or a successor committee with the same or similar authority).1
Cause has the same meaning as such term is defined in the respective Officer’s Employment Agreement.
Change in Control means the occurrence of any of the following events:
(i)A “Change in Control” as defined in Appendix A of the Ferguson Group Performance Ordinary Share Plan 2019; or
(ii)A “Relevant Event” as defined in sub-paragraphs (a) through (c) of Section 8.1 (“Take-Over”) of the Ferguson Group Long Term Incentive Plan.
1 Prior to August 1, 2022, the Committee was called the Remuneration Committee.
Notwithstanding the foregoing, if required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
Code means the Internal Revenue Code of 1986, as amended.
Employment Agreement means the most-recent contract signed and entered into by the Company (or subsidiary) and the respective Officer regarding the Officer’s terms and conditions of employment.
Good Reason has the same meaning as such term is defined in the Officer’s Employment Agreement;2 provided that (notwithstanding any contrary provision in such Employment Agreement) an Officer invoking Good Reason must do so within 90 days of the initial existence of the triggering condition in order to qualify as Good Reason under this Policy.3
Release means the contract, form or general release required by the respective Officer’s Employment Agreement that serves as consent in writing to release of the legal liability of the Company.
Policy Benefits means the benefits and payments in Sections C and D of the Policy.
Separation Benefits means the benefits and payments in Section C.
Target Level of Performance means the level or amount of vesting of a respective stock-based award that occurs pursuant to a stock award when the Company and/or individual meets target performance goals.
2 In the event that an Officer does not have Good Reason defined in their Employment Agreement, then the following Good Reason provision shall apply: “Good Reason” means the occurrence of one or more of the following, which is not cured within thirty (30) days of written notice thereof and which is asserted in writing by the Officer within 90 days of the occurrence thereof: (a) the assignment to the Officer of any duties inconsistent in any material adverse respect with the Officer’s duties or responsibilities as contemplated in their Employment Agreement; (b) any reduction in the Officer’s Base Salary; (c) any other action by the Company that results in material diminishment in the Officer’s duties or responsibilities; provided that the Company shall not be deemed to have breached this provision due to any change in the number of positions reporting to the Officer as a result of a reduction in force; (d) the Company’s failure to comply with any material provisions of the Officer’s Employment Agreement; (e) any purported termination of the Officer’s employment by the Company other than as permitted by the Officer’s Employment Agreement; or (f) a change in the Officer’s reporting relationship (as set forth in the Officer’s Employment Agreement) that is not mutually-agreed upon by the parties.
3 For the avoidance of doubt, and notwithstanding any contrary provision, a Good Reason termination shall not have occurred under this Policy unless it also meets the requirements for a “Good Reason” termination under Section 409A of the Code and the Treasury Regulations thereunder.
B.Eligibility
This Policy shall be applicable to each individual who is designated by the Board of Directors as an Executive Officer of the Company as of (a) the Company’s latest Annual Report on Form 10-K filed with the SEC and such Officer remains employed by the Company as the effective date of a Change in Control, and/or (b) as the effective date of a Change in Control (each, an Officer).
C.Separation Benefits Upon Involuntary Termination
If, in connection with a Change in Control, or within twenty-four (24) months following the effective date of a Change in Control, the Officer’s employment with the Company (or its successor) is terminated by the Company (or the successor) without Cause or the Officer terminates their employment with the Company (or the successor) for Good Reason (in each case as defined below), then as of the effective date of such employment termination (Termination Date) and subject to the conditions of this Policy, the Officer will be entitled to the following benefits:
1.Vesting Acceleration Upon Termination
The remaining unvested portion of any stock options, stock awards, restricted shares, or performance shares held by the Officer shall accelerate and vest, without any pro-ration for time, as of the Termination Date.4
2.Cash Severance
The Company will pay to the Officer cash severance (the Severance Payment) in an amount equal to the sum of (a) plus (b), where:
“(a)” equals the Officer’s Target Annual Bonus for the year in which the Termination Date occurs, prorated based on the number of days during the performance period that the Officer was employed with the Company, divided by 365 days; and
“(b)” equals three (3) times (for the CEO) or two (2) times (for all other Officers) the sum of:
(i) the Officer’s Base Salary, plus
4 For purposes of Section C of this Policy, with respect to any Officer’s awards with performance vesting conditions, such awards shall vest based on their respective performance conditions as reasonably determined by the Company in good faith based on performance forecasts available as of the Termination Date; provided that in the event that such performance vesting conditions are below the vesting requirements for meeting the Target Level of Performance as set forth in each respective award agreement or grant, then the respective pro-rated shares or options below the Target Level of Performance shall be forfeited and the Company shall also provide to such Officer upon a Termination covered by this Policy a lump sum cash payment equal to the difference between (a) the pre-tax cash value of such award at Target Level of Performance, less (b) the pre-tax cash value of such award computed using the performance forecasts available as of the Termination Date.
(ii) the Officer’s Target Annual Bonus for the year in which the Termination Date occurs (or if no target has been set as of the Termination Date, then the target annual cash incentive amount for the prior year).
Subject to the conditions set forth in the Policy, such Severance Payment will be made in one lump sum as soon as reasonably practicable following the expiration of the revocation period of the Release, not later than March 15 after the year of termination. This Cash Severance benefit shall be in lieu of any comparable cash severance benefit (i.e., with regard to base salary and annual bonus) that otherwise may be provided in the Officer’s Employment Agreement; provided that all other separation benefits as may be described in the Officer’s Employment Agreement shall remain valid.
3.Conditions to Payment of Benefits
Notwithstanding anything else to the contrary contained herein, no Officer shall be entitled to payment of any benefits provided under this Section C or otherwise under this Policy unless and until the Company (or its successor) shall have received a Release in the time period set forth in the Employment Agreement and the Officer has been in compliance and continues to be in compliance with all of the covenants contained in their respective Employment Agreement and the Release.
D.Vesting Acceleration at Change in Control
In the event that the acquiring entity does not agree to assume the Company’s existing share plans following the Change in Control (or fully replace the remaining unvested portion of any stock options, stock awards, restricted shares, or performance shares held by the Officer immediately prior to the effective date of the Change in Control with an equivalent or better share award), then the remaining unvested portion of any such stock options, stock awards, restricted shares, or performance shares held by the Officer shall accelerate and vest, without any pro-ration for time, immediately prior to the effective date of the Change in Control.5 With respect to any replacement share awards that have performance conditions, if the performance vesting targets for such replacement share awards are not substantially equivalent to the former performance vesting targets for the pre-Change in Control awards in terms of overall design, goals, ch
5 For purposes of Section D of this Policy, with respect to any Officer’s awards with performance vesting conditions, such awards shall vest based on their respective performance conditions as reasonably determined by the Company in good faith based on performance forecasts available as of the effective date of the Change in Control; provided that in the event that such performance vesting conditions are below the vesting requirements for meeting the Target Level of Performance as set forth in each respective award agreement or grant, then the respective pro-rated shares or options below the Target Level of Performance shall be forfeited and the Company shall also provide to such Officer upon the Change in Control a lump sum cash payment equal to the difference between (a) the pre-tax cash value of such award at Target Level of Performance, less (b) the pre-tax cash value of such award computed using the performance forecasts available as of the effective date of the Change in Control.
aracteristics, and attainability by the respective Officer, then such replacement share awards shall be deemed to be not equivalent for purposes of the foregoing sentence.
E.Taxes.
1.General Withholding Tax Obligations
The Officer shall be responsible for any income, excise or other taxes imposed on the Officer under applicable law with respect to the benefits provided hereunder, including without limitation delivering to the Company (or its successor) any amounts necessary to timely satisfy any applicable withholding tax obligations. The Officer’s receipt of any benefit hereunder is conditioned on his or her satisfaction of any applicable withholding or similar obligations that apply to such benefit, and any cash payment owed hereunder will be reduced to satisfy any such withholding or similar obligations that may apply.
2.Limitation on Payments
Upon a Change of Control, in the event that the Company’s legal counsel or accountants determine that any payment, benefit or transfer by the Company under this Policy or any other plan, agreement, or arrangement to or for the benefit of an Officer (in the aggregate, the Total Payments) to be subject to the tax (Excise Tax) imposed by Code Section 4999 but for this Section E, then, notwithstanding any other provision of this Policy to the contrary, the Total Payments shall be delivered either (a) in full or (b) in an amount such that the value of the aggregate Total Payments that the Officer is entitled to receive shall be One Dollar ($1.00) less than the maximum amount that the Officer may receive without being subject to the Excise Tax, whichever of (a) or (b) results in the receipt by the Officer of the greatest benefit on an after-tax basis (taking into account applicable federal, state and local income taxes and the Excise Tax).
In the event that clause (b) results in a greater after-tax benefit to the Officer, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order:
(i)the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio;
(ii)the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and
(iii) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Total Payments (on the basis of the relative present value of the parachute payments).
The Company shall direct its legal counsel or accountants to prepare the calculation described hereinabove, including the calculation regarding whether payments are owed under clause (a) or (b) above, upon the written request of the Officer.
3.Code Section 409A
It is the parties’ intent that this Policy and the benefits payable hereunder comply with or are exempt from the requirements of Code Section 409A and any final regulations and guidance promulgated thereunder (collectively, Section 409A) so that none of the Policy Benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. Notwithstanding anything to the contrary in this Policy (or other agreement or arrangement), if Officer is a “specified employee” within the meaning of Section 409A at the time of Officer’s “separation from service” (as defined in Section 409A) (other than due to death), and if the amounts payable to Officer pursuant to this Policy, when considered together with other severance payments or Policy Benefits, if any, to which Officer may be entitled under any other agreement or arrangement, would be considered deferred compensation under Section 409A (together, the Deferred Compensation Separation Benefits), then only that portion of the Deferred Compensation Separation Benefits which does not exceed the Section 409A Limit (as defined below) may be made within the first six (6) months following Officer’s separation from service date in accordance with the payment schedule that otherwise applies to each payment or benefit.
Any portion of the Deferred Compensation Separation Benefits in excess of the Section 409A Limit otherwise due to Officer on or within the six (6) month period following Officer’s separation from service will accrue during such six (6) month period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the separation from service date. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule otherwise applicable to each payment or benefit. For these purposes, each severance payment provided for under this Policy is hereby designated as a separate payment and will not collectively be treated with any other payments as a single payment.
Notwithstanding anything herein to the contrary, if Officer dies following his or her separation from service but prior to the six (6) month anniversary of his or her separation from service date, then any payments delayed in accordance with this Section will be payable in a lump sum as soon as administratively practicable after the date of Officer’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. In addition, to the extent that the Release Period spans two calendar years, such Deferred Compensation Separation Benefits will not commence until the second calendar year regardless of whether the Officer is a “specified employee” within the meaning of Section 409A.
For purposes of this Policy, Section 409A Limit will mean the lesser of two (2) times: (i) Officer’s annualized compensation based upon the annual rate of pay paid to Officer during the Company’s taxable year preceding the Company’s taxable year of Officer’s termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Code Section 401(a)(17) for the year in which Officer’s separation from service occurs.
Notwithstanding anything to the contrary contained in this Policy, to the extent that any amendment to this Policy would constitute under Section 409A a delay or acceleration in payment of a Deferred Compensation Separation Benefit, or a change in the form of payment of a Deferred Compensation Separation Benefit, then such any amendment that effects a delay in a payment or a change in the form of payment must be done in a manner that complies with Section 409A(a)(4)(C) and any amendment that effects an acceleration of payment must be done in a manner that complies with Treas. Reg. §1.409A-3(j).
F.Governing Law
This Policy shall be governed by the laws of the Commonwealth of Virginia.
G.Severability
By executing this Policy below, the Officer agrees with the Company that each provision herein will be treated as a separate and independent clause, and the unenforceability of any one clause shall in no way impair the enforceability of any of the other clauses. The parties intend that the Covenants will be construed as a series of separate covenants, one for each county, city, state, nation and other political subdivision of the territories in which the Company does business. If, in any judicial proceeding, a court refuses to enforce any of the separate covenants (or any part thereof) deemed included in the Covenants, then such unenforceable separate covenant (or such part) shall be deemed eliminated from this Policy for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced by the court. The parties intend that the Covenants be enforced to the maximum degree permitted by applicable law.
H.Death of Officer
If an Officer dies after becoming eligible for Policy Benefits and executing the Release but before full receipt of the Policy Benefits, then the Policy Benefits for which Executive is eligible shall be paid to the Officer’s estate. If an Officer dies after becoming eligible for Policy Benefits but before executing the Release, then no Policy Benefits with respect to the Officer are payable under this Policy unless the Officer’s estate executes a release comparable to the Release for and on behalf of the estate of the Officer.
I.Offsets and Clawback
The Company may, in its discretion and to the extent permitted under applicable law and/or Code Section 409A, offset or clawback (pursuant to the circumstances set forth the Officer’s Employment Agreement) against the Officer’s benefits under this Policy the fair market value of unreturned property, and any outstanding loan, debt or other amount the Officer owes to the Employer. The Company may recover any overpayment of benefits made to an Officer or an Officer’s estate under this Policy or, to the extent permitted by applicable law, offset any other overpayment made to the Officer against any Policy benefits or other amount the Employer owes the Officer or the Officer’s estate.
J.Administration
This Policy shall be administered by the Committee. The Committee shall have the absolute discretion and exclusive right to interpret, construe and administer the Policy in good faith and to make final determinations on all questions arising under the Policy, including but not limited to questions concerning eligibility for, the amount of and receipt of Policy benefits. All decisions of the Committee will be conclusive, final and binding upon the parties.
K.Amendment or Termination of the Policy
The Company reserves the right to amend or terminate this Policy at any time in its sole discretion by action of the Committee until the occurrence of a Change in Control. Following a Change in Control, the Company may amend or terminate the Policy only upon the written approval by all of the Officers who, financial or otherwise, may be negatively affected/impacted by such amendment or termination.
L.General
Any successor to the Company (whether direct or indirect, and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the Company’s obligations under this Policy. An Officer may not assign or transfer his or her rights under the Policy to any other person or entity. Notwithstanding the foregoing, the terms of the Policy and all rights of an Officer hereunder will inure to the benefit of, and be enforceable by, his or her personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
APPLICATION OF THIS POLICY
Any conflict between this Policy and the laws of any country in which the Company operates shall be referred to the Group General Counsel.
The Committee authorizes the Group General Counsel (or delegate) to establish additional policies, procedures and guidelines to help implement this Policy.
GUIDANCE
For further guidance on any aspect of this Policy, please contact the Group General Counsel.
This Policy is owned and issued by Compensation Committee of the Board of Directors.
Approved by the Ferguson plc Compensation Committee: July 27, 2022; Effective: August 1, 2022
Issue Number: 1
Previously Issued: N/A
Exhibit 10.46
APPROVED BY THE BOARD: 21 JANUARY 2015
UPDATED: 1 AUGUST 2017
FERGUSON PLC
FERGUSON GROUP SHARE PLANS: RETIREMENT POLICY
Unless otherwise specified in the rules of the Plans, any UK tax resident participant in any of the Plans shall be treated as having retired, for the purpose of the operation of the rules of the Plans only (and not for any other purpose relating to a participant’s employment, pension or any other matter), if he or she ceases to be employed, is aged 60 years or above at the date of cessation of employment and has informed the Company or his or her employing company in writing that he or she intends to retire unless:
a)the Company or employing company has good reason to believe prior to the cessation of employment that the participant is not in fact intending to retire, in which case the employee will not be treated as having retired; or
b)the participant has a contractual or other entitlement in respect of awards granted on or prior to 31 December 2014 to retire at an age lower than 60 years, in which case the participant will be entitled to be treated as having retired at that lower age for the purpose of those awards only; or
c)the participant has in fact ceased employment for any reason other than retirement, in which case the employee will not be treated as having retired.
In respect of other participants in the Plans, the Company will observe local laws relating to retirement in determining whether a participant should be treated as having retired.
Plans means the Company’s current and future share-based long term incentive and all-employee savings plans, including its executive share option plans, long term incentive plans, ordinary share plans, international sharesave plans, savings-related share option schemes and employee share purchase plans.
This policy applies solely to the operation of all the Company’s Plans and will be reviewed annually by management.
Ferguson Group Share Plans: Retirement Policy August 2017
FERGUSON ENTERPRISES INC. EXECUTIVE LIFE INSURANCE PLAN II
PLAN DOCUMENT
ARTICLE I
INTRODUCTION
1.1 Purpose of Plan. The purpose of the Ferguson Enterprises Inc. Executive Life Insurance Plan II (the “Plan”) is to provide Participants (as defined below) with life insurance coverage pursuant to which each such Participant (or trustee or other permitted transferee) shall be the owner of applicable life insurance Policy (as defined below).
1.2 Nature of Plan. This Plan is intended to constitute an employee welfare benefit plan under the Employee Retirement Income Security Act of 1974 (“ERISA”).
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or items shall have the following indicated meanings:
(a) “Administrator” shall mean the committee as may be appointed from time to time by the Board to supervise administration of the Plan.
(b) “Board” shall mean the board of directors of the Ferguson Enterprises, Inc.
(c) “Cash Surrender Value” shall mean an amount that equals, at any specified time, the cash surrender value available with respect to the Policy.
(d) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(e) “Company” shall mean Ferguson Enterprises Inc., or any of its subsidiaries and/or affiliates (1) approved to adopt this Plan by Ferguson Enterprises, Inc., and (2) affirmatively electing to adopt the Plan.
(f) “Effective Date” shall mean January 1, 2006.
(g) “Insurer” shall mean New York Life Insurance & Annuity Corporation and/or such other carrier(s) as the Administrator, in its sole discretion, may select for purposes of providing insurance under this Plan.
(h) “Participant” shall mean a highly compensated or management employee of the Company selected by the Administrator, in its sole discretion, to participate in the Plan in accordance with Section 3.1.
(i) “Participant’s Death Benefit” shall mean a death benefit under the Policy purchased on such Participant’s life that is equal to the amount corresponding to such
Participant’s category, as shown on Schedule 1 attached hereto, as same may amended from time to time.
(j) “Plan Year” shall mean the twelve (12) month period commencing on January 1, 2006 and every twelve (12) month period commencing thereafter.
(k) “Policy” shall mean any and all life insurance policies purchased on the Participant’s life, pursuant to this Plan, as determined in the sole discretion of the Administrator.
(l) “Policy Year” shall mean the twelve (12) month period commencing on the date the Policy is issued by the Insurer, and every twelve (12) month period commencing thereafter.
2.2 Construction. The masculine gender, where appearing in the Plan, shall include the feminine gender (and vice versa), and the singular shall include the plural, unless the context clearly indicates to the contrary. Headings and subheadings are for the purpose of reference only and are not to be considered in the construction of this Plan. If any provision of this Plan is determined to be for any reason invalid or unenforceable, the remaining provisions shall continue in full force and effect.
ARTICLE III
PARTICIPATION IN THE PLAN
3.1 Selection of Participants. Participation in this Plan shall be limited to a select group of management or highly compensated employees employed by the Company. From this “select group,” the Administrator shall designate the employees who are eligible to participate in this Plan. All such designations shall be within the unfettered discretion of the Administrator and shall be revocable, in its unfettered discretion, at any time. No employee shall have the right to participate in this Plan until such time as the employee has been formally designated as a Participant by the Administrator. The Administrator shall determine the effective date of a Participant’s participation in the Plan. In no event will an employee become a Participant in the Plan prior to the issuance of a Policy on the employee’s life. Participation in the Plan shall terminate in accordance with Article V.
3.2 Classification of Participants. The Administrator shall, prior to implementation of this Plan, classify each Participant in accordance with Schedule I. The classification shall determine the amount of each Participant’s Death Benefit. All such classifications shall be within the unfettered discretion of the Administrator and shall be subject to modification, in its unfettered discretion, at any time. The Administrator reserves the absolute right, in its sole discretion, to add new Participants to a group, to modify classifications with respect to the entire group, some portion of the group, or on an individual basis. In modifying any classification(s), the Administrator shall have the absolute right to use any criteria or basis it so chooses and shall not be required to consider the title of a Participant.
ARTICLE IV
OWNERSHIP AND FUNDING OF POLICY
4.1 Acquisition of Policy. The Participant (or trustee or other permitted transferee) and the Administrator shall cooperate in applying for and obtaining the Policy. The Policy shall be issued to the Participant (or trustee or other permitted transferee) as the owner.
4.2 Future Actions. The Participant (or trustee or other permitted transferee) and the Administrator agree that they will take all necessary action to cause the Insurer to issue the Policy to conform to the provisions of this Plan.
4.3 Premium Payment. Until the occurrence of a Termination Event (as defined in Article V), the Company shall pay to the Insurer each Policy Year on behalf of each Participant with respect to the Policy an amount equal to the premium payment as defined in the Premium Payment Methodology (attached hereto as Exhibit A). The existence of and/or the language contained in the Schedule of Current Assumptions shall not be construed as a guarantee by the Company to provide a specific amount of Cash Surrender Value to the Participant upon any Termination Event or at any other time. The Board shall reserve the right, pursuant to Section 8.1, to revise the Premium Payment Methodology at any time.
4.4 Participant’s Obligation to Contribute Premium. A Participant shall have no obligation to contribute premiums to the Insurer under the Plan until such time as Participant’s participation in the Plan shall terminate in accordance with Article V. Upon termination of a Participant’s participation in the Plan, such Participant shall be responsible for payment of all premiums with respect to the Participant’s Policy, except as otherwise provided in the Plan.
4.5 Policy Rights. The Participant (or trustee or other permitted transferee) shall remain the owner of the Policy and shall retain all incidents of ownership in the Policy.
4.6 Gross-Up Payment. In the event any premium payment by the Company to or for the benefit of a Participant under Section 4.3 is subject to (a) the income tax imposed under Subtitle A of the Code, (b) employment taxes imposed on employees under Subtitle C of the Code, or (c) state or local income taxes, then Participant shall be entitled each Plan Year to receive additional compensation in an amount such that is equal to thirty percent (30%) of the premium payment on such Participant’s behalf for the Plan Year.
ARTICLE V
TERMINATION OF PARTICIPATION IN THE PLAN
5.1 Termination of Participation. A Participant’s participation in the Plan shall cease upon the earliest of the following dates, to be known as “Termination Events”:
(a) the date of the Participant’s death while insured under the Policy;
(b) such earlier date as may be selected by the Administrator, in its unfettered discretion, for the termination of an individual Participant’s participation in the Plan;
(c) the date this Plan is terminated in accordance with Section 8.1;
(d) the date of the Participant’s termination of employment; or
(e) the first day of the Policy Year following the Participant’s sixty-fifth (65th) birthday.
5.2 Rights of Parties upon Termination of Participation. In the event a Participant’s participation in the Plan is terminated upon the Participant’s death pursuant to Section 5.l(a), Article VI shall apply and the Plan shall terminate, with respect to such Participant and Policy.
5.3 Early Retirement Option. Notwithstanding Section 5.l(d) above, if a Participant retires after attainment of the earlier of (i) both fifteen (15) years of service and age fifty-nine and a half (59½) or (ii) both twenty (20) years of service and age fifty-five (55), such Participant shall continue to participate in the Plan and receive the benefits described in Article IV based on his classification at the time of his retirement. Participation of a Participant under this Section 5.3 shall cease (i) upon the occurrence of a Termination Event described in Sections 5.l(a), (c) or (e), or (ii) as provided in Section 5.4 below.
5.4 Competition. Continuation of benefits under Section 5.3 is expressly conditioned upon Participant’s covenant that he will not directly or indirectly compete with the Company or any of its affiliates. Competition shall include, but not be limited to, (i) offering any services or products which are the same as or similar to any services or products provided by the Company or any of its affiliates at any time during the period of Participant’s employment with the Company; (ii) soliciting or attempting to solicit the trade of any customer or prospective customer of the Company for the purpose of selling any services or products provided by the Company or any of its affiliates at any time during the period of the Participant’s employment with the Company; or (iii) soliciting or attempting to solicit employees of the Company for employment with a different employer. In the event that the Participant commences to compete with the Company, the Administrator may, at its discretion, discontinue benefits described in Article IV.
ARTICLE VI
DEATH OF PARTICIPANT
6.1 Designation of Participant’s Beneficiary. The Participant (or his trustee or other permitted transferee) shall have the right to designate a beneficiary for the Participant’s Death Benefit (the “designated beneficiary”). If any dispute shall arise over the identity of the designated beneficiary or if more than one person shall make a claim for Participant’s Death Benefit, the Insurer shall determine the identity of the beneficiary or beneficiaries entitled to receive any benefits payable hereunder on account of the death of a Participant in accordance with the rules set forth in the Policy or under applicable law.
ARTICLE VII
ADMINISTRATION OF PLAN
7.1 General. The Company and the Administrator shall perform the duties respectively assigned to them under this Plan and shall not be responsible for performing duties
assigned to others under the terms and provisions of this Plan. No inference of approval or disapproval is to be made from the inaction of any party described above or the Participant or agent of any of them with regard to the action of any other such party. Persons, organizations or corporations acting in a position of any fiduciary responsibility with respect to the Plan may serve in more than one fiduciary capacity.
7.2 The Administrator. The Administrator may delegate its administrative responsibilities to advisors or other persons it so chooses and may rely upon information or opinions of legal counsel or experts selected to render advice with respect to the Plan.
7.3 Allocation of Fiduciary Responsibility. The Administrator is the named fiduciary with respect to the administration of the Plan. It shall not be responsible for any fiduciary functions or other duties assigned to others.
7.4 Powers of the Administrator.
(a) General Powers. The Administrator shall have the power and discretion to perform the administrative duties described in this Plan or required for proper administration of the Plan and shall have all powers necessary to enable it to properly carry out such duties. Without limiting the generality of the foregoing, the Administrator shall have the power and discretion to construe and interpret this Plan, to hear and resolve claims relating to this Plan, and to decide all questions and disputes arising under this Plan. The Administrator shall determine, in its discretion, the eligibility of employees to participate in the Plan. The Administrator shall determine the status and rights of a Participant.
(b) Decisions Final. The decision of the Administrator upon all matters within the scope of its authority shall be binding and conclusive upon all persons.
(c) Reporting and Disclosure. The Administrator shall file all reports and forms lawfully required to be filed by the Administrator with any governmental agency or department, federal or state, and shall distribute any forms, reports, statements or plan descriptions lawfully required to be distributed to Participants and others by any governmental agency or department, federal or state.
7.5 Claims Procedure.
The following claims procedure shall be followed in handling benefit claims under this Plan.
(a) The Participant, his trustee, or his beneficiary (the “Claimant”), shall file a claim for benefits by notifying the Administrator in writing. If the claim is wholly or partially denied, the Administrator shall provide a written notice within ninety (90) days from the time the claim is filed specifying the reasons for the denial, the provisions of this Plan on which the denial is based, and additional material or information, if any, that is necessary for the Claimant to receive benefits. Such written notice shall also indicate the steps to be taken by the Claimant if a review of the denial is desired.
(b) If a claim is denied, and a review is desired, the Claimant shall notify the Administrator in writing within sixty (60) days after receipt of written notice of a denial of a claim. In requesting a review, the Claimant may review plan documents and submit any written issues, comments, documents, records, and other information relating to the claim the Claimant feels are appropriate. The Administrator shall then review the claim and provide a written decision within sixty (60) days of receipt of a request for a review. This decision shall state the specific reasons for the decision and shall include references to specific provisions of this Plan, if any, upon which the decision is based.
(c) In no event shall the Claimant be entitled to proceeds other than those attributable to or payable from the Policy.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment and Termination of Plan. The Board shall have the right at any time, by an instrument in writing duly executed, acknowledged and delivered to the Administrator, to modify, alter or amend this Plan, in whole or in part; provided, however, that no such modification or amendment of the Plan shall take effect prior to the date of Board action. In addition, while it is the expectation of the Company that this Plan and the payment of contributions will be continued indefinitely, continuance of the Plan is not assumed as a contractual obligation of the Company. The Board expressly reserves the right at any time to terminate this Plan or to reduce, temporarily suspend or discontinue contributions hereunder on a prospective basis, following the date of such Board action.
8.2 Binding Agreement. This Plan document shall be binding upon the heirs, administrators, executors, successors and assigns of each party.
8.3 Insurer Not a Party. The Insurer is not a party to this Plan, shall in no way be bound by or charged with notice of its terms, and is expressly authorized to act only in accordance with the terms of the Policy. The Insurer shall be fully discharged from any and all liability under the Policy upon payment or other performance of its obligations in accordance with the terms of the Policy.
8.4 State Law. All of the provisions of this Plan shall be construed and enforced according to the laws of the Commonwealth of Virginia and shall be administered according to the laws of such Commonwealth, except as otherwise required by BRISA, the Code or other federal law.
8.5 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, with or without cause, unless expressly provided in a separate written employment agreement. Nothing in this Plan shall be deemed to give the Participant the right to be retained in the service of the Company or to interfere with the right of the Company to discipline or discharge the Participant at any time.
8.6 Notice. Any notice, consent or demand required or permitted to be given under the provisions of this Plan shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed to a party hereto, it shall be sent by United States certified mail, postage prepaid, addressed to: (i) such party’s last known address as shown on the records of the Company, or (ii) to the Company at 12500 Jefferson Ave,, P.O. Box 2778, Newport News, VA 23602-4314. The date of such mailing shall be deemed the date of notice, consent or demand.
8.7 Tax Matters. The Company does not represent or guarantee that any particular federal, state or local income or payroll tax consequence will result to any Participant under this Plan. The Company shall have the right to withhold from any wage or salary payments to any Participant under this Plan or take other actions necessary to satisfy the Company’s obligation to withhold federal, state and local income and payroll taxes.
8.8 Entire Agreement. This Plan document constitutes the entire agreement between the parties hereto with regard to the subject matter of this agreement and supersedes all previous negotiations, agreements and commitments in respect thereto. No oral explanation or oral information by either of the parties to this agreement shall alter the meaning or interpretation of this agreement.
| | |
FERGUSON ENTERPRISES, INC. |
By: /s/ Joseph R. Witt |
Title: Treasurer |
SCHEDULE I
Pursuant to Section 3.2 of the Plan, Participant’s Death Benefit shall be determined in accordance with the following schedule, as amended from time to time, in the discretion of the Administrator:
| | | | | | | | |
Category | Description | Participant’s Death Benefit |
Category I | Chief Executive Officer, Chief Operating Officer, or Senior Vice Presidents participating in FELIP I on December 31, 2005 | $1,750,000 |
Category II | Vice Presidents participating in FELIP I on December 31, 2005 | $1,250,000 |
Category III | Other employees participating in FELIP I on December 31, 2005 | $500,000 |
EXHIBIT A
PREMIUM PAYMENT METHODOLOGY
The following assumptions and methodology shall be used for purposes of establishing the annual premium (non-smoker and smoker) which shall be contributed by the Company in accordance with Section 4.3:
| | | | | |
Insurance Carrier: | New York Life Insurance and Annuity Corporation |
Product: | Corporate Sponsored Universal Life |
Current Crediting Rate: | Defined by the carrier annually |
Non-Smoker Premium Methodology:
On or before each policy-anniversary the Administrator-will-solve for an annual premium payment, assuming non-smoker insurance charges, to be paid through the participant’s age 65 that will maintain the level death benefit as defined in Schedule 1 and will allow the policy’s cash value to be 25% of the initial face amount at the participant’s age 95.
Smoker Premium Methodology:
On or before each policy anniversary the Administrator will solve for an annual premium payment, assuming non-smoker insurance charges, to be paid through the participant’s age 65 that will maintain the level death benefit as defined in Schedule 1 and will allow the policy’s cash value to be 25% of the initial face amount at the participant’s age 95. However, smoker insurance charges will be deducted by the carrier from the policy cash value. The use of smoker insurance charges will cause the policy to lapse prior to age 95, unless additional premium payments are made. It will be the participant’s responsibility to contribute further premium, if so desired, to achieve the cash value target described above. Smokers who have quit smoking can request a change to non-smoker rates, pending a urine test.
The Current Crediting Rate and Insurance Charges are not guaranteed and will fluctuate over time, therefore both methodologies described above cannot guarantee the policy will perform as illustrated.
AMENDMENT NO. 1
TO
FERGUSON ENTERPRISES, INC.
EXECUTIVE LIFE INSURANCE PLAN II
THIS AMENDMENT NO. ONE is made as of the 28th day of January, 2008, by Ferguson Enterprises, Inc., a Virginia corporation (the “Corporation”).
WHEREAS, the Corporation adopted the Ferguson Enterprises, Inc. Executive Life Insurance Plan II (the “Plan”) for the benefit of participating employees effective as of January 1, 2006;and
WHEREAS, pursuant to Section 5.l(b) of the Plan, the Administrator of the Plan may, at its sole discretion, terminate an individual’s participation in the Plan; and
WHEREAS, pursuant to Section 8.1 of the Plan, the Corporation reserved the right to amend the Plan, and now desires to do so;
NOW, THEREFORE, the Corporation hereby amends the Plan, effective January 28, 2008, as follows:
1.Section 3.1 of the Plan entitled “Section of Participants” is hereby amended and restated in its entirety to read as follows:
3.1 Selection of Participants. Participation in the Plan is limited to the Company’s corporate officers at the vice-president and higher level. The Administrator, or its designees, shall designate the employees to participate in this Plan. All such designations shall be at the sole discretion of the Administrator and shall be revocable at the Administrator’s sole discretion at any time. The Administrator, or its designees, shall determine the effective date of a Participant’s participation in the Plan. In no event will an employee become a Participant in the Plan prior to the issuance of a Policy on the employee’s life. Participation in the Plan shall terminate in accordance with Article V.
2.Schedule 1 to the Plan is hereby amended to delete all references to “Category III”.
3.Section 4.6 of the Plan entitled “Gross-Up Payment” is hereby amended by deleting the phrase “thirty percent (30%)” and substituting in its place the phrase “thirty-five percent (35%)” in its place.
4.Section 5.3 of the Plan entitled “Early Retirement Option” is hereby deleted in its entirety.
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, has caused this Amendment No. One to be executed as of the day and year first above written.
FERGUSON ENTERPRISES, INC.
By: /s/ Terry E. Hall
Terry E. Hall, Vice President
Exhibit 10.49
AMENDMENT NO. 2 TO THE
FERGUSON ENTERPRISES, LLC
EXECUTIVE LIFE INSURANCE PLAN II
THIS AMENDMENT is made as of the 21st day of September, 2023, by Ferguson Enterprises, LLC, a Virginia limited liability company (the "Company").
WHEREAS, the Company adopted the Ferguson Enterprises, Inc. Executive Life Insurance Plan II (the "Plan") for the benefit of participating employees effective as of January 1, 2006;
WHEREAS, on January 28, 2008, the Company first amended the Plan;
WHEREAS, on March 31, 2019, the Company converted from a corporation to a limited liability company, and was thereby renamed “Ferguson Enterprises, LLC”; and
WHEREAS, pursuant to Section 8.1 of the Plan, the Company reserved the right to amend the Plan, and now desires to do so;
NOW, THEREFORE, the Company hereby amends the Plan, effective as of the date first written above, as follows:
1.The Title of the Plan is changed to:
“Ferguson Enterprises, LLC Executive Life Insurance Plan II”.
2.Section 1.1 of the Plan is amended by replacing the first sentence thereof with the following:
“The purpose of the Ferguson Enterprises, LLC Executive Life Insurance Plan II (the “Plan”) is to assist Participants (defined below) in the payment of premiums for life insurance coverage pursuant to which each such Participant (or trustee or other permitted transferee) shall be the owner of the applicable life insurance policy.”
3.Section 1.2 of the Plan is amended by replacing the first sentence thereof with the following:
“The Plan is merely an arrangement where the Company may make bonus contributions equal to life insurance premiums for a small number of executive employees in accordance with the requirements of Code Section 162. The Plan is not intended as an employee benefit plan under the Employee Retirement Income Security Act.”
4.Section 2.1 of the Plan is amended by replacing “Ferguson Enterprises, Inc.” with “Ferguson Enterprises, LLC” in each place it appears.
5.Section 3.1 of the Plan is amended by replacing the first and second sentence with the following:
“Participation in this Plan is limited to a limited number of executive employees as may be designated by the Administrator.”
6.Section 7.3 of the Plan is deleted.
7.Section 7.4 of the Plan is amended by replacing paragraphs (a), (b) and (c) with the following:
“The Administrator shall have the power and discretion to perform the administrative duties with respect to the Plan and shall have all powers necessary to enable it to properly carry out such duties. Without limiting the generality of the foregoing, the Administrator shall have the power and discretion to interpret decide upon all provisions or matters under the Plan. The decision of the Administrator upon all issues or matters shall be binding and conclusive upon all persons.”
8.Section 7.5 of the Plan is deleted.
* * *
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this Amendment to be executed as of the day and year first above written.
| | | | | | | | | | | |
| FERGUSON ENTERPRISES, LLC | |
| | | |
| | | |
| /s/ Ian Graham | |
| Ian Graham | |
| Senior VP & Secretary | |
| TITLE | | |
| | | | | | | | | | | |
| Name of Significant Subsidiary | State or Other Jurisdiction of Incorporation or Organization |
| Ferguson Enterprises, LLC | Virginia |
| Doing Business As Name: | |
| Aaron & Co. | |
| Aaron and Company | |
| A-H Distribution | |
| A-H Logistics | |
| A P Supply Company | |
| A. P. Supply Co. | |
| ACF Environmental | |
| Action Automation, a Wolseley Industrial Group company | |
| Action Plumbing Supply | |
| Action Supply Co. | |
| Adirondack Piping Solutions | |
| ADL | |
| Air Cold | |
| Air Cold Supply | |
| Airefco | |
| Alaska Pipe & Supply | |
| AMS Steam Products | |
| Andrews Lighting & Hardware Gallery | |
| BAC Appliance Center | |
| Bath + Beyond | |
| Beautyware Plumbing Supply Co. | |
| Blackman Plumbing Supply | |
| Brock-McVey | |
| Bruce | |
| Bruce-Rogers Company | |
| Bruce Supply | |
| Cal-Steam | |
| Canyon Pipe & Supply | |
| Capital Distributing | |
| CFP, a Ferguson enterprise | |
| City Lights Design Showroom | |
| Cline Contract Sales | |
| Crow Company | |
| Custom Lighting & Hardware | |
| D2 Land & Water Resource | |
| Davies Water | |
| Dealernet | |
| Duhig Stainless | |
| | | | | | | | | | | |
| Equarius Waterworks, Meter & Automation Group | |
| Factory Direct Appliance | |
| Ferguson Bath & Kitchen Gallery | |
| Ferguson Bath, Kitchen & Lighting Gallery | |
| Ferguson Climate Makers | |
| Ferguson Direct | |
| Ferguson Enterprises | |
| Ferguson Enterprises, Inc. of Virginia | |
| Ferguson Enterprises of Montana, LLC | |
| Ferguson Enterprises of Virginia, LLC | |
| Ferguson Facilities Supply | |
| Ferguson Full Service Supply | |
| Ferguson FSS | |
| Ferguson Heating & Cooling | |
| Ferguson Hospitality Sales | |
| Ferguson HVAC | |
| Ferguson HVAC – EastWest Air | |
| Ferguson HVAC – Lyon Conklin | |
| Ferguson Industrial | |
| Ferguson Industrial Plastics Division | |
| Ferguson Industrial Plastics and Pump Division | |
| Ferguson Integrated Services | |
| Ferguson International | |
| Ferguson Leasing Company | |
| Ferguson Parts & Packaging | |
| Ferguson Valve & Automation | |
| Ferguson Waterworks | |
| Ferguson Waterworks - Municipal Pipe | |
| Ferguson Waterworks - Red Hed | |
| Ferguson Waterworks EPPCO | |
| Ferguson Waterworks International | |
| Ferguson.com | |
| Ferguson Xpressnet | |
| Founders Kitchen and Bath | |
| FNW | |
| Frishkorn | |
| Galleria Bath & Kitchen Showplace | |
| Gotham | |
| Gotham Pipe | |
| Gotham Pipe Supply | |
| Grand Junction Pipe | |
| Guarino Distributing | |
| Henry Kitchen & Bath | |
| | | | | | | | | | | |
| Henry Plumbing Kitchen & Bath Galleries | |
| Henry Plumbing Supply | |
| High Country Plumbing Supply | |
| Hot Water Products | |
| Hot Water Sales and Associates | |
| Industrial Hub of the Carolinas | |
| Innovative Soil Solutions | |
| J&G Products, a Ferguson enterprise | |
| J.D. Daddario Company | |
| Joseph G. Pollard Co. | |
| Karl’s Appliances | |
| Kennedy Culvert & Supply | |
| Kennedy Water Works | |
| Kitchen Art | |
| Kitchen Art of South Florida | |
| Lighting and Appliance | |
| Lighting Design Center | |
| Lighting Plus | |
| Lighting Unlimited | |
| Lincoln Products | |
| Linwood Pipe and Supply | |
| Louisiana Utilities Supply Company | |
| LUSCO | |
| Lyon Conklin | |
| Lyon Conklin & Co., Inc. | |
| Lyon Conklin, a Ferguson Enterprise | |
| Maddux Supply Company | |
| Matera Paper | |
| Matera Paper Company | |
| McFarland Supply | |
| Meyer Appliance | |
| MFP Design | |
| Michigan Meter | |
| Midwest Pipe & Supply, a Ferguson enterprise | |
| Mission Valley Pipe | |
| Mission Valley Pipe & Supply | |
| Mississippi Utility Supply Co. (MUSCO) | |
| Old Dominion Supply | |
| Parnell Martin Companies | |
| Peebles Supply Corporation | |
| Pipelines | |
| Pipelines of PA | |
| Pipe Products | |
| PL Sourcing, Inc. | |
| Plumb Source | |
| | | | | | | | | | | |
| Plumbers Supply Company | |
| Plumbers Supply Company of St. Louis | |
| Plumbing Décor, a Wolseley Company | |
| Plumbing Supply Now | |
| Pollardwater | |
| Powell Pipe & Supply Co. | |
| Power Process Equipment | |
| Professional's Bath Source | |
| PV Sullivan Supply | |
| Ramapo Wholesalers | |
| Redlon & Johnson | |
| Reese Kitchen, Bath & Lighting Gallery | |
| Rencor Controls | |
| Renwes Sales | |
| Robertson Supply | |
| S.W. Anderson | |
| Schell Supply Corporation | |
| SG Supply Co. | |
| SOS Sales | |
| Stevens Supply Corporation | |
| Sunstate Meter & Supply | |
| Tacoma Heavy Goods | |
| Tarpon Wholesale Supplies | |
| The Ar-Jay Center | |
| The Davidson Group | |
| The Kitchen Showcase | |
| The Parnell Martin Companies | |
| The Plumbing Source | |
| The Stock Market | |
| TPW Kitchen & Bath | |
| Triton Environmental | |
| Uncle Sam Piping Solutions | |
| Wallwork | |
| Wallwork Bros. | |
| Warner Supply Corporation | |
| Water Works Supply | |
| Waterworks Industries | |
| Webb Distributors | |
| Westburne Supply | |
| Western Air Supply | |
| Westfield Lighting | |
| Wolseley Financial Services | |
| Wolseley Industrial Group | |
| WPCC Forwarding | |
| Wright Plumbing Supply | |
| | | | | | | | | | | |
| Ferguson Finance (Switzerland) AG | Switzerland |
| Ferguson Group Holdco Limited | England and Wales |
| Ferguson Holdings Limited | Jersey |
| Ferguson Holdings (Switzerland) AG | Switzerland |
| Ferguson Swiss Holdings Limited | England and Wales |
| Ferguson Overseas Limited | England and Wales |
| Ferguson UK Holdings Limited | England and Wales |
| Ferguson U.S. Holdings, Inc. | Virginia |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-253988, 333-263084 and 333-268654 on Form S-8 of our reports dated September 26, 2023, relating to the financial statements of Ferguson plc and the effectiveness of Ferguson plc's internal control over financial reporting, appearing in this Annual Report on Form 10-K for the year ended July 31, 2023.
/s/ Deloitte & Touche LLP
Richmond, Virginia
September 26, 2023
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-253988, 333-263084 and 333-268654 on Form S-8 of our report dated September 27, 2022, relating to the financial statements of Ferguson plc appearing in this Annual Report on Form 10-K for the year ended July 31, 2023.
/s/ Deloitte LLP
London, United Kingdom
September 26, 2023
Certification of Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Kevin Murphy, certify that:
1.I have reviewed this Annual Report on Form 10-K of Ferguson plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| | | | | | | | |
| | /s/ Kevin Murphy |
| | Name: Kevin Murphy |
| | Title: Chief Executive Officer |
Certification of Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, William Brundage, certify that:
1.I have reviewed this Annual Report on Form 10-K of Ferguson plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 26, 2023
| | |
/s/ William Brundage |
Name: William Brundage |
Title: Chief Financial Officer |
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (the “Act”), I, Kevin Murphy, the Chief Executive Officer of Ferguson plc (the “Company”), hereby certify, that, to my knowledge:
1.the Annual Report on Form 10-K for the year ended July 31, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 26, 2023
| | |
/s/ Kevin Murphy |
Name: Kevin Murphy |
Title: Chief Executive Officer |
This certification accompanies the Report pursuant to Section 906 of the Act and shall not, except to the extent required by the Act, be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (the “Act”), I, William Brundage, the Chief Financial Officer of Ferguson plc (the “Company”), hereby certify, that, to my knowledge:
1.the Annual Report on Form 10-K for the year ended July 31, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 26, 2023
| | |
/s/ William Brundage |
Name: William Brundage |
Title: Chief Financial Officer |
This certification accompanies the Report pursuant to Section 906 of the Act and shall not, except to the extent required by the Act, be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
Exhibit 97
Executive Compensation Clawback Policy
| | | | | |
| Title: | Executive Compensation Clawback Policy |
| Owner: | Compensation Committee of the Board |
| Applies: | Worldwide |
| Issuer: | Compensation Committee of the Board |
| Issued: | September 20, 2023 |
Policy Statement
Ferguson plc (including all of its subsidiaries worldwide, the Company) is committed to acting with integrity and in compliance with applicable laws and regulations in all its business dealings and to ensuring that management decisions are not improperly and adversely impacted by incentive compensation entitlements that could impose legal or reputational costs on the Company.
Principles
1.This Policy provides for the recoupment of certain executive compensation (Clawback) in the event of:
a.An accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities law (see Appendix A: SEC Rules-Based Clawback Provisions), and/or
b.Other misconduct by an Executive Officer pursuant to the terms of the Company’s compensation plans (see Appendix B: Compensation Plan Clawback Provisions).
2.This Policy is designed to comply, at a minimum, with Section 10D of the Securities Exchange Act of 1934 (the Act), as well as the rules promulgated thereunder by the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE) listing standards.
Policy Notes
•The Committee authorizes the Chief Legal Officer (or delegate) to establish additional policies, procedures and guidelines to help implement this Policy.
•This Policy shall be administered by the Compensation Committee of the Board (the Committee). Any determinations made by the Committee shall be final and binding on all affected individuals.
•For further guidance on any aspect of this Policy, please contact the Chief Legal Officer.
Appendices
Appendix A: SEC Rules-Based Clawback Provisions
Appendix B: Compensation Plan Clawback Provisions
Policy History
Previously Issued: July 27, 2022 (superseded by this Policy)
Executive Compensation Clawback Policy
Appendix A
SEC Rules-Based Clawback Provisions
A.Definitions.
Accounting Restatement means an accounting restatement of the Company’s financial statements due to the Company’s material noncompliance with any financial reporting requirement under the U.S. federal securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
Clawback Period means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal years.
Executive Officers means the Company’s current and former executive officers (as determined by the Committee in accordance with Section 10D of the Exchange Act, the rules promulgated thereunder, and NYSE listing standards.
Financial Reporting Measure means (i) any measure that is determined and presented in accordance with the accounting principles used in preparing financial statements, or any measure derived wholly or in part from such measure, such as revenues, EBITDA, or net income and (ii) stock price and total shareholder return. For the avoidance of doubt, a financial reporting measure need not be presented within the Company’s financial statements or included in a filing with the SEC.
Incentive-Based Compensation means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure. Incentive-Based Compensation is deemed received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.
Overpayment means, with respect to each Executive Officer in connection with an Accounting Restatement, the amount of Incentive-Based Compensation received while serving as an Executive Officer that exceeds the amount of Incentive-Based Compensation that otherwise would have been received during the Clawback Period had it been determined based on the restated amounts, and must be computed without regard to any taxes paid. Any Incentive-Based Compensation that the Company has recovered from an Executive Officer pursuant to any other recovery regime, including Section 304 of the Sarbanes-Oxley Act of 2002, will be credited against any Overpayment due from such Executive Officer.
Restatement Date means the earlier to occur of: (i) the date Ferguson plc’s Board of Directors (the Board), a committee of the Board, or the officer or officers of the Company
Executive Compensation Clawback Policy
authorized to take such action if Board action is not required, concludes or reasonably should have concluded that the Company is required to prepare an Accounting Restatement; or (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement.
B.Overpayment Determination.
In the event of an Accounting Restatement, the Committee shall promptly (and in all events no later than the date of such Committee’s first regularly scheduled meeting after the Restatement Date; unless such meeting is scheduled less than 30 days after the Restatement Date, in which case no later than the date of such Committee’s second regularly scheduled meeting after the Restatement Date) determine the amount of each Executive Officer’s Overpayment, if any.
Recovery of Incentive-Based Compensation is limited to Overpayments received by an Executive Officer (i) after beginning service as an Executive Officer if that person served as an Executive Officer at any time during the Clawback Period for that Incentive-Based Compensation, and (ii) while the Company’s securities are listed on the NYSE. For the avoidance of doubt, an award of Incentive-Based Compensation granted to an individual before the individual becomes an Executive Officer will be subject to recovery under this Policy, so long as the Incentive-Based Compensation was received by the individual at any time during the Clawback Period after beginning service as an Executive Officer.
For Incentive-Based Compensation based on (or derived from) stock price or total shareholder return, where the amount of the Overpayment is not subject to mathematical recalculation directly from the information in the Accounting Restatement, the amount must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was received; and the Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to the NYSE.
In no event is the Company required by this Appendix to award an Executive Officer an additional payment if the Accounting Restatement would have resulted in a higher Incentive-Based Compensation payment.
C.Overpayment Recovery.
In the event the Committee determines there has been an Overpayment(s), the Committee shall require each Executive Officer to repay or forfeit his/her Overpayment. For the avoidance of doubt, except as set forth in the Impracticability of Overpayment Recovery section of this Appendix, in no event may the Company accept an amount that is less than the amount of the Overpayment.
The Committee has broad discretion to determine the appropriate method of recovery of the Overpayment based on all applicable facts and circumstances and taking into account the
Executive Compensation Clawback Policy
time value of money and the cost to shareholders of delaying recovery. The method for recovering any Overpayment may include, without limitation:
requiring reimbursement of cash Incentive-Based Compensation previously paid;
seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
offsetting the Overpayment from any compensation otherwise owed by the Company to the Executive Officer;
cancelling outstanding vested or unvested equity awards; and/or
taking any other remedial and recovery action permitted by law, as determined by the Committee.
To the extent the Committee determines that any method of recovery other than repayment by the Executive Officer in a lump sum in cash or property is appropriate, the Company shall offer to enter into a repayment agreement (in a form reasonable acceptable to the Committee) with the Executive Officer. If the Executive Officer accepts such offer and signs the repayment agreement within thirty (30) calendar days after such offer is extended, the Company shall countersign such repayment agreement. If the Executive Officer fails to sign the repayment agreement within thirty (30) calendar days after such offer is extended, the Executive Officer shall be required to repay the Overpayment in a lump sum in cash (or such property as the Committee agrees to accept with a value equal to such Overpayment) on or prior to the date that is thirty (30) calendar days following the date on which the Committee determined the amount of any Overpayment.
To the extent that an Executive Officer fails to repay any of the Overpayment to the Company when due, the Company shall take all actions reasonable and appropriate to recover such Overpayment from the Executive Officer. The Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Overpayment. This Appendix shall be binding and enforceable against Executive Officers and their beneficiaries, heirs, executors, administrators or other legal representatives.
D.Impracticability of Overpayment Recovery.
The Committee shall recover any Overpayment in accordance with this Appendix, except to the extent that the Committee determines such recovery would be impracticable because:
(i) The direct expense paid to a third party to assist in enforcing this Appendix would exceed the Overpayment, after the Company has made a reasonable attempt to recover any Overpayment, documented such reasonable attempt, and provided that documentation to the NYSE;
(ii) Recovery would violate home country law where that law was adopted prior to November 28, 2022; provided that, before determining that it would be impracticable to recover any Overpayment based on violation of home country law, the Company has obtained an
Executive Compensation Clawback Policy
opinion of home country counsel, acceptable to the NYSE, that recovery would result in such a violation and a copy of the opinion is provided to the NYSE; or
(iii) Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
E.No Indemnification.
The Company shall not indemnify any Executive Officer against (i) the loss of any incorrectly awarded Incentive-Based Compensation that is repaid, returned or recovered pursuant to the terms of this Appendix, or (ii) any claims relating to the Company’s enforcement of its rights under this Appendix. Further, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation from the application of this Appendix or that waives the Company’s right to recovery of any Overpayment, and this Appendix shall supersede any such agreement (whether entered into before, on or after the approval of this Appendix).
F.Amendment; Termination.
The Committee may amend this Appendix from time to time in its discretion and shall amend this Appendix as it deems necessary, including as and when it determines that it is legally required by any federal securities laws, SEC rule or NYSE rule or listing standard.
The Committee may terminate this Appendix at any time.
Notwithstanding anything in this Appendix to the contrary, no amendment or termination shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or NYSE rule or listing standard of the NYSE.
G.Interpretation; Acceptance of Terms; Other Recoupment Rights.
The Committee intends that this Appendix will be applied to the fullest extent of the law and is authorized to interpret and construe this Appendix and to make all determinations necessary, appropriate, or advisable for the administration of this Appendix.
The Committee may require an Executive Officer to agree to abide by the terms of this Appendix as a condition to the grant or acceptance of any employment or service agreement, equity award agreement, or similar agreement entered into on or after the adoption of this Appendix.
Any right to recoup an Overpayment is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Executive Compensation Clawback Policy
Appendix B
Compensation Plan Clawback Provisions
A. Definitions.
Covered Executive means one of the Company’s current or former executive officers, as determined by the Board in accordance with Section 10D of the Exchange Act and the NYSE Listing Standards, as well as any other associate who may be deemed subject to this Appendix B as specified in the applicable share or bonus plans. In accordance with the terms of the Non-Employee Director Incentive Plan adopted in 2022, Covered Executive also includes Non-Employee Directors who receive grants under such plan.
Covered Circumstance means:
a.A material financial misstatement of the Company’s audited financial accounts (other than as a result of a change in accounting practice); and/or
b.Misconduct.
Misconduct means:
a.conduct by a Covered Executive that results in (or is reasonably likely to result in) significant reputational damage to the Company;
b.the negligence or gross misconduct of a Covered Executive; and/or
c.fraud effected by or with the knowledge of a Covered Executive.
B. Clawback Authority – Long Term Incentive Awards
If one or more of the following occur:
•at any time, when fraud is effected by or with the knowledge of one or more Covered Executive(s); or
•prior to the fifth anniversary of the applicable grant date, in all other Covered Circumstances,
then the Committee, in its absolute discretion (discretion to be exercised reasonably and in good faith), may take one or more of the following actions against the relevant Covered Executive(s):
1.reduce (including, if appropriate, reducing to zero) the number of shares, notional shares or restricted shares in respect of which any future award is granted to the relevant Covered Executive(s);
2.reduce (including, if appropriate, reducing to zero) the cash amount payable under an unvested award held by the relevant Covered Executive(s) or the number of shares, notional shares, or restricted shares under an unvested award and/or the number of shares and/or dividend equivalents under a vested but unexercised option held by the relevant Covered Executive(s); and/or
Executive Compensation Clawback Policy
3.require such Covered Executive(s) to pay to the Company as the Committee may direct and on such terms as the Committee may direct,
by such number and/or amount as the Committee considers appropriate under the circumstances.1
C.Clawback Authority – Deferred Bonus Plan.
If a Covered Circumstance occurs before the first anniversary of the announcement of the results for the financial year to which the relevant Covered Executive(s)’ cash bonus is made under the Deferred Bonus Plan, and in the case of a material financial misstatement, such misstatement resulted in a higher cash bonus payment than would have been the case without such misstatement, then the Committee, in its absolute discretion (discretion to be exercised reasonably and in good faith), may take one or more of the following actions against the relevant Covered Executive(s):
1.reduce (including, if appropriate, reducing to zero) the amount of any future cash bonus that would otherwise be payable to such Covered Executive(s) under any bonus plan operated by the Company;
2.to the extent permissible under applicable law, offset against any future payments (e.g., base salary) otherwise to be made by the Company; and/or
3.require such Covered Executive(s) to pay to the Company as the Committee may direct and on such terms as the Committee may direct,
such amount as the Committee considers appropriate under the circumstances.
D. Accountability.
A Covered Executive subject to Clawback under this Appendix B shall pay any outstanding amount within 30 days of being notified by the Company and is responsible for promptly, upon request, signing any documents as may be required to effect any of the provisions in this Appendix B.
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1With respect to a vested award, such amount shall be no greater than the value of the vested shares and dividend equivalents under award at the vesting date. |
